Roku is having its moment as cord-cutting households opt for streaming services over old-school cable packages — and advertisers are getting on board.
On Thursday, the company reported that total Q4 net revenue surged 58% to $650 million, beating analysts’ expectations of $617 million, according to IBES data from Refinitiv.
Platform revenue, which includes ad sales, rose 81% to $471.2 million, exceeding estimates of $416 million, as Roku’s six largest ad agency buyers more than doubled their spending year-over-year, CEO Anthony Wood said on the earnings call.
“The progress that was made in 2020, with more and more viewers shifting to streaming for their TV, more advertisers following their viewers to streaming, and more content companies launching major new streaming services, these are enduring structural changes,” he said.
The Roku Channel, Roku’s free, ad-supported streaming network, has been a major boost to both ad revenue and device sales, which grew 18% to $178.7 million in the quarter. The Roku Channel is growing at twice the rate of the platform overall, Wood said.
“The Roku Channel is benefiting from this virtual cycle of more advertising dollars, more content and more viewing,” he said. “We’re focused on an AVOD business model, which means licensing or sourcing content that’s profitable on an ad-supported basis.”
As streaming activity grows, Roku’s average revenue per user rose 24% year-over-year to $28.76. The company also added 14 million active accounts in 2020, closing out the year with 51 million active accounts and 63 million active users.
Roku viewers streamed 17 billion hours of content between October and December 2020, averaging at 3.8 hours per day per active account. That’s an increase from Q3, when streaming hours hit 14.8 billion .
“We think the pandemic has accelerated and permanently changed the curve on the shift to streaming,” Wood said.
Original content push
Roku, which hosts popular streaming services including Disney+, Netflix and Amazon Prime Video, hasn’t made a play in the original content space yet.
But after purchasing Quibi’s content library in January, Roku plans to up its game on this front.
Roku will begin adding Quibi content to its Roku Channel platform for free later this year. The company also recently posted a job listing for a lead production attorney, indicating it plans to hire up on the content side, per Protocol.
“As our scale grows, we have more options with the type of content that we can source, whether it’s licensing or an acquisition of local content rights like we did with Quibi,” Wood said.
Expanding into original content will put Roku in closer competition with the content providers it hosts on its platform. That tension was already building as Roku struggled to hammer out a carriage deal to carry both WarnerMedia and Amazon Prime on its platform last year.