Roku’s Grab for Ad Money Pays Off with 57 Percent Growth in Q2

Over-the-top (OTT) platform Roku recorded 57 percent year-on-year growth to $157 million in its Q2 financial results as the company’s ramped up targeting of ad revenue appears to be paying off. Investors responded positively to the news, with Roku’s share price jumping over eight percent after the results were released.

Roku has over the past few years been diversifying its revenue streams, moving away from reliance on hardware sales. Income from the Roku platform, drawn from licensing fees and advertising revenue, exceeded income from Roku player sales for the first time in Q1 this year, and is now substantially higher. Platform revenue reached $90.3 million in Q2, a 96 percent year-on-year increase, compared to player revenue which hit $66.5 million.

“Robust active account growth expanded the reach and scale of our TV streaming platform, while at the same time Roku captured a bigger share of TV advertising budgets and continued progress on monetisation,” the company said in a statement.

Roku’s play for ad dollars has helped move the company closer to profitability, reporting losses of $100,000 for Q2, down from $13.4 million in Q2 last year. Some investors have been very sceptical of the company since its IPO last year, given that Roku doesn’t turn an annual profit, but ad revenue seems to be steering the company in a positive direction.

Roku runs both display ads and video ads on its platform, but counts video advertising as its primary source of ad revenue. Video ad revenue was listed as the largest driver of platform revenue growth, with a 48 percent year-on-year growth in average revenue per user (ARPU) also attributed to video advertising.

Partly this growth in ad income is tied to sales of Roku’s hardware, or of TV’s which run Roku software. The company now claims to have 22.0 million active accounts, up 46 percent year-on-year, with time spent streaming content on the Roku platform up 57 percent year-on-year. This increased scale has allowed it to draw in more income from video ads run on ad-supported channels hosted on the Roku platform.

The company has over the last year been seeking other ways to increase ad revenue both on and off its platform. Roku launched The Roku Channel in the US last September, a free advertising-supported video on-demand (AdVOD) service hosted on the platform. Since then, The Roku Channel has also launched in Canada and been made available via web browsers, meaning it is no longer available only to Roku users.

While the content library on The Roku Channel is much more limited than on the likes of Netflix, Amazon Prime or Hulu, Roku’s GM of platform business Scott Rosenberg suggested it may look to expand its library to become more competitive in the near future. “We’re getting more and more confidence in predicting what users are going to consume, what’s going to resonate with them,” he said. “We’re getting more and more expert — not just at prediction but actually promoting, driving traffic around it and that’s why you will see us get bolder with great titles like the Matrix Trilogy [Roku licensed the trilogy to offer the movies on Roku’s own channel].”

Roku also launched its Audience Marketplace back in June, which it hopes will attract more advertisers onto the platform by enabling them to use first-party user data to programmatically buy targeted campaigns across Roku’s owned and operated inventory.

The company still isn’t predicting an annual profit yet, forecasting an annual net loss of between $10-$22 million, but says it believes it is “well positioned to seize the significant opportunities being created by the transition to streaming”.

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