Roku Stock – Connected TV Growth Poised to Upend Upfront Marketplace
Because most consumers have shifted their attention from linear TV to streaming, advertisers (and their wallets) have had to follow suit.
As the TV industry heads into the upfront TV marketplace, the big question will be just how well this so-called connected TV, also referred to as CTV, gets monetized.
Connected TV pertains to any premium video content that comes to devices connected to the Internet, including Smart TVs, streaming devices such as a Roku or Amazon Fire TV Stick, video game consoles like PlayStation or Xbox, mobile phones, tablets and desktop computers.
At-home entertainment consumption has skyrocketed over the past year, with most of the world sheltering in place during the global pandemic. As a result, overall time spent streaming spiked 44% in the fourth quarter of 2020 compared with the prior year, according to streaming analytics firm Conviva. And most of that time spent streaming is through a connected TV device.
With that kind of domination in living rooms around the world, CTV is key to unlocking the valuable ad dollars being shifted away from linear TV into streaming.
It is estimated that domestic CTV ad spend will total $11.36 billion this year, and by 2024 it is expected to reach $18.29 billion, according to eMarketer.
With all this money flowing into streaming ads on connected devices, management at large media companies is starting to see the writing on the wall.
For example, Disney’s direct-to-consumer ad revenue is catching up to that of its broadcast network, ABC. Last quarter, ad revenue at Disney’s DTC businesses jumped 47% year-over-year, to $882 million, and looks poised to soon eclipse ad revenue brought in at ABC. The broadcast network saw its ad revenue rise a more modest 5%, to $984 million.
Another massive benefit to the rise in connected TV is it gives traditional media companies an opportunity to compete with the tech rivals that have been dominating the media ad market with targeted digital ads.
YouTube, Hulu and Roku collectively rake in about half of total CTV ad revenue, according to eMarketer. YouTube alone accounted for 36% of all U.S. CTV ad revenue last year and is expected to grow its share to 39% by 2022.
Roku is one of the few streaming pure plays currently on the market, and the stock’s rally over the past year reflects Wall Street and Main Street’s bullish sentiment. Shares of the streaming giant have soared more than 260% over the past 12 months, and its market cap surpassed $50 billion for the first time ever earlier this year.
Connected TV is undeniably a great opportunity within streaming, but there are some issues in the marketplace. Measurement standards are still very inconsistent for important metrics like click volumes and ad impressions, and there have even been complaints of an overall lack of available CTV advertising relative to the inventory available in linear TV.
These challenges will be brought to the forefront as the TV upfronts approach, as it’s expected that much of the conversation this season will be the cross-platform selling of ads between linear TV and streaming.
Streaming and connected TV are slowly altering the TV ad industry as we know it, and while the opportunities around CTV remain abundant, there are still challenges to work through as the space grows rapidly.