1. Roku ad sales are up. First let’s look at ad sales. Worldwide revenue in the Platform segment (which includes ad revenue and license fees from partners) went up by 11% y-o-y, easily blowing past analysts’ expectations. (Most of the Platform segment is advertising, but we don’t know how much exactly. The segment stands for more than 90% of Roku’s revenue, the rest being device sales.)
2. No recovery of the ad market yet. Does this point to a recovery of the advertising market? Sadly, no. Similar to yesterday’s @Meta results, this growth is mostly due to an increase in user numbers (accounts), which grew almost 16% y-o-y. And while streaming hours went up by 21%, indicating more usage per account, average revenue per account dropped by 7%. This points to a stubbornly lukewarm ad market. Roku in a letter to shareholders said as much: some encouraging signals in ad sales in CPG and health & wellness, but weakness in tech and in media & entertainment, and overall uncertainty due to the macro-economic environment.
3. Strike will affect ad sales. In fact, worse, Roku warned that due to the writers’ and actors’ strike, fall release schedules would be affected, delaying upfront negotiations, possibly putting a dampener on ad revenue.
4. Other publishers are in the same place. If we look at the results of other publishers’ recent earnings, a similar picture emerges. Perhaps some modest first signs of recovery, but nothing to write home about, and continuing uncertainty where the overall economy will be going. @Google‘s ad revenue grew by only 3.3%, and @Meta‘s whopping 12% increase can entirely be explained by growing user numbers. Granted, @Microsoft grew ads by 8%, but then they’re not one a major player in advertising.
5. Exceeding expectations, stock up. Nevertheless, Roku easily surpassed analysts’ expectations. The company’s stock price went up by almost 9% in after-hours trading.
Leave a Reply