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

TL;DR

This study uses a long-term randomized experiment on Pandora to measure how consumers respond to different levels of audio advertising, revealing significant long-term demand effects and preferences for ad frequency and length.

Contribution

It provides the first long-run experimental evidence on consumer sensitivity to audio ad load, demonstrating the importance of experimental design over observational methods.

Findings

Ad load significantly reduces listening hours and days.

Listeners prefer more frequent, shorter ads.

Increased ad load boosts paid ad-free subscriptions.

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 maintaining consistent treatment assignment for 21 months, we measure long-run demand effects and find ad-load sensitivity three times greater than what we would have obtained from a month-long experiment. We show the negative impact on the number of hours listened, days listened, and 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 listeners primarily respond to the total number of ads per hour, with a slight preference for more frequent but shorter ad breaks. Lastly, we find that increased ad load led to an increase in the number of paid ad-free subscriptions to Pandora. Importantly, we show that observational methods often lead to biased or even directionally incorrect estimates of these effects, highlighting the value of experimental data.