In order to provide easier ways for advertisers to buy banner ads Pandora, a music streaming service, introduced auctions for advertising space on its newly created private ad exchange. These auctions allow advertisers to target specific audiences, based on the data collected when Pandora’s users sign up. Besides that, Pandora offers advertisers its 350 customized targeting segments, allowing for much more directed marketing instead of a prolonged exposure to a wider audience.

To protect its user’s privacy, Pandora opened these auctions strictly to advertisers who have bought advertising space directly from Pandora before, also allowing for higher quality ads. The use of automated third party advertising tools is also prohibited.

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“In order to be able to transact with transparency as well as target with first-party data, you have to have a direct relationship with [Pandora] to buy into the marketplace,” said Jack Krawczyk, VP Product Manager at Pandora.

Before the introduction of the ad exchange, brands used Pandora to reach people who visited their sites. After that, they were introduced to Pandora’s first party data and since March, when a chosen group of advertisers was selected for testing the new ad exchange (including Ford and Essence’s clients), they had the option to precisely direct their marketing efforts to specific audiences.

Pandora hopes these features will improve its in-app advertising capabilities as opposed to its desktop ad performance. The income from in-app adverts was much lower than desktop ads in the first quarter of 2014: $34.92 per 1000 listeners, as opposed to $58.04. This is particularly important as 78% of Pandora’s revenue in the same time period came from mobile phones.