Roku ARPU flattens as ad market stays under pressureRoku ARPU flattens as ad market stays under pressure
Roku's ad-aided Platform unit, typically a growth engine for the company, saw sales dip by 1% in Q1 2023. The streaming giant expects ad spending to remained pressured into Q2.
April 26, 2023
Roku's revenues for the first quarter of 2023 hit the mark, but the streaming specialist saw its average revenue per user (ARPU) drop in the quarter as ad spending on its platform remained "pressured."
Those advertising troubles showed up at Roku's Platform unit, which includes revenues derived from ad sales, the distribution of free, ad-supported streaming channels and OS licensing. Though Roku's Platform unit has been a major growth driver for the company in recent years, Q1 revenues there dipped 1%, to $635 million.
"While ad spend on the Roku platform in verticals including financial services and M&E [media and entertainment] remained pressured, verticals such as travel and health and wellness improved," Roku said in its quarterly investor letter (PDF). Roku expects those ad trends to continue into Q2.
Figure 1: Roku has begun to design and build its own lineup of connected TVs.
Those lower ad spending trends contributed to a dip in ARPU, which dropped 5% to $40.67.
To aid its efforts ahead of the annual TV advertising upfronts, Roku last week introduced a "Primetime Reach Guarantee" program. Roku claimed that a pilot with an unnamed financial services company was able to reach more TV households during a one-day flight during primetime than an average program on a top-five cable network.
Roku said aggregate revenues rose 1% to $741 million paired with a loss of $212.5 million. Those losses widened from a year-ago loss of $23.5 million but narrowed from a loss of $249.9 million in the prior quarter. Device revenues rose 18%, to $106.4 million.
Roku active accounts grew, but the pace of growth slowed. The company added 600,000 active accounts in the quarter, climbing to 71.6 million. Streaming hours hit 25.1 billion in Q1, up 20% year-over-year.
Roku's recent string of losses has caused some analysts to take a dim view on Roku's profitability prospects, even in the face of a pair of recent layoffs (PDF) and other cost-cutting efforts.
"Despite some recent cost actions, we do not see a path to GAAP operating profits for the foreseeable future" as Roku invests in areas such as global expansion, smart home products and its decision to design and build its own family of connected TVs, Michael Nathanson, analyst with MoffettNathanson (a unit of SVB Securities) explained in a research note issued last week.
"With Roku headcount still nearly double where it was at the end of 2020, it would appear Roku needs to take even greater headcount reductions than the 6% cut in late March," he added.
— Jeff Baumgartner, Senior Editor, Light Reading
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