After years of customizing playlists to individual listeners by analyzing components of the songs they like, then playing them tracks with similar traits, the company has started data-mining users’ musical tastes for clues about the kinds of ads most likely to engage them.
“It’s becoming quite apparent to us that the world of playing the perfect music to people and the world of playing perfect advertising to them are strikingly similar,” says Eric Bieschke, Pandora’s chief scientist.
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Pandora is now testing hypotheses like these by, among other methods, measuring the frequency of ad clicks. “There are a lot of interesting things we can do on the music side that bridge the way to advertising,” says Mr. Bieschke, who led the development of Pandora’s music recommendation engine.
A few services, like Pandora, Amazon and Netflix, were early in developing algorithms to recommend products based on an individual customer’s preferences or those of people with similar profiles. Now, some companies are trying to differentiate themselves by using their proprietary data sets to make deeper inferences about individuals and try to influence their behavior.
This online ad customization technique is known as behavioral targeting, but Pandora adds a music layer. Pandora has collected song preference and other details about more than 200 million registered users, and those people have expressed their song likes and dislikes by pressing the site’s thumbs-up and thumbs-down buttons more than 35 billion times. Because Pandora needs to understand the type of device a listener is using in order to deliver songs in a playable format, its system also knows whether people are tuning in from their cars, from iPhones or Android phones or from desktops.
So it seems only logical for the company to start seeking correlations between users’ listening habits and the kinds of ads they might be most receptive to.
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“I would guess, looking at music choices, you could probably predict with high accuracy a person’s worldview,” says Vitaly Shmatikov, an associate professor of computer science at the University of Texas at Austin, where he studies computer security and privacy. “You might be able to predict people’s stance on issues like gun control or the environment because there are bands and music tracks that do express strong positions.”
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Shazam, the song recognition app with 80 million unique monthly users, also plays ads based on users’ preferred music genres. “Hypothetically, a Ford F-150 pickup truck might over-index to country music listeners,” says Kevin McGurn, Shazam’s chief revenue officer. For those who prefer U2 and Coldplay, a demographic that skews to middle-age people with relatively high incomes, he says, the app might play ads for luxury cars like Jaguars.
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Although users may elect to pay $36 annually to opt out of receiving ads, advertising on the free service accounts for the bulk of Pandora’s revenue. Out of $427.1 million in revenue in the 2013 fiscal year, advertising generated $375.2 million.
