Pandora to acquire digital audio adtech company AdsWizz for $145 million

Music streaming company Pandora made a rare foray into acquisitions today with the news that it has snapped up adtech startup AdsWizz.

Pandora is doling out $145 million in total to secure AdsWizz, “at least” 50 percent of which will be paid in cash, with the remainder payable in cash or stock — presumably based on performance.

Founded in 2008, San Mateo-based AdsWizz is focused squarely on digital audio advertising, with programmatic “self-serve” ad-buying a core part of the platform, which explains its appeal to a company like Pandora.

But what is most interesting about this deal is that Pandora isn’t gobbling up the company’s technology for its own use. Pandora said that advertisers will eventually be able access AdsWizz’s marketplace through Pandora — as well as other “leading audio publishers” — meaning that Pandora is keeping AdsWizz alive for potential rivals to use. The company will “make it easier for publishers to monetize their inventory and for advertisers to buy and measure their campaigns,” according to a statement.

“Since I joined Pandora six months ago, I have highlighted adtech as a key area of investment for us,” noted Pandora CEO Roger Lynch. “Today we took an important step to advance that priority and accelerate our product roadmap. With our scale in audio advertising and AdsWizz’s tech expertise, we will create the largest digital audio advertising ecosystem, better serving global publishers and advertisers while improving Pandora’s own monetization capabilities.”

Pandora the adtech company

Recent data from the Internet Advertising Bureau (IAB) suggests that digital audio advertising revenues rose 42 percent to $603 million in the first half of 2017, and the growing popularity of podcasting likely means this figure will continue to grow.

Pandora may be a stalwart of the music-streaming realm, but competition from the likes of Spotify and Apple Music hasn’t worked in its favor. Still, its recent Q4 2017 financials showed that revenue was up seven percent year-on-year, while its subscribers grew by 25 percent on the previous year, driven in part by the launch of its on-demand premium streaming service. This news drove its stock up marginally, but its share price is still down massively from its 2014 peak of $37 and currently sit at less than $5.

That Pandora is now effectively an adtech business in its own right opens up a new revenue stream for the company, though it remains to be seen whether other audio publishers will use a service owned by a potential rival.

Pandora has made four previous known acquisitions in its nearly 20-year history. The last semi-acquisition was in 2015 when it bought key assets from Rdio after it filed for bankruptcy. And it bought Ticketfly and Next Big Sound that same year, though it offloaded Ticketfly at a loss two years later. It had also previously bought a South Dakota radio station in 2013.

The AdsWizz acquisition is expected to close in Q2 2018, after which AdsWizz will become a Pandora subsidiary, with AdsWizz CEO Alexis van de Wyer staying on as CEO.

“Now is the time to combine forces with Pandora, one of the leaders and pioneers in digital audio, and accelerate our ability to provide solutions that meet the increasingly sophisticated needs of advertisers and digital audiences,” said van de Wyer.”