There’s an age old question in ad supported media. At what point do the number of ads you expose an audience to hit a point of diminishing return because users tune out or leave the platform altogether? In the simplest example think of two radio stations – one playing all music with no commercials while the other plays 59 minutes of ads per hour. Obviously the all-music station will keep their happy listeners for as long as they can listen, while the all-ad station will have exactly zero listeners. So the trick for radio program directors, and every broadcaster/publisher for that matter, is to determine that Goldilocks sweet spot of running the right number of ads to max out revenue yield without burning through their audience.
In one of the most comprehensive studies ever done on this topic data scientists analyzed the listening habits of 35M Pandora users over a two year period. To create a base line these listeners were exposed to six ads per hour (note that’s ad units, not minutes of ads). Then the ad load for some listeners was dialed all the way up to 12 units per hour while others were decreased to three units per hour. Keep in mind since Pandora also has an ad-free subscription tier the three “bail out” choices for heavy ad load listeners was to pay for a subscription, listen less, or leave Pandora altogether.
So what happened? Not surprisingly the listeners who received more ads had an adverse reaction to the experience. But it’s fascinating to see the difference in how users reacted depending on one important variable – their age. The graphic below shows that older listeners were more likely to purchase an ad free subscription after receiving the heavier ad load, while younger listeners went elsewhere. Obviously Pandora could harness this data to determine the optimal ad loads calibrated to specific listeners’ ad tolerance levels.
After hearing of this experiment I started to think about broadcast TV and Radio with their bloated ad loads. Most broadcasters run between 10-15 minutes of ads per hour – which could be 30+ ad units! Would they see a ratings bump if they started running fewer ads? Last month I published an article about Fox and NBC cutting their prime time network ad loads as a way to stimulate viewership. So should broadcast radio follow this example and go on an ad load diet too?