The next speaker in our Economics and Strategy Talk series was David Reiley, Distinguished Scientist at SiriusXM Pandora, who presented his research related to consumer demand and sensitivity to paid advertisements. This event was held on Zoom on February 25th from 6:00 pm to 7:30 pm CT.

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.

Presenter Biography

David Reiley, Distinguished Scientist at SiriusXM Pandora has a PhD in Economics from MIT and a A.B. in Astrophysical Sciences from Princeton. He is an economist in the advertising-science group at Pandora and an Adjunct Professor at the UC Berkeley School of Information. He previously spent more than seven years at Google and Yahoo! Research, primarily working on experiments to measure the effects of online advertising. He started his career as an economics professor at Vanderbilt University and at the University of Arizona.

David is passionate about the use of field experiments in economics and the social sciences and has spent his career promoting their use. Before his dissertation at MIT in 1996, field experiments were quite rare in economics. Now there are dozens of people regularly performing field experiments to learn about economic and social behavior. Most people still consider economics to be an observational rather than an experimental science, but that has been changing significantly.