Roku occupies a unique position in the connected TV ecosystem: Its devices are used by over 35% of connected TV users, making it the most popular brand among streaming devices. Roku also licenses its operating system to smart TV manufacturers. And the company’s growing ad business is a sign of the potential for connected TV to bridge the divide between traditional TV and digital video advertising.
Scott Rosenberg, Roku's senior vice president and general manager of platform, gave eMarketer's Paul Verna a look into the company’s ad business, and explained what advertisers want to see before they shift more ad dollars from traditional TV to connected TV. The interview was part of eMarketer’s August 2018 report, “Connected TV Advertising: Almost Ready for Prime Time.”
Roku’s advertising business started out with ads that pop up when you launched the device, but now that you’re focusing on in-stream inventory and sponsorships, what does it look like today?
Our original ad business circa 2013 was very much about inventory in our user interface, and we still do that on our home screen. When we agree to distribute a channel on our platform, our content partners typically negotiate for prominence in the Roku stream. Most of our big partners also come in and buy advertising from us to further accelerate their user acquisition and retention on the platform.
More recently, we’ve also started to factor in sponsorships. We’ll unlock content brought to you by such-and-such brand. For example, we had Showtime and a bunch of other content partners kick in free content to celebrate National Streaming Week. We brought in E*Trade as a sponsor, and those E*Trade placements existed in both our user interface and in the Roku channel where all this content was hosted.
That said, the video advertising side of our business—selling 15- and 30-second spots across hundreds of channels on our platform, including the Roku channel—is a substantially bigger ad segment for us now. That opportunity flows from our relationship with ad-supported channels on our platform—we negotiate for access to their audiences when we agree to distribute them—and from the Roku channel, which is a free, ad-supported channel we launched in September. It's already the third most popular free channel on our platform.
How much are these advertising opportunities driven by cord-cutters?