Measuring Consumer Sensitivity to Audio Advertising: A Field Experiment on Pandora Internet Radio

20 Pages Posted: 22 Apr 2018

See all articles by Jason Huang

Jason Huang

Uber

David Reiley

Pandora Media, Inc.; UC Berkeley School of Information

Nick Riabov

Netflix

Date Written: April 21, 2018

Abstract

A randomized experiment with almost 35 million Pandora listeners enables us to measure the sensitivity of consumers to advertising, an important topic of study in the era of ad-supported digital content provision. The experiment randomized listeners into nine treatment groups, each of which received a different level of audio advertising interrupting their music listening, with the highest treatment group receiving more than twice as many ads as the lowest treatment group. By keeping consistent treatment assignment for 21 months, we are able to measure long-run demand effects, with three times as much ad-load sensitivity as we would have obtained if we had run a month-long experiment. We estimate a demand curve that is strikingly linear, with the number of hours listened decreasing linearly in the number of ads per hour (also known as the price of ad-supported listening). We also show the negative impact on the number of days listened and on the probability of listening at all in the final month. Using an experimental design that separately varies the number of commercial interruptions per hour and the number of ads per commercial interruption, we find that neither makes much difference to listeners beyond their impact on the total number of ads per hour. Lastly, we find that increased ad load causes a significant increase in the number of paid ad-free subscriptions to Pandora, particularly among older listeners.

Suggested Citation

Huang, Jason and Reiley, David H. and Riabov, Nickolai M., Measuring Consumer Sensitivity to Audio Advertising: A Field Experiment on Pandora Internet Radio (April 21, 2018). Available at SSRN: https://ssrn.com/abstract=3166676 or http://dx.doi.org/10.2139/ssrn.3166676

Jason Huang

Uber ( email )

1455 Market St
San Francisco, CA 94103-1331
United States

David H. Reiley (Contact Author)

Pandora Media, Inc. ( email )

2101 WEBSTER ST 16TH FLOOR
Oakland, CA 94612
United States

UC Berkeley School of Information ( email )

102 South Hall
Berkeley, CA 94720-4600
United States

Nickolai M. Riabov

Netflix ( email )

Los Gatos, CA
United States

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