Roku CEO: Why streaming ads are more effective than TV ads

JP Mangalindan
Chief Tech Correspondent

Streaming video has several advantages over traditional TV and cable for viewers, but there are benefits for marketers, too.

“Steaming ads work really well, even more effectively than ads on linear channels,” Roku CEO Anthony Wood told Yahoo Finance on Wednesday afternoon after the popular streaming company posted better-than-expected first-quarter 2018 earnings.

Roku (ROKU) contends that has to do with a number of factors. Not only are streaming ads more targeted to each user’s individual interests and tastes on the Roku platform, but they’re usually served fewer ads than on TV, as well. Fewer ads overall probably helps explain why those surveyed said streamed ads were generally more memorable — they weren’t inundated as much.

Roku posted better-than-expected Q1 2018 earnings, driven platform sales. by Source: REUTERS/Brendan McDermid

Roku on Wednesday reported a loss of $.07 per share on revenues of $136 million, which is significantly better than the loss of $.15 per share on revenues of $127.6 per share that Wall Street analysts had been generally expecting. The number of active Roku accounts also grew 47% year-over-year to 20.8 million.

Solid platform sales

Chalk much of that up to platform revenues — essentially the software side of Roku — and more specifically, advertising, which represented the largest driver of platform revenue growth: $75.1 million versus the $61.5 million in Roku device sales.

For Roku, the company’s investments on the platform side appears to be working. Indeed, according to a recent study conducted by IPG, Magna and Roku, ads on Roku’s platform are 67% more effective at getting users to purchase the items featured in those ads versus ads featured on television. Viewers also said streamed ads were more memorable than those on linear TV.

The study surveyed over 4,600 consumers and calculated traditional ad metrics, including ad recall (how memorable the ad was), brand favorability and purchase intent.

Roku’s latest earnings are a good sign for the streaming service, which went public last September. Its strong performance may validate the effectiveness of its shift from being a hardware company in its earlier years to a software platform that relies on revenue from streaming ads.

JP Mangalindan is the Chief Tech Correspondent for Yahoo Finance covering the intersection of tech and business. Email story tips and musings to jpm@oath.com. Follow him on Twitter or Facebook.

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