Roku surpasses 65m global accounts, but ad forecasts dent share price

Streaming challenger Roku continued to make good progress in Q3 2022, according to Anthony Wood, founder and CEO. In a letter to shareholders, he said: “In Q3, we added 2.3 million Active Accounts, and The Roku Channel’s Streaming Hours increased 90% year over year. Platform revenue grew 15% y-o-y, which was lower than our historical growth rates but positive given the difficult macro environment.”

Anthony Wood

While the overall picture is better than analysts expected, Wood acknowledged that the economic downturn is taking its toll. “Advertising spend on our platform continues to grow more slowly than our beginning-of-year forecast due to current weakness in the overall TV ad market and the ad scatter market in particular,” he said. As a result of that summary, nervous markets opted to send Roku’s share price down.

In terms of other metrics, platform revenue increased 15% y-o-y to $670 million while total Streaming Hours were 21.9 billion hours, an increase of 1.1 billion hours from last quarter. Average Revenue Per User (ARPU) grew to $44.25 – up 10% y-o-y. Wood also said: “We’re pleased to officially welcome Charlie Collier to Roku as president, Roku Media, which is focused on ad monetisation, content licensing, and production. We also recently named Mustafa Ozgen as president, Devices, which is focused on increasing Active Accounts through the sale of TV streaming devices.”

In terms of total Active Accounts, Roku’s global figure now stands at 65.4 million: “Growth was driven by TV sales in both US and international markets, along with improved Active Account retention. We continued to absorb higher costs in our player business to insulate consumers from price increases. As a result, Player gross margin was down 4 percentage points year over year as supply chain costs remain elevated.”

As for building scale outside the US, Wood said: “We are expanding our global Roku TV programme to Germany with TCL and Metz, and to Australia with TCL. Our results in Mexico demonstrate that our three-phased business model works outside the US: (1) scale, (2) engage, and (3) monetise. Since our launch in 2019, our Mexico product lineup has grown to offer streaming players and Roku TV models through 12 partners. We are the number 2 selling smart TV OS in Mexico, and with this scale and meaningful engagement we launched our advertising business earlier this year.”

In the company’s TV segment, Wood said Roku is putting a lot of energy into helping users discover content they want to watch: “With the huge increase in streaming content and services, along with the frequent changes to where a specific show/movie/event can be watched, the consumer experience has become fragmented and confusing. TV audiences are spending longer and longer amounts of time staring at the TV screen trying to figure out what to watch and where to find it,” he said.

Wood also talked up the performance of The Roku Channel. This “continues to be a unique and valuable asset. For the third consecutive quarter, the Roku Channel was a top 5 channel by both Active Account reach and Streaming Hour engagement on the Roku platform in the US. The Roku Channel also ranked first in reach amongst AVOD/FAST services in the US and Canada according to TiVo’s most recent quarterly Video Trends Report. We have built a broad portfolio of compelling content, and in Q3 we drove particular success in several specific categories.”