The Trade Desk (TTD) shouldn’t buy Roku, and here’s why: First, TTD can’t afford it. Roku generated about $3.5 billion in revenue last year, which would place its acquisition price at around $10 billion. TTD, however, only has $1.5 billion in cash and cash equivalents. It cannot afford Roku.
But even if TTD did have the money, buying Roku would be a bad deal. Why burden yourself with a hardware business just to gain a modest source of connected TV (CTV) inventory, and only after paying a fortune for it? Especially when Roku is unlikely to be among the “last four streamers standing” when the dust settles?
Sure, it would be ideal for TTD to control the platform for its core business. We’ve seen what can happen when you don’t — like when Apple pulled the rug out from under much of Facebook’s advertising business by deprecating its Identifier for Advertisers (IDFA) in 2020. That move wiped billions off Facebook’s market cap almost overnight.
Even theoretically, acquiring Roku would not help TTD mitigate the threat of disintermediation to its CTV business, which now accounts for almost half of its revenue and is still growing.
The rumored development of its own Smart TV OS makes more sense for TTD. It’s a cheaper option and could also provide the company with greater security. The questions are: Could TTD sign up hardware partners to use its Smart TV OS, and would those partnerships make a significant impact in terms of transaction volume given the investment required for product and business development?
Ultimately, TTD may need to accept that there is a limit to how much it can control its environment. For now, given the fragmented and competitive nature of the streaming video market—and the desperation of streamers for revenue—it shouldn’t be too difficult for TTD to secure CTV inventory on favorable terms.
However, the big shakeout in streaming video has only just begun. As the landscape evolves to resemble traditional cable—dominated by four major networks, with a few smaller players that don’t significantly impact the market—securing CTV distribution will likely become more challenging for TTD.
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