ROKU and Stay at Home

Investment Analysis Clubs Saul’s Investing Discussions
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I can’t think of companies better positioned for literally being ordered to stay at home than Zoom and Roku.

I’m taxing this article from fieldf on another forum, I hope they don’t mind.

https://www.adweek.com/programmatic/pixalate-ad-fraud-scheme…

The article is specifically about an incident of ad fraud (not involving Roku) on the Roku platform but there are some investor gems buried in there I’ll get to shortly.

The story is that an ad tech company owns some apps that sells ad inventory to advertisers, including big brands like Geico through a variety of other Ad tech companies including TTD. The fraud occurs because the ad companies thought they were purchasing ad inventory on CTV shows and instead their ads were placed on other apps in Roku like screensaver apps or pet entertainment apps(while owners aren’t home).

The fraud occurs because as the article mentions CTV ads are the most valuable and highest margin ad space in the digital world at $25 CPM or $25 per thousand impressions(Roku has said average $30 CPM in conference calls). In comparison most digital inventory gets a few dollars ($3-5) CPM. So this app was buying $3-5CPM inventory and selling it as CTV inventory and viola bid buck fraud.

Roku responded that if you buy direct from them this will never be an issue. Dataxu?

Roku’s developer guidelines prohibit screensavers from running video ads, but the exploited app developers didn’t label their screensaver-like apps as screensavers, effectively working around the policy.

“When buying directly from Roku or trusted publishers, we can assure buyers that their ads will appear on channels certified for monetization on our platform. Furthermore, we developed our operating system and own the ad-tech stack and the first-party data that ensures that we offer a best-in-class ad experience and meet industry best practices,” a Roku spokesperson said.

So besides the CPM talk there the article had some other nuggets.

Roku is currently the top platform in CTV in terms of scale. Our research showed that in 2019, 59% of all programmatic OTT/CTV ads went to Roku devices. While others are gaining ground, like Amazon at 19%, “Roku remains the top platform by quite a bit,” Nasir said.

multiple platforms have noted a recent rise in CTV ad requests.

Viamedia, a monetization platform for cable TV groups, saw a 30% increase in OTT revenue between March 9 and March 19. Beachfront Media, a video-focused SSP, said it saw a 92% increase in CTV requests during the week of March 12.

So while no direct statement on ROKU ad revenue one could surmise they are seeing a similar increase in ad impressions and revenue. And as can be seen Roku has a very dominate position in CTV programmatic ads on its platform. 59% vs #2 FireTV at 19%.

Other sources are discussing the shifting budgets towards CTV.

For the most part, ad buyers are looking to the TV networks to help them find alternative inventory rather than rushing to cancel campaigns, according to agency executives. Both sides recognize that the networks cannot plug their sports programming gaps with anything that would attract a comparably large and broad audience, “so it’s about how do we redirect and try to reach those audiences. That’s mostly been redirecting to digital video, OTT and advanced TV,” said Adam Simon, svp and executive director of strategy at UM’s IPG Media Lab

https://digiday.com/future-of-tv/ever-changing-situation-tv-…

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Nice find Darth I doubt even a recession will dent CTV ad rev much. I think Roku’s weak price action the last couple days has been due to their tapping the $69M revolving credit. The market seems to view it as a negative. They had $517M in cash at the end of last Q. So, why would they even need the $69M?

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The key here is how is ConnectedTV ad spend affected by this recession and panic, across TTD and ROKU.

In the other side of ad tech, Facebook and Twitter and Google ad rates are PLUMMETING. But those are for web and mobile ads. ConnectedTV is wholly a different angle. We don’t know if it will be impacted the same way, or stay immune due to all the eyes on those ads right now.

Beth Kindig was talking about this on Twitter about ad impact seen thus far.
https://twitter.com/Beth_Kindig/status/1243096192386392065
https://twitter.com/Beth_Kindig/status/1242815399193767936

I asked about Roku and she replied…

"Facebook and Twitter have a lot more eyeballs too right now. Everyone on a lot of screens during the quarantine. Nobody has experience with this kind of situation. Roku could do well or could get hit with low ad demand. Disney is closed. Are they spending the same? I don’t know.

I can tell you this hasn’t happened before to Facebook or Twitter - where users are up but ad demand is down. OTT usage and mobile usage are both up. Halted economy is hard to predict in the short term. Conviction remain same for the long term."

