Roku Inc., a streaming-media company that derives its revenue from media companies, is facing a unique challenge due to the ongoing Hollywood strikes. However, the company is finding ways to navigate this predicament and maintain profitability.
Roku generates revenue through various channels. It sells devices directly to consumers, takes a percentage of subscriptions bought through its platform, licenses its operating system to TV manufacturers, and sells ads. Advertising on the Roku platform is particularly attractive to media and entertainment companies as it allows them to reach users who have expressed interest in viewing content.
The CEO of Roku, Anthony Wood, spoke about the company’s appeal to media and entertainment advertisers during a recent earnings call. He highlighted Roku’s ability to help viewers discover content across different services and platforms. Wood emphasized their integration of M&E promotions into the user interface, which proves to be an effective and user-friendly way of exposing content.
Wood stated, “One of the biggest roles we have is helping viewers find something to watch across all the different content and services on the platform…through our M&E promotions, which are a very effective way and a very user-friendly way to expose content.”
While media and entertainment advertising has experienced a decline due to the current economic climate and advertising cycle, Roku believes it is gaining a larger market share amidst these circumstances. The company’s Chief Financial Officer, Dan Jedda, mentioned that they anticipate further pressure on media and entertainment advertising in the second half of the year due to limited release schedules caused by labor strikes. Nonetheless, Roku’s executives have been actively working on diversifying the company’s exposure and ad opportunities.
Roku remains optimistic about its ability to overcome the challenges posed by the current state of the industry. With its innovative strategies and strong position in the streaming-media market, Roku aims to continue providing value to both viewers and advertisers alike.
More from : Actors, writers, hotel housekeepers and grad-student workers are all striking for the same reason
Expanding Opportunities with Roku City
Charlie Collier, the president of Roku Media, disclosed during the earnings call that they are currently facing more demand than capacity in Roku City. As a result, they are actively exploring thoughtful ways to expand their reach and cater to the growing interest from advertisers. The early moves seem to be resonating with streamers as well. Collier shared comments from fans who expressed their excitement about Barbie virtual installments, showcasing the positive reception towards these new brand collaborations.
Roku Announces Shopify Partnership
In addition to the developments in Roku City, the company has recently announced a partnership with Shopify for shoppable TV ads. This strategic move aims to leverage the power of streaming platforms and e-commerce to create a seamless shopping experience for viewers. By integrating e-commerce functionality into their ad platform, Roku is opening up new possibilities for brands to engage with their audience and drive conversions.
Outlook and Market Reaction
While facing media-ad pressures and observing signs of potential recovery in other ad categories, Roku’s third-quarter revenue forecast indicates expectations for a sequential decline. However, this outlook surpasses consensus views, leading to a surge in the company’s stock price by nearly 20% during Friday morning trading. Analysts are now questioning whether the company’s view is too conservative.
According to Steven Cahall of Wells Fargo, the outlook presents more opportunity than risk. He highlights the potential for Roku to achieve a sequential improvement in revenue per hour, which would greatly contribute to its monetization efforts. Additionally, it’s worth noting that Roku has a history of providing conservative guidance, as emphasized by Jason Helfstein from Oppenheimer.