Roku Outperforms Ad Industry, Says TV Spend Won’t Recover Until ‘Well Into’ 2021

Roku did way better than the TV ad market at large in Q2, despite a major pullback in ad spend from brands across the board.

Platform revenues, which include advertising, grew 46% YoY to $244.8 million, Roku said Wednesday during its Q2 earnings call. Overall, revenues increased 42% YoY to $356 million in the quarter.

Amid uncertainty in the linear market, Roku’s client base grew 40% YoY in Q2, and its retention with advertisers spending more than $1 million on the platform increased to 92%. Roku’s performance advertising business grew 346% YoY, thanks to its OneView programmatic ad-buying platform.

“This is against the backdrop of linear TV declining 15% to 25%,” said Scott Rosenberg, SVP and GM of Roku’s platform business. “Our growth … highlights the shift of ad dollars coming out of linear advertising into OTT.”

Roku added 3.2 million active accounts in Q1, growing its user base by 41% YoY to 43 million as people turned to streaming en masse during lockdowns. Streaming hours were up by 2.3 billion compared with Q1, growing 65% to 14.6 billion.

Viewing hours, though, have moderated since the lockdowns eased, but are still above pre-COVID levels, said Roku CFO Steve Louden.

Roku’s success in the quarter is proof that CTV has hit a tipping point for advertisers, Rosenberg said.

“COVID has pulled forward a bunch of cord cutting that was going to happen anyway,” he said. “The pandemic has forced marketers to come to grips with [the fact that] there’s been a significant departure of audience out of linear TV, and it’s not coming back.”

But Roku wasn’t totally unscathed by the pandemic. Its monetized video ad impressions grew 50% year over year, “albeit slower than we expected prior to the pandemic,” Roku said in its shareholder letter. Average revenue per user was still up 18% YoY to $24.92.

“It is an uncertain market,” Rosenberg said, “but we think we’re well positioned to continue to capture share through the end of the year.”

The HBO Max/Peacock standoff

Roku touted its work with content owners in the quarter, noting that many increased their investment in marketing on the platform as linear TV investments stalled.

But investors were curious about the ongoing standoff between Roku and both HBO Max and NBCUniversal’s Peacock. Neither has been able to reach terms for a distribution agreement on the platform.

Roku CEO Anthony Wood said the company welcomes more content providers, but wants to establish a “win-win-win relationship.” Roku is at an impasse with HBO Max and Peacock because it wants to sell a larger share of their inventory as part of rev-share deals.

“That’s what funds our business and allows us to bring low-cost devices to consumers,” Wood said.

Roku also spoke about its growth with smaller publishers through The Roku Channel, which helps content providers do the heavy lifting of launching, marketing and monetizing an OTT channel. In Q2, Roku added 30 new linear channels to the Roku Channel, which now reaches 43 million people.

“The Roku Channel is not just an app,” Rosenberg said. “It’s an integral part of our platform and one of the key ways content partners are starting to publish into OTT.”

A view into OneView        

Roku shared details on the gangbusters growth it saw from performance advertisers through OneView.

By allowing advertisers to use Roku’s ad ID to target and measure across platforms, OneView has attracted more performance advertisers while expanding “the book of business we can do with an advertiser,” Rosenberg said.

“One of [OneView’s] strengths is helping advertisers optimize campaigns to bottom funnel results,” he added. “That’s bringing in a class of performance advertisers who may not have traditionally invested in TV.”

Roku also launched a shopper data capability in OneView for CPGs through a partnership with Kroger, which allows brands to onboard shopper data to target and measure CTV ads.

But while Roku is aggressively expanding its performance advertising capabilities, it still has its sights set on the global linear TV market.

“We need to play in both fields,” Rosenberg said, “but we’re investing very heavily in these advanced ways of trading and optimizing advertising.”