So the answer is ultimately that we don’t know the impact on ROKU til we know. As I said in my Tremors post, the net LONG TERM effect is sure to be that Roku is solidifying its lead in ConnectedTV/OTT services, and ultimately ends up with more eyes and viewing after all is said and done. But it’s likely to be a few rocky months as we discover the effect of ad spend during this turmoil.

-muji
long ROKU

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“I can tell you this hasn’t happened before to Facebook or Twitter - where users are up but ad demand is down.”

Here is the part I don’t understand in terms of ad spend. What is the sales and ad implementation cycle look like? How long is that time period from the point where I want to place an ad, so I create the ad, purchase the ad space and then execute by running the ad. How long is that process?

I ask because could it be possible that many advertisers have been caught off guard? Is is possible that this once in a lifetime event of the astronomical increase in eyeballs across all of these formats just hasn’t yet been addressed by advertisers?

I really don’t know, but it just does not make intuitive sense to me that all of these platforms show an unbelievable increase in available “impressions” and fewer companies want to take advantage of that opportunity?

Maybe there is a whole, entirely new cohort of companies that traditionally don’t advertise that need to advertise now, but just have not yet completed the creative side of producing the ad content. Maybe some of the traditional advertisers have had to zig on producing new ad content as the world has zagged on them.

Just trying to make sense out of something that just doesn’t seem right to me.

Example: I understand the Buffalo Wild Wings isn’t going to run an add showing everybody hanging out in the restaurant drinking beers and watching NBA playoffs…BUT, are they down in their basement right now creating new content that focuses on a Covid sensitive ad campaign that highlights take out and delivery?

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Hmcproperties:

This is anecdotal but I recently drove back from Palm Springs to the Canadian prairies and noted a number of national chains appeared to me to shifted their tv ads to hi-lite drive thru, take out,Uber eats etc. None mentioned the Covid.crisis. This was noted over a period of five days. Even more notable to me was weathertech known for their custom floor mats has new advertisements on tv illustrating how easy it is to disinfect and wash them. Seems some companies are transitioning and creating content quite fast.

Be well,
Dwight

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“Seems some companies are transitioning and creating content quite fast.”

I’d say a lot of companies are creating new content quite fast.

Tonight I watched about an hour of prime time network TV and saw the following ads:

Little Caesar’s - they don’t touch your pizza after it cooks - safe to eat.

Ford - will defer payments on a new car purchase

Hyundai - will defer payments on a new car purchase

Buick - GM - deferred payments

Free OnStar - to keep you safe, and new financing terms

Toyota - open and committed to supporting the community

Acura - remaining open thru the crisis

Infiniti - no payments for 90 days

BMW - new financing options

AutoNation - still open - health and safety are there # 1 priority.

…and the list goes on.

It was insane how many new COVID-19 related ads there were and how quickly these came out.
Amazing to see every car company with aggressive new ad campaigns.

I know the speculation is that ad spending is way down but that’s not what I saw on prime time network TV tonight. Felt like I was watching the Superbowl.

Are there really published numbers about ad spending being down or is that just speculation?

Applications and content with more eyes are certainly going to get more business from companies that are desperately and creatively trying to attract customers.

Wish I owned TTD, ROKU, …

ClydeJ

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Are there really published numbers about ad spending being down or is that just speculation?

“We don’t monetize many of the services where we’re seeing increased engagement, and we’ve seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19.”

FB -24% YTD
TTD -23% YTD
ROKU -38% YTD

I don’t understand why ROKU is punished so much more. I think it is very mispriced here. CTV/OTT is where all the growth is in ad space. Roku is now combining the best features of TV ads (can’t avoid nor skip) with the interactivity of mobile ads (clickable). They are changing the rules about what Streaming Ads can do at the same time the market is exploding.

Stay-at-home is boosting streaming hours heavily. This isn’t going away. Roku provides the most eyes and is likely still growing its lead right into this new stay-at-home situation. Ad rates may dip … but Roku’s platform will only strengthen as they win either way regardless of up or down economy right now. In good times, folks are signing up for
Premium channels that they get a cut of. In lean times, consumers are reducing spend and relying more on free, ad-supported content more. Roku Channel is likely seeing huge viewer gains right now.

-muji
long ROKU

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From ROKU’s last quarterly call, “For the full year, nearly one in three smart TVs sold in the U.S. were Roku TVs.”

With unemployment skyrocketing, sales of new televisions will take a huge hit. Perhaps the sentiment is growth in new users will also slow.

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