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    Pandora Radio: Fire Unprofitable Customers?: Michael Bangert Rithu Gopalan Rohan Katpelly Abhishek Purohit Shweta Vaidya

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    Pandora is considering ways to make unprofitable heavy users of its free streaming service into profitable customers. It could cap free usage at 40 hours per month and charge $0.99 for any additional usage. This would generate an estimated $1.1 million extra in monthly revenue. Pandora could also generate more advertising revenue by increasing the percentage of page space used for ads from 60% to 80% and charging premium rates to advertisers targeting premium users. Diversifying onto new platforms and customizing the service for different customer segments may also help increase profits.

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    Pandora Radio: Fire Unprofitable Customers?: Michael Bangert Rithu Gopalan Rohan Katpelly Abhishek Purohit Shweta Vaidya

    Uploaded by

    Vindhya_m
    231 views19 pages
    Pandora is considering ways to make unprofitable heavy users of its free streaming service into profitable customers. It could cap free usage at 40 hours per month and charge $0.99 for any additional usage. This would generate an estimated $1.1 million extra in monthly revenue. Pandora could also generate more advertising revenue by increasing the percentage of page space used for ads from 60% to 80% and charging premium rates to advertisers targeting premium users. Diversifying onto new platforms and customizing the service for different customer segments may also help increase profits.

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    J520_21021_Pandora_Team3

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    Pandora is considering ways to make unprofitable heavy users of its free streaming service into profitable customers. It could cap free usage at 40 hours per month and charge $0.99 for any additional usage. This would generate an estimated $1.1 million extra in monthly revenue. Pandora could also generate more advertising revenue by increasing the percentage of page space used for ads from 60% to 80% and charging premium rates to advertisers targeting premium users. Diversifying onto new platforms and customizing the service for different customer segments may also help increase profits.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    231 views19 pages

    Pandora Radio: Fire Unprofitable Customers?: Michael Bangert Rithu Gopalan Rohan Katpelly Abhishek Purohit Shweta Vaidya

    Uploaded by

    Vindhya_m
    Pandora is considering ways to make unprofitable heavy users of its free streaming service into profitable customers. It could cap free usage at 40 hours per month and charge $0.99 for any additional usage. This would generate an estimated $1.1 million extra in monthly revenue. Pandora could also generate more advertising revenue by increasing the percentage of page space used for ads from 60% to 80% and charging premium rates to advertisers targeting premium users. Diversifying onto new platforms and customizing the service for different customer segments may also help increase profits.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 19

    Pandora Radio : Fire

    Unprofitable Customers?
    Michael Bangert
    Rithu Gopalan
    Rohan Katpelly
    Abhishek Purohit
    Shweta Vaidya
    Agenda
    Introduction and Executive Summary

    Pa n d o ra ’ s B u sin e ss M o d e l

    R e ve n u e
    s?
    Focus Areas

     

    Control Usage Advertising Revenue

    Utilize Advertising Space to


    Enhance User Experience Diversification
    Control Usage

    Optimize Streaming Costs

    Cap usage at 40 hours. Beyond that charge 99 cents

    Address Leaky Faucet Issue by cutting off music during inactive period
    Why does 10% matter to Pandora ?
    Recommendation: Cap the listening hours beyond 40 hours/month per user.

    10%

    Impact on Pandora :

    Imbalance

    Source: Pandora Case

    6
    Effects of 40 hour cap
    Revenue increase after 40 hour cap

    Daily unique users 1,800,000  


    10 % high volume users 180,000  
    1 % of high vol pay premium 1,800  
    times 0 . 99 $1,782 Monthly revenue from cap
         
    Listen hours / day 4,500,000  
    54 % by high vol users 2,430,000  
    89 % are capped * 2,162,700  
    Stream cost 0.0258  
    Daily savings 55,798  
    Num of days music capped 20  
    per month
      $1,115,953 Monthly savings from cap
         
    Total monthly increase $1 , 117 , 735  

         
    * Note, we are assuming that    
    10% of users will create
    additional accounts in order to
    continue free streaming.
    Advertising Revenue

    Raise prices for ads being displayed to premium users

    Determine Loyal users who interact more with Pandora

    Provide Advertisers with user analytics


    Why does 10% matter to the advertisers ?

    ecommendation : Charge the advertisers more for access to premier users

    Advertisers agree that targeting ads using subscriber profiling is key to successful
    interactive advertising.

    High Volume UsersGenerate more data aboutAdvertisements


    interests are interactive
    Increase
    and targeted
    Click through rate and Ad

    Would advertisers pay a premium for premium users ?

    Source: Heavy Reading 2008

    9
    Utilize Advertising Space to Enhance User
    Experience

    Use more space for ads

    Increase current 60% ad space usage

    Integrate new apps like chat and sponsored trivia/ lyrics to keep users on Pando

    Focus on aesthetics and positioning of Ads


    Quality Vs Quantity of Advertisements

    Recommendation : Optimal Utilization of page space.

    Pandora utilizes only 60% of available space.


    Optimum Utilization
    Case of Maximum Utilization
    User Experience

    Enhances user experience and


    generates more revenue from
    advertisements

    No of Advertisements

    Source: Dey Alexander Consulting

    11
    Expected Increase in Revenue by Using 80%
    Ad Space
      Existing ad revenue New ad revenue
    ( 60 % used ( 80 % used
    space ) space )

      All users Free users Premium


    users

    CPM Rate * $7 $7 $10

    Avg num of ads per listener per hour * 7 10 10

    % page space used 60 80 80

    Avg ad revenue per listener per hour 0.0294 0.056 0.08


    ($)
    Daily unique users 1,800,000 1,798,200 1,800

    Total revenue per hour $52,920 $100,699 $144

         

    Total increase in revenue   47 . 50 %


    Diversification

    Explore new platforms and customer segments

    Integrate Pandora with other devices as done for iPhone

    Customize the player to attract children/families, female customers and disabl

    Create a html version for low bandwidth users

    Source: Pandora, 2008

    13
    Exploring new Platforms and Customer
    Segments
    ion : Pandora should be launched on multiple platforms and cater to a wi

    Pandora iPhone’ssuccess - usage statistics, 2008


    § Pandora was the most popular free app on iTunes.


    § New listener every two seconds.
    § 3.3 million tracks streamed to iPhone listeners over the weekends.
    § Retention rate of listeners averaging over an hour of listening per day.

    • Scope for catering to diverse customer segments


    Ø
    Ø65% of the users in the age group of 18-34.
    Ø54% of listeners are male.
    ØNo information provided on users with special needs.

    Source: Pandora, 2008

    14
    Implementation Guidelines
    Risk Mitigation Strategy

    | 16
    Questions?
    Appendix – Distribution of
    Pandora listeners

    Source: Pandora Case

    18
    Appendix slide – structure tree

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