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Why Pandora Is Acquiring AdWizz

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Pandora to acquire audio ad business AdWizz

Music streaming company Pandora (P) announced that it would be acquiring audio ad tech startup Adwizz for $145.0 million in a combination of cash and stock. This transaction is subject to regulatory approval. After the acquisition, AdWizz plans to operate independently. The startup is an ad tech platform and specializes in providing audio ads to music streaming services.

Pandora has had a tough time since going public due to rising competition, especially from Spotify, which has seen robust growth in its user base.

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The rationale behind the acquisition

Pandora said it would use the acquisition to take advantage of the growth in digital audio advertising. The acquisition would make Pandora a provider of audio ads while it also remains a provider of music subscriptions. 

In 4Q17, Pandora reported subscription revenue growth of 25.0% YoY to $97.7 million. This growth offsets the decline in ad revenues, which slipped from $313.0 million in 4Q16 to $297.7 million in 4Q17. Pandora had nearly 5.5 million paid subscribers in 4Q17.

Pandora said it would invest in the startup’s technology to support its own business, while AdWizz would cater to Pandora’s competitors. Pandora stock rose 2.7% on March 21 after the announcement and an additional 5.7% in after-hours trading.

The company still generates most of its revenue from ads, while it has also started its own subscription business to compete with Spotify and Apple Music.

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