Roku is sitting in a nice position as the streaming wars kick off.
The OTT platform reported on Wednesday net revenue growth of 50% year over year to $260.9 million in Q3. And it will benefit from the proliferation of both ad-supported and non-ad-supported services.
More high-profile streaming services will drive more engagement on Roku, allowing the platform to capture linear TV budgets as they follow consumers over the top, said CEO Anthony Wood on the earnings call.
“We think eventually all TV will be streamed,” he said. “The rise of these services will encourage that transition.”
Wood compared Roku’s position in the streaming market to retailers that capture shopper marketing budgets from manufacturers whose products they sell. As Disney+, Apple TV+, Peacock and HBO Max launch within the next six months, Roku is selling tune-in ads and premium placements on its home page to drive subscriber acquisition.
“We have built into the platform a lot of tools to promote their services and sign-up subscribers, and they’re taking advantage of those tools,” Wood said.
More ad-supported streaming services will increase inventory that Roku can sell.
Roku’s platform revenue, which includes advertising, increased 79% year over year to $179.3 million. The volume of monetized video ad impressions more than doubled in the quarter, and average revenue per user was up 30% year over year to $22.58.
Roku’s ad-supported network, The Roku Channel, is becoming a bigger revenue contributor. As more people tune into ad-supported streaming services, Roku makes more money to invest in better content, creating a virtuous cycle, said Scott Rosenberg, SVP and general manager of Roku’s platform business. The network already has 40 live channels, 30 family shows and access to 40 premium subscriptions like HBO.
“In the aggregate, the more attention and energy that’s put into OTT advertising, the better for everybody,” Rosenberg said.
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Roku anticipates its $150 million acquisition of dataxu will inspire more advertisers to purchase OTT inventory, since dataxu’s self-serve suite makes planning and buying easier than it had been before.
Roku also thinks it can use dataxu’s device graph and data science capabilities to prove out OTT’s value.
“We look at [dataxu] primarily as a vehicle to bring demand into the ecosystem from TV,” Rosenberg said.
For now, Roku will remain open to other DSPs such as The Trade Desk and Adobe, depending on buyer preferences.
“Being an open ecosystem is essential to how we operate here,” Rosenberg said. “It’s both good to the ecosystem and good business.”
While the deal hasn’t closed yet, Roku said it will not break out dataxu’s revenue separately because it plans to integrate the platform into its overall stack. Roku expects dataxu will drive $13 million of platform revenue in Q4.
Thanks in part to the acquisition, Roku is raising its overall 2019 outlook to 49% year over year growth, to $1.1 billion, up from 46% growth previously predicted.
“Dataxu is a natural step in the roadmap we’ve been pursuing,” Rosenberg said.
