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The Rundown: Roku reports advertising slowdown in the next quarter

Netflix isnt the only real streaming company to possess experienced a slowdown in the next quarter of 2022. Roku has similarly seen a slowdown in its platform business, which encompasses its advertising business.

In Q2, there is a substantial slowdown in TV advertising spend because of the macro-economic environment, which pressured our platform revenue growth, browse the opening type of Rokus letter to shareholders published on July 28.

The main element numbers:

  • $764 million altogether revenue, up 18% year over year
  • $673 million in platform revenue, up 26% year over year
  • $91.2 million in player revenue, down 19% year over year
  • 63.1 million active accounts, up 14% year over year
  • 20.7 billion hours worth of video streamed through Roku, up 19% year over year
  • Average revenue per user of $44.10, up 21% year over year

Advertising slowdown

Roku didn’t put any numbers on its advertising slowdown, however the company did underline that advertising revenue grew by some percentage, just at a slower pace. It attributed the ebb to advertisers pulling money from the scatter market, i.e. the inventory available beyond annual upfront commitments.

Platform revenue growth was less than expected as much marketers abruptly curtailed or paused advertising spend in the ad scatter market through the latter 1 / 2 of Q2, the business stated in the shareholder letter.

Throughout a call with reporters on Thursday afternoon, Roku chief financial officer Steve Louden said the scatter ad market pullback generally occurs at hawaii of some type of downturn. Roku enables upfront advertisers to cancel their commitments to a larger degree than traditional TV networks by supplying a two-day cancelation option. However, Roku vp of ad sales and strategy Alison Levin said through the call with reporters that Roku didn’t see upfront advertisers cancel their commitments in Q2 for a price any unique of previous quarters and attributed the slowdown to the pullback in scatter.

Upfront bright spot

Roku has signed upfront handles all seven major agency holding companies and secured $1 billion altogether commitments, the business announced in tandem using its earnings report. Of the advertisers that made upfront commitments to Roku this season, 25% didn’t sign upfront handles the company this past year.

Asked what percentage of last years upfront advertisers did upfront handles Roku this season, Levin didn’t directly answer fully the question, but said that in key verticals, Roku retained 100% of upfront advertisers from this past year. She didn’t specify what those verticals were.

Hardware hardship

Rokus declining hardware business isnt helping the business cope with the advertising slowdown. The business has been coping with supply chain issues affecting sales of its CTV devices and smart TVs which are powered by its CTV platform.

In Q2, Rokus U.S. hardware sales were less than Q2 2021, per the shareholder letter. That decline in sales means that Roku isn’t adding as many folks to its platform as in previous periods, though it still added 1.8 million active accounts in the quarter.

With hardware sales struggling, Roku seems to be pressed to obtain its existing user base to invest additional time streaming movies, Television shows and videos on its platform to be able to generate platform revenue, which may include advertising revenue. However, in Q2 the quantity of time people spent streaming programming on Rokus platform dipped by 1% from Q1 to 20.7 billion hours. That dip contrasts with streamings share of total TV watch amount of time in the U.S., which increased in the time, reaching an archive 34% share in June, in accordance with Nielsen.

Murky outlook

Roku has withdrawn its revenue growth guidance for the entire year of 2022 in light of the gloomy macroeconomic conditions. Quite simply: There’s an excessive amount of macro uncertainty for all of us to provide a complete year outlook, Roku CEO Anthony Wood said through the companys earnings call with analysts on Thursday.

Amid that uncertainty, Roku has slowed its pace of hiring a lot and contains also looked to slow the growth of non-head count costs, Louden said through the call with reporters. He didnt say what those costs were, but he later said that the business has been considering the costs connected with its free, ad-supported streaming TV service The Roku Channel, which include the money the business spends to license programming for the service along with the money it spends to create original shows and movies.

Roku did reveal its expectations for the 3rd quarter. Theyre not great, although company does expect total revenue to tick up by 3% year over year in Q3 to attain $700 million.

Roku is expecting that advertising spend, particularly in the scatter market, will still be negatively impacted. We also think that consumer discretionary spend will continue steadily to moderate, pressuring both Roku TV and Roku player sales, its shareholder letter stated.

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