Music Streaming Services & User Engagement: Pandora Beats the Competition (for Now)

Pandora recently announced its Q1 2015 earnings, which crushed Wall Street’s expectations: the company landed $297.3 million in revenue from ads, subscriptions and ticket sales (from its pricey acquisition of Ticketfly). Pandora is also assimilating Rdio (acquired in November 2015) into its service, and the integration may yield the ability for users to play music on demand.

All this is good news for Pandora, but its Q1 earnings and acquisitions don’t necessarily mean that it will fare any better against Spotify or its related rival, SoundCloud.

How Music Streaming Services Make Money

It’s incredibly complicated to make money in the music streaming business. It’s not only the chunk of royalties that these services have to pay to participating artists (even SoundCloud, which has its roots in DJs and EDM, pays royalties), but they also have to worry about user discovery, acquisition, engagement, and retention – just like any other mobile app publisher. And because services (also including SoundCloud) monetize through advertising, conveying user metrics to advertisers is even more important.

Pandora, Spotify and SoundCloud: Usage and Engagement

Let’s compare the numbers for U.S.-based users, aged 18 and over. Note that the figures provided are calculated when the service is running in the foreground.

Pandora remains the top music streaming player in the U.S., with 53 million active monthly users across PCs, smartphones and tablets, and as many as 13 million daily users. On average, 12.7 million users accessed Pandora’s services on a daily basis in March 2016, giving it a stickiness rate of 24%.

Pandora, Spotify and SoundCloud: User Demographics

Pandora’s mobile audiences have grown tremendously over the past five years; this has been transformational. Today, as many as 41.9 million (or nearly 80%) of its monthly users are using the service on smartphones. Spotify, by comparison, has 20.7 million users accessing the service via PC versus 20.9 million (or 53%) on smartphones. The majority of SoundCloud users are accessing the service via a PC (29.4 million users versus 15.5 million on smartphones, and 5.9 million on tablets.)

The user base of each service is quite different when you examine it from the perspective of gender and age:

  • Pandora’s user base is dominated by women and users younger than 50 years old:
    • 44% Millennials
    • 33% Gen X
    • 20% Baby Boomers
    • 3% Silents
  • Spotify’s user base:
    • 54% Millennials
    • 26% Gen X
    • 16% Baby Boomers
    • 4% Silents
  • SoundCloud’s user base:
    • 35% Millennials
    • 24% Gen X
    • 26% Baby Boomers
    • 15% Silents

(We’re left wondering why so many Baby Boomers are on SoundCloud. Perhaps they’re following the mashups of their Millennial kids?)

As we have explained in previous posts about audience measurement, it’s not only the net reach and the monthly users that are important; what’s really telling is who uses the service, how often and for how long.  These metrics should help publishers better understand how to extend and engage their audiences. Spotify has already jumped on board, recently announcing plans to leverage its first-party demographic data with external cross-device data to provide enhanced ad-targeting product for advertisers. Big brands like Esurance and Lay’s have already signed on, indicating a high interest in reaching mobile users specifically.  We’ve already highlighted the massive growth of the mobile app economy, and this latest news simply re-emphasizes the importance of measuring this new mobile audience.

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