Television advertising is changing, and marketers are changing with it. Viewers are abandoning the “linear TV” of networks and cable. Instead, they’re moving to over-the-top television, or OTT, which enables them to watch streaming content from the internet on smart TVs, computers, tablets, and smartphones.
Roku is a company in the OTT world, and it’s also the name of the device that the company sells. A Roku device is a digital media player that provides simple streaming entertainment to a TV’s HDMI port to any television set. It translates content from streaming services, such as Netflix and Hulu, so a viewer can watch them on a “smartened” TV set.
While Roku is popular among cable cord-cutters, some viewers keep cable service and use Roku alongside it. Additionally, some smart TV owners add a Roku to their smart sets because it often enables more content and provides better streaming quality. That adds up to a lot of Roku’s – which, as of now, are over 50 million in service.
For many viewers, Roku provides their first taste of OTT viewing. Consumers who have been confused by all the choices in the non-cable world can be surprised and pleased by how easy it is to hook up Roku TV and use the Roku remote to start enjoying it. The main menu presents the Roku Channel Store, which lists dozens of content providers. Some are free, and most require paid subscriptions with many free trial offers. Roku actually has its own free service, called The Roku Channel.
A consumer can be a Roku viewer without buying a Roku device. There’s a free Roku app, and a viewer can manage subscriptions and view content through the Roku Channel store on a computer or smartphone, as well as on a TV.
Roku does a lot to make advertising on the Roku device easy for marketers who want to reach the digital viewing audience. Roku’s platform sells TV commercial spots, similar to how Hulu sells some TV spots on E! that runs on the Hulu app. The types of advertising include the 15 to 30-second spots shown before or during an OTT show with full-screen interactive video and interactive overlays.
The Roku ad platform, OneView, provides a marketer’s interface into Roku programmatic advertising, which is the real-time automated purchase of ads across a variety of content providers. Because of the size of the Roku audience, OneView is able to provide extensive demographic data. It makes guarantees about demographic delivery and assures measurables, such as website visits and mobile app downloads.
OneView includes traditional linear TV advertising. And the result of having this widespread presence of Roku devices in linear TV homes gives them a large repository of data on these viewers. An advertiser may supply ad parameters and buy advertising programmatically through the Roku platform and may even purchase slots directly from the Roku platform or from its affiliated content providers.
While Roku offers a full range of advertising choices, the main reason marketers engage with Roku is to reach the audience that’s watching content through a Roku media player. Much of that audience has cut the cord and is not watching linear TV at all. Even those who still have linear TV spend more and more of their viewing hours with the new OTT content.
Thus, an OTT advertising platform is both a necessity and an opportunity for marketers. It’s where the viewing audience is going, and it’s where an advertiser can present customized and targeted advertising in a way that hits the intended targeted audience.
When an audience has Roku subscriptions to content providers such as Hulu, Netflix, and Amazon Prime, then an advertiser can reach that audience with various opportunities for OTT advertising. That includes Hulu advertising, Netflix advertising, and Amazon Prime advertising.
To a viewer, Roku is a doorway, and all the OTT content providers are what’s behind the door. An advertiser has the ability to present messages both at and behind that door – at the Roku channel menu and on the content providers.
What should a digital ad look like? All OTT providers publish specifications, such as Hulu advertising specs. They tell an advertiser what’s needed in such areas as dimension, frame rate, audio bit rate, and display ratio.
Cost to Advertise on Roku
How much does it cost to advertise on Roku? While an advertiser has to engage with Roku to get an exact figure, one should note that buying digital ads is different from buying ads on linear TV. With linear TV, advertisers pay a specific amount for a specific time slot based on the size and make-up of the audience that’s expected to show up for that time slot. An ad campaign is relatively untargeted and is “shotgunned” to a large number of people, only some of whom represent the demographic targeted.
OTT advertising is targeted to the audience the advertiser defines for its ad campaign(s). OTT advertising cost is typically specified in cost per mille, or CPM. The “mille” stands for thousand, and the CPM is the amount paid for 1,000 impressions or 1,000 viewings of the ad. This makes sense because an advertiser doesn’t know when or where the ad will be seen, even though the demographics of the audience are known.
Roku advertising cost depends on whether the ad is on The Roku Channel Store or The Roku Channel, or whether it runs on one of the content providers available to Roku viewers. It also depends on the popularity of the show and whether or not it’s an interactive ad. Let’s use Hulu as an example once more. Hulu has an interface, Hulu Ad Manager, that, like OneView provides a portal into the digital marketing world for advertisers. Hulu advertising cost 2020 has been reported to have a Hulu advertising CPM of around $20 to $60.
Roku stock is listed on the NASDAQ as ROKU, and it’s been publicly traded since 2017. It started at about $26 a share and in 2020 it passed $200. Roku revenue was over $1 billion in 2019 and is expected to keep rising.
How does Roku make money? At one time it was from the sale of physical devices, but in recent years Roku advertising revenue has surpassed Roku revenue from hardware sales. Roku revenue takes a number of forms:
- Advertising on the Roku Channel Store and The Roku Channel
- Sponsorship of entire shows on The Roku Channels
- When viewers watch a content provider through Roku, Roku is entitled to sell some of that provider’s ad inventory
- A fee for subscriptions purchased from the Roku menu
- Fees for advertisements sold through OneView
- Payment for placing a direct button to a content provider on the Roku remote
- Deals with TV manufacturers to build the Roku digital media device directly into the TV
OTT advertising companies include content providers that sell ads, companies that help marketers purchase ads, and companies that facilitate the exchange. Roku does all of these. It sells ads on its own content and facilitates ads trading on an automated exchange.
These ads include OTT advertising examples such as spots that run before and during the content. Roku advertising examples include interactive and non-interactive versions of the ads and also banner ads on the channel store.
Roku captures and maintains a data store of Roku demographics that allows them to precisely target viewers across multiple media. For instance, it can stream ads to a computer or mobile device based on what content the viewer recently watched or on what sites the viewer recently visited. Roku can help marketers send a message to someone who looked at their product, or a competitor’s product, online but didn’t make a purchase.
These kinds of ads target a Roku audience marketplace that spans generations. Gen Zers, Millennials, Gen Xers, and Boomers are all represented in the sum total of people who use Rokus.