Roku ended the recent fiscal period with more than 61 million account households worldwide, with the majority of those households in the United States. That scale has prompted Roku to ramp up spending on original content it greenlights, licenses and streams via The Roku Channel, the company’s ad-supported VOD platform.
While Roku is the No. 1 gateway to third-party streaming services on the internet, the consumer electronics manufacturer of Chinese-made televisions and soundbars remains challenged attracting television advertisers, according to CFO Steve Louden.
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Speaking May 17 on the virtual Needham Technology & Media Conference, Louden said around 18% of legacy TV marketing budgets have moved to the Roku platform, compared to 50% of TV viewers. The executive sees the imbalance as an opportunity.
“Advertisers are actually lagging the consumers, so there is more [advertising] budget[s] to be had,” Louden said.
Specifically, the executive said that as The Roku Channel generates more reach and user engagement, the proposition to advertisers to move their budgets from legacy TV broadcast to streaming becomes more compelling.
“That engagement will happen over time,” Louden said.
When asked why ad-supported video streamers are subjected to the same ads repeatedly, unlike broadcast television, Louden said the AVOD market remains locked for the time being in the “wild west” in terms of user engagement, with each streaming service determining ad frequency cap, or number of times a targeted ad is shown to users.
Louden countered that The Roku Channel subject viewers to 50% of the ads they would see on broadcast television, while also trying to limit repetition of a single ad spot. Louden didn’t disclose what the ad load on The Roku Channel is.
“Not everybody has the same view about [ad frequency],” he said.
Regardless, as competitors Netflix and Disney+ ready less-expensive ad-supported subscription options, Louden said the move underscores the appeal of The Roku Channel, and viewer willingness to offset watching ads with a lower-priced entertainment choice.
“When we started The Roku Channel, most of the world had declared free ad-supported TV dead, and SVOD was going to be the only solution,” Louden said. “We’re very happy that the thesis we have [about AVOD as the future] has been proven correct. When there is more competition [among AVOD services], that’s good. We, as the leading platform in terms of engagement, we feel we have the best media and entertainment tools for content publishers.”