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ROKU CELEBRATES A SEMI ‘REBOUND’ IN STREAMING AD GROWTH | ADEXCHANGER
Home CTV Roku Celebrates A Semi ‘Rebound’ In Streaming Ad Growth
CTV
ROKU CELEBRATES A SEMI ‘REBOUND’ IN STREAMING AD GROWTH
By Alyssa Boyle
Thursday, November 2nd, 2023 – 12:50 am
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Roku is bouncing back from a slump in ad sales growth … somewhat.
The company’s total revenue grew 20% YOY in Q3, while platform revenue, which
encompasses ad sales and content distribution, was up 18% YOY.
Compared to Q1, when platform revenue dipped 1% YOY, and Q2, when recovery in ad
sales growth was still shaky, things are certainly looking up for Roku, which
blamed its past weaker performance on macroeconomic concerns and the twin
strikes by Hollywood writers and actors.
But now “we’re seeing a solid rebound in [revenue from] video ads,” said CFO Dan
Jedda during the company’s earnings call on Wednesday.
Although studios and actors still can’t reach an agreement, economic conditions
are improving and Roku has been busy creating new ad units, expanding
programmatic supply for buyers and growing its account base.
Roku added 2.3 million new accounts globally last quarter, the same steady
growth rate it reported this time last year. Roku now has 75.8 million monthly
active global accounts, a 16% YOY jump.
People are also spending more time watching TV on Roku. Global streaming hours
on Roku grew 22% YOY, and streaming hours are up 50% YOY on The Roku Channel
specifically, which is free to users who already own a Roku device.
Roku credits that growth in large part to having expanded its content library
with sports and free ad-supported TV channels, content that doesn’t hinge on
production schedules.
Ads, baby
But the real star of Roku’s Q3 was the “strong contribution from video
advertising,” said CEO Anthony Wood.
Roku expanded the ad units on its home screen to brands from any vertical in Q2
to create more ways for advertisers to reach ad-free viewers. (Amazon made a
similar ad update for Fire TV this week.)
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Roku also rolled out new full-screen interactive ad units called “showrooms” in
Q2 and introduced video ads to the Spotify app within Roku’s OS in September.
More inventory and more programmatic availability are both behind the new growth
in ad sales, according to Wood.
Roku is still working to make more of its inventory available in demand-side
platforms other than its own. Transactions through third-party buying platforms
“grew meaningfully” in Q3, Wood said, although he didn’t share exact numbers.
Proceeding with caution
But Roku isn’t totally out of the woods yet.
Average revenue per user (ARPU) dropped 7% YOY to $41.03, which is the same
percentage of YOY decline as the prior quarter, when account growth was
outpacing the growth of its platform business. Still, ARPU is up
quarter-over-quarter for the first time since Q3 of last year, Jedda said. (Roku
ended Q2 this year with an ARPU of $40.67.)
“[Roku’s] ARPU will continue to benefit from a recovery in the ad industry,”
Jedda said, referring to the macroeconomic conditions that interfered with ad
revenue growth for most streaming services throughout this year. Expect similar
growth in ARPU this quarter, he added.
“However, we remain cautious amid uneven market recovery,” Jedda said.
Ad spend overall is growing at an unpredictable pace because it varies by brand
type. Spend across health and wellness and in the consumer-packaged goods
verticals is growing steadily, whereas financial services and media and
entertainment ad spend isn’t growing as quickly, Jedda said.
These lags will “challenge” ad revenue growth in Q4, he said, particularly in
the media and entertainment category considering the ongoing actors strike.
But here’s some decent news for Roku: Revenue from TV device sales, historically
a low-margin business overall, is up 33% YOY, thanks in large part to Roku
launching its own TV sets earlier this year.
So, despite suboptimal ARPU numbers and uncertain ad sales growth, “we’re
optimistic about the ongoing rebound in video advertising on our platform,”
Jedda said.
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