Roku has built its business on the idea that they can sell cheap streaming players and TVs as long as they make up the money with ads. Now Roku says that revenue from ads on streaming will soon be larger than revenue from traditional pay-TV services according to a report from Bloomberg.
“In the long run, the total addressable market for streaming video is all TV money, period,” said Scott Rosenberg, a senior vice president and general manager of Roku’s platform business. Over-the-top (OTT) streaming “lets advertisers do things that they’ve gotten used to in digital but which hasn’t been possible on TV,” such as individually targeting consumers based on user-specific data.
This report comes as Roku, in the third quarter of 2019, saw revenue from ads and subscriptions jump $112.2 million up 59% over the same period in 2018. This is compared to revenue from streaming player sales that was just $6.2 million.
When asked about how much money Roku makes off its hardware, Roku’s CEO said: “We don’t really make money… we certainly don’t make enough money to support our engineering organization and our operations and the cost of money to run the Roku service. That’s not paid for by the hardware. That’s paid for by our ad and content business.”
More and more we are seeing ad companies put more dollars into digital advertisements. While TV ad sales are still huge, as subscriber counts drop ad companies have started to look at other ways to reach their audience.
Roku seems to be one of the big winners when it comes to streaming ads on your TV. They are one of the largest sellers of streaming ads on TVs, and they are well placed to continue their dominance in the world of streaming video ads on your home TV. The question now is how quickly will ad spenders move their money from traditional TV placements to streaming services.