Netflix isn’t the only streaming company to see poor performance in the second quarter of 2022. Roku has also been hit by a slowdown in its platform business, including its overall advertising business.
Roku’s July 28th “letter to shareholders“In the second quarter, the impact of the macroeconomic environment led to a significant decline in TV ad spend, which weighed on our platform revenue growth,” it reads.
Roku didn’t provide figures for the decline in its advertising business, but emphasized that ad revenue is growing somewhat, albeit at a very modest pace. It attributed this to advertisers withdrawing funds from the scatter market, or inventory that was left unsold on the upfront.
In a letter to shareholders, the company said platform revenue growth slowed “as many marketers abruptly reduced or paused their advertising spend previously spent on the handout market in the second half of the second quarter.” “It was below expectations,” he said.
During a conference call with reporters on the afternoon of July 28, Roku CFO Steve Luden said loose market recessions generally occur “in certain recession conditions.” . Roku allows upfront advertisers to cancel their commitments by offering a two-day cancellation option, more than any other TV network company.
But Alison Levin, the company’s vice president of ad sales strategy, said in the same conference call that the percentage of Roku’s upfront ad subscribers that canceled commitments in the second quarter was “that It was at a level “almost unchanged from previous quarterly figures,” and attributed the slowdown in the advertising business to “exiting the loose market.”
Along with the earnings call, Roku also announced that it has signed upfront deals with all seven major Agency Holdings, securing commitments totaling $1 billion. Of the advertisers who signed upfront deals with Roku in 2022, 25% had not signed with the company in the previous year.
When asked what percentage of upfront advertisers in 2021 will continue to sign deals with Roku in 2022, Levin declined to give a direct answer, but said that “in the major media verticals,” Roku said it is keeping 100% of its upfront advertisers for 2021. However, it did not clarify what these vertical media are.
Roku’s hardware business is in decline, and it’s not helping the slowdown in its advertising business. The company has been grappling with supply chain issues affecting sales of CTV devices and smart TVs to use its CTV platform.
Roku’s U.S. hardware sales for the second quarter of 2022 are “down year-on-year,” according to a letter to shareholders. The drop in revenue could be a sign that the platform hasn’t gained as many users as it did in Q2 2022, even though the company added an additional 1.8 million active accounts.
With hardware sales struggling, Roku needed more time for existing users to stream movies, TV shows and videos on its platform in order to increase platform revenue, including advertising revenue. It seems that However, users streamed shows on Roku’s platform in the second quarter to 20.7 billion hours, down 1% from the first quarter. This decline in viewing time was driven by an increase in streaming viewing as a percentage of total TV viewing time in the US during the quarter, reaching a record high of 34% in June (Nielsen[Nielsen]investigation).
Roku has dropped its 2022 full-year revenue growth criteria given the sluggish macroeconomic conditions. That is, “the macro uncertainty is too high to give a full-year outlook,” Roku CEO Anthony Wood said during a videoconference conference call with analysts on July 28. rice field.
Amid this uncertainty, Roku has slowed its hiring pace “significantly” to limit the increase in “non-headcount costs,” Luden said during a conference call with reporters. speaking. He didn’t say what those costs were, but he later explained that the costs associated with the free, ad-supported streaming TV service, The Roku Channel, included program licenses and original shows and movies for the service. He said it included production costs.
Roku also revealed its expectations for the third quarter, but it doesn’t look like much growth, with total revenue expected to grow 3% year-on-year to $700 million.
Roku predicts that “ad spend, especially in the slam-dunk market, will continue to be negatively impacted.” In a letter to shareholders, the company said, “We expect consumer discretionary spending to continue to be moderate, which will weigh on Roku TV and Roku player sales.”
Tim Peterson (translation: SI Japan, editing: Shohei Wakeshima)