Pandora: Unleashing Mobile Phone Ads

Forever, it seems, we've been told that it's just a matter of time—next year, for sure—that mobile marketing will take off in the U.S. Yet advertising on cell phones remains tiny.

That may be about to change for two reasons: Web-surfing smartphones are selling briskly even in a downturn, and applications for those gadgets—especially Apple's (AAPL) iPhone and the BlackBerry—are proliferating. That means people are spending a lot more time playing games, watching TV, and shopping on their phones. All that activity translates into what marketers call engagement, a fancy way of saying people are paying attention. Companies, of course, prize that, so they're looking for mobile applications that are a good fit for their brands.

Which brings us to Pandora, a nine-year-old, free online service that lets users design "radio stations" based on their musical preferences. Since Pandora launched a mobile edition two years ago, it has signed up 6 million people (total users for mobile and Web versions is 27 million). That has prompted the likes of Best Buy (BBY), Dockers, Target (TGT), and Nike (NKE) to buy ads on Pandora and experiment with what remains a cheap advertising medium—one most companies have yet to figure out. "We've reached a tipping point," says Domino's (DPZ) Pizza advertising executive Rob Weisberg. "Marketers, especially consumer brands, have to take mobile seriously now. You have to be where your customer works, lives, and plays."

Pandora has become a test bed because people who use the service tend to spend a lot of time playing around with it. They are constantly creating stations, rating songs, and scrolling through playlists to find artists they don't know. Pandora founder Tim Westergren says on average subscribers use the mobile service about 90 minutes a day (though there are no independent numbers).

Advertisers are trying out Pandora in myriad ways. Sometimes it's as a direct marketing tool. Domino's, for example, puts up ads that urge people to call in for a pizza directly from their phones. Other companies are using coupons. Docker's offered a 20% discount if visitors went to the brand's site and entered the promotional code "Pandora." Some companies prompt users to watch movie clips where their products are featured prominently. Puma, which developed a shoe with Ducati motorcycles, ran ads on Pandora that included a trailer from the Vin Diesel movie Fast & Furious 4. The ads allowed people to buy shoes that were featured in the film from their phones. Kraft (KFT) and Nike, looking to have people come directly to them, took out ads encouraging Pandora users to put links on their phones that take them to special mobile sites providing advice as well as promote products. Kraft's is the iFood Assistant, with recipe tips, and Nike's is the Nike Training Club, with workout suggestions.


If one thing has surprised advertisers, it's how avidly consumers are responding. Target says 27% more people clicked on its ad for the release of Christina Aguilera's greatest hits CD last fall than on any other mobile Web campaign. The ad urged users to visit a site where they could get a free Aguilera ringtone and buy the album. Target recently launched a Pandora campaign for the retailer's C9 by Champion clothing line.

Sonos, which sells home music systems, just wrapped up a campaign on Pandora. DeAnna Wassom, Sonos' senior marketing director, says she has never seen better customer response in her 20 years in the business. The ads asked people to click through to a promotional video. Typically, only 1% to 2% of people click on ads overall. But nearly 5% clicked in this case, says Wassom, and almost 40% of those clicking watched the entire video. During the campaign, nearly twice as many people asked to be put on Sonos' e-mail list as those signing up on the company's regular site.

Derek Handley, whose firm, Hyperfactory, has persuaded several companies to advertise on Pandora, says most brands have no clue how to market on mobile devices. Many try to do too much, including making sites so technologically flashy that they crash phones. The key is to keep it simple, he says. Handley also advises companies to build special mobile sites, because regular ones don't translate well to supersmall screens. With mobile marketing poised to take off, the companies experimenting now will have a head start.

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