Advertisers Not Yet ‘Caught Up’ to ‘Secular Shift’ to Streaming, Says Roku
Roku users streamed more hours of TV in the past 18 months than “in the previous nine years combined,” said CEO Anthony Wood on a call about Q4 Thursday evening. “Advertisers are following” viewers as they shift from linear TV to streaming, “but they haven't caught up yet,” he said. Friday, the stock closed up 25 percent at $64.47.
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Over-the-top ad dollars are “still relatively small” compared with the number of viewers who shift, but “we are starting to see that change,” said Wood. Advertisers find OTT placements a difficult buy, said Scott Rosenberg, general manager-Roku platform business. “We're making great progress on the street with the ad community,” he said. “We're in the early stages of a secular shift” from TV linear ad spending into OTT, and Roku “is driving this transition better and more smartly,” he said.
Roku is making strides “showing advertisers the reach arithmetic, the number of users who left linear who are now in OTT and are only reachable on the Roku platform,” said Rosenberg. It’s estimated that “well more” than 10 percent of TV viewing is happening in OTT, “yet nowhere near 10 percent of TV ad budgets are yet spent in OTT,” he said. Roku’s “monetized video ad impressions” more than doubled in 2018, “and we think that will more than double again in 2019,” said Chief Financial Officer Steve Louden.
Cord cutters are “a key targeting segment for us,” said Rosenberg. “The opportunity to reach consumers who cut or shave the cord” and are “simply no longer reachable through a linear ad campaign is why advertisers invest with us,” he said. Roku estimated 3 million U.S. homes cut the cord last year. Wood said “roughly half” of Roku’s 27.1 million active user accounts are cord cutters, including the 7.8 million accounts it added in 2018.
Wood thinks virtual MVPDs are “great” because they give reluctant cord cutters a bridge to shift to streaming and “it drives more streaming usage on our platform.” Roku gets a revenue share if customers sign up for a vMVPD through Roku, he said.