"On TV And Video" is a column exploring opportunities and challenges in advanced TV and video.
Despite video streaming giant Roku’s record year, Scott Rosenberg, Roku’s SVP and GM of its platform business, told reporters ahead of Thursday’s earnings call, “we’re certainly going through a catch-up period” when it comes to ad spending keeping pace with the surge in streaming viewers.
“I think 2020 was a transformational year for TV marketers who understand that viewership is leaving linear TV and not coming back,” he said. “We’re certainly seeing that start to show up in the TV upfront commitments that advertisers made – they’re generally down and more flexible and many advertisers have the opportunity to reallocate budgets to OTT. But we still have a ways to go in terms of the dollars matching consumer time – we’re nowhere near seeing half of TV money being invested in streaming yet.”
For Roku in particular, the primary impediment to the growth of its ad business – which saw the number of monetized video ad impressions in Q4 more than double YoY – is the behavior of TV ad buyers who traditionally buy linear TV.
“That’s the biggest short-term obstacle for our ad business,” CEO Anthony Wood said during the earnings call.
Rosenberg noted how the head of investment at a major ad agency recently admonished his colleagues, saying they should be buying TV in the same way that they watch TV.
“He’s basically saying, you all at home know how you’re watching TV and that it’s heavily streaming and yet you’re not matching your investment,” Rosenberg said. “Our biggest challenge and biggest competition is ultimately competing for ad dollars away from the traditional TV spending pattern. We’re making great progress there.”
The rise of streaming services on Roku like Disney Plus, HBO Max and Peacock will only continue to drive the cord-cutting trend. In Q4, Rosenberg said that the six largest agency holding companies more than doubled their OTT spend with Roku, the same agencies that control the majority of TV ad spending.
“These services launching are drawing more consumers into streaming and creating an even better case for consumers to cut the cord and move more of their viewership to Roku, to streaming,” Rosenberg said. “It’s further more helpful that all of the recent direct-to-consumer services have an ad-supported strategy in place, because that bolsters the overall narrative within the market that we’ve been in for years now about the importance of advertisers investing in OTT.”
A Bigger Role For Programmatic
Rosenberg said OTT will become “heavily” programmatic over time, a key reason for Roku’s investment in its OneView ad platform, the DSP it rebranded in 2020.
“A majority of spending in OTT is still a more traditional spending pattern – insertion order based – largely because most of the money that’s flowed into OTT has come out of TV budgets and that’s generally how TV has been spent historically,” he said. “We do believe that long term … programmatic will become a majority of how OTT is bought and sold, not the least of which because programmatic is a superior way to leverage our data, to leverage measurement, to do dynamic optimization of your spend.”
Last year was a foundational year for OneView, which integrated with Roku-native identity, data and attribution tools. The platform drove significant year-over-year growth and spending on OTT impressions through OneView more than doubled in 2020, while spending on impressions delivered on the Roku platform in OneView more than quadrupled.
“OneView has deepened our agency holding company relationships and licensing of OneView is a component of the upfront agreements that we wrote in Q4 with all the major agency holding companies,” Rosenberg said.
OTT remains a premium product and prices relative to television, and Rosenberg said there’s a whole other class of advertisers coming into OTT “who either couldn’t invest or couldn’t invest much in television, because as a medium, it didn’t work for them and didn’t give them the performance credentials, or measurement that they needed.”
“These are advertisers who may have historically invested much more heavily in social media, in search and display advertising, who are now able and interested in participating in OTT because of the ability to measure and optimize,” he said. “And those advertisers are not always going to be buying on a traditional CPM basis. Some of them are going to be buying on a performance basis, on a cost-per-action basis.”