### Measuring Consumer Sensitivity to Audio Advertising:

A Field Experiment on Pandora Internet Radio

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 can see that the long-term effects of a change in ``ad
load,'' or number of ads per hour, take over a year to be fully
realized. 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.

*This version: 3 November 2017
*