Ad Sales More Than Doubled Roku Q3 Earnings

U.S. big streaming player company, Roku, announced Q3 earnings on November 7th.

Total revenue was 39% up year-over-year, but loss from operation were also nearly 50% up to 11.7 million USD.

“Platform” revenue increased by 74%

Roku has 2 main sources of revenue for streaming services. The first is “Player” revenue, the revenue from sales of hardware’s such as TV and streaming player. And the second is “Platform” revenue, which includes agent fees from the paid channels such as Netflix, and commercial advertising fees on free channels.

Platform segment revenue was 74% up year-over-year to $100.1 million, with over two-thirds of the revenue coming from advertising services such as video ads, audience development and brand sponsorship advertising on the Roku user interface. With their business model, as the sales of hardware grow, Platform revenue will expand. Therefore, Platform segment will remain a key contributor to the overall increasing revenue.

Robust active account growth

The company has scaled active accounts rapidly through free TV operating system that runs on lower-cost hardware player. There are nearly 24 million active accounts in Roku in a competitive industry.

Besides strong growth in active account number, average revenue per user (ARPU) reached a new high of $17.34, 37% up year-over-year, with ARPU from advertising (video and display) growing even faster. This is the reason we see ad sales were more than doubled year-over-year.

The company launched free-to-watch “The Roku Channel” just over a year ago, in September 2017. The Roku Channel sent out brand sponsorship advertising during the free contents, and sales in these ads contributed most to Platform segment revenue. “The Roku Channel” has already become a top 5 popular channel among all Roku Channels and has got high support from the users.

Cost structure improved

With increasing R&D ratio, the company is improving sales-cost ratio steadily and rapidly. We can see sales-cost ratio kept on lowering to 54% this quarter.

Roku predicts that all TV, and eventually all TV advertising, will be streamed. In the upcoming streaming era, Roku announces to take several measures and one of them is “Measure Partner Program”. Roku launched this program from last quarter to help brands and publishers quantify the impact of advertising campaigns running on the Roku platform. Eleven partners including Nielsen, comScore, ResearchNow, Nielsen Catalina Solutions, Acxiom, Experian, Oracle Data Cloud, Kantar, Placed, Factual, and Polk, are part of the program. According to research, there are 46% of customers who watched the ads would visit the ads website.

This November, Roku struck a deal with Verizon’s Oath to distribute live and on-demand content from Yahoo and other media properties on The Roku Channel. The live and VOD content come from Yahoo News, Yahoo Finance, Yahoo Sports, HuffPost, RYOT and MAKERS will present under “Yahoo” banner.

According to company reports, the largest US cable and satellite TV services together have lost about 2 million linear TV subscribers so far this year – and about 4 million since the end of 2016. With more and interesting contents, Roku is leading the way on the technology front with an operating system that is purpose-built for TV and innovative services like The Roku Channel.

This report was published by Stockclip, Inc. on 12/11/2018.

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