Brian McAndrews might best be described as the modern Internet’s ad architect, the “Don Draper” of Web advertising.
His resume is comprised of top tier media companies stationed at “the pivot point,” ready to reposition their offerings for the Internet’s next generation, the next frontier.
A board director at The New York Times, AdReady, Clearwire, and Capital Cities/ABC, a Managing Partner at Madrona Ventures and an Exec VP. at Walt Disney, McAndrews took over the Microsoft Advertiser and Publisher Solutions (APS) Group responsible for building and marketing all ad platforms, including Atlas, DRIVEpm, MSNDR, and AdCenter after managing those ad technologies in their formative years at aQuantive Inc., one of the fastest-growing global digital marketing companies in the world, where he served as Chief Executive Officer and as President. aQuantive included three distinct business units: Avenue A | Razorfish, one of the world’s largest interactive advertising firms with agencies in the U.K., France, Germany, Australia, China and Japan; Atlas and DRIVEpm.
This month, Brian set his sights on a new job of Steve “Jobs-ian” dimensions — trying to transform the advertising paradigm and rate card that has put the Pandora Internet radio business in a box. Because of the new species of Internet company that Pandora represents the company has been charged upwards of 1000% more in royalties that other music programmers are paying. Now that Apple has jumped into the fracas with iTunes Radio, well, let’s just say that McAndrews must love a challenge.
As reported very succinctly in this month’s Harvard Business Review blog network, after 13 years and 175 million users, Pandora has yet to turn a profit.
“McAndrews faces two challenges as he steps to the helm: reducing royalties from the 50-60% of sales currently paid, and increasing revenues per listener hour. The former represents the company’s central challenge, and is the subject of an ongoing war with rights-holders. But McAndrews can’t wait until that problem is solved to begin plotting Pandora’s future.”
How is it that Pandora found itself in the excessive royalties box?
Both terrestrial and satellite radio pay much lower fees per hour of music than Pandora. And, according to Pandora’s assistant general council, at least 16 out of the top 20 Internet radio companies pay less than Pandora. Terrestrial radio pays a fixed fee (for 2012, BMI fee ranged from 0.3 – 1.7% of gross revenues), while satellite radio pays 9% of revenues (compared to Pandora’s roughly 60%). Pandora has responded with negotiating, litigating, lobbying and galvanizing its users – and has even bought a radio station to try and even the playing ground. So far to no avail.
The predictions are stark. Pandora will either need to pay similar amounts to other radio stations or abandon its current business model. In the meantime, McAndrews has other maneuvers he can begin to make.
Improve ad targeting. Pandora users often get mobile ads for businesses in faraway markets. The company does not tap into GPS and IP Data to truly localize its ad delivery. Once in place, geo-located promotions are the logical next-step. Foursquare, Yelp. Square and daily deals sites can serve up targeted promotions to Pandora listeners where they live or work.
Go for Facebook Integration. Having customers sync their accounts through Facebook Connect will derive the same benefit it does for so many others. Better knowledge of just who is doing the listening. That translates into better ad targeting
Launch a music ticket platform. Beat Apple to the punch. Do you see any connection between Apple Passbook. Genius Lists and music? We do!
Become an artist platform. Pandora can be for artists what music labels are not. True promoters and developers of talent.
We eagerly await McAndrew’s initiatives and to see how and when he may kindle the future for the music service by thinking outside of Pandora’s box. [24×7]
