Roku TV Set-Top Ad Biz Delivers Impressive Results


Author: Wayne Friedman  Source: MediaPost

Traditional TV media companies need to get into over-the-top TV advertising revenues. The reason is economic. Nontraditional TV companies are making eye-opening advertising TV numbers.

Roku, the biggest OTT set-top-box maker, pulled in $125 million in overall third-quarter revenue, up 40% from the same period a year ago and double the amount since the start of 2017. This was on the day Roku began as publicly traded TV company.

Roku says about two-thirds of its “platform” revenues, which totaled $57.5 million, came from video ads served on ad-supported networks, including The Roku Channel. It did not go into details for all those ad-supported channels.

Platform revenues -- which include ad results -- are growing much faster than set-top-box sales -- up 137% versus the third-quarter 2016. It isn’t the same when it comes to revenue from sales of its set-top players -- a slight 4% hike to $67.3 million from the third quarter in 2016.

No matter. Investors liked this picture a lot -- kicking up Roku’s new stock 26% on Wednesday. On Thursday, Roku rose another 50%, stopping at $29.19.

Roku is the leading TV app set-top-box provider -- with a 37% share, and some 16.7 million accounts. Amazon Fire TV is at 24% share, while Chromecast is at 18% and Apple TV is at 15%.

Roku’s advertising revenue is healthy, and it speaks to what TV advertisers are looking for: TV-like advertising avails. Make that mostly premium TV-video advertising avails.

Now, it isn’t on the same order as Hulu, which does around $940 million annually in advertising revenue, according to estimates. But as a pure independent media company, Roku shows that premium TV digital video advertising has room for innovation.

Much of this may be coming, when this technology might be included in TV sets, with perhaps Roku licensing more to TV set makers and others, all while retaining -- if possible -- some advertising share.

Obstacles will exist everywhere, including from Samsung and Vizio, two big U.S. manufacturers that have been mulling all this advertising activity, especially with their evolving smart TV interfaces.

Until then, we’ll keep our eyes open. On all screens.