If you’ve grown weary of seeing the same limited selection of ads repeatedly, a change may be on the horizon as Roku aims to diversify its advertising landscape. The streaming service provider is embarking on an ambitious initiative to increase the pool of advertisers, envisioning a future where the ad experience on streaming platforms mirrors the dynamic content found on social media, featuring a wider array of brands and engaging videos.
At the core of Roku’s strategy is the application of generative AI technology. Dan Jedda, Roku’s Chief Financial Officer and Chief Operating Officer, discussed the company’s advertising expansion plans during two investor conferences hosted by Citi and Bank of America this month.
“The landscape will shift from focusing on just the top 200 advertisers to accommodating up to 100,000 advertisers,” Jedda disclosed to attendees at the Citi conference.
For those curious about the evolution of television, Roku is a pivotal player. As a publicly traded entity dedicated to smart TV and streaming, it offers a clearer view of its performance numbers compared to companies like Amazon or Google.
Boasting significant market leadership in the U.S., Roku continues to highlight its achievements. Jedda noted that currently, over 20 percent of U.S. television viewing occurs on Roku devices, with these devices present in more than half of U.S. broadband households. “We are set to exceed 100 million streaming households shortly,” he stated.
The Roku Channel itself has also experienced notable growth, with streaming hours increasing by 80 percent year over year. Jedda forecasts that future growth for the channel will maintain a range of 55-60 percent. Recent data from Nielsen indicated that the Roku Channel accounted for 2.8 percent of all TV viewing in July, surpassing major streaming competitors like Peacock and HBO Max.
With streaming hours on the rise, Roku has a wealth of viewership to monetize via advertising. Jedda admitted that the company has struggled to sell ads at the pace of its increasing viewer numbers, stating, “We’re expanding quickly in terms of supply. Currently, we are approximately half sold out.”
To capture the remaining inventory, Roku intends to engage smaller, local advertisers. This includes businesses such as car dealerships, small retail outlets, and other local enterprises, collectively referred to as small and medium-sized businesses (SMBs).
“The SMB sector has been largely excluded from connected TV advertising,” Jedda remarked during the investor presentations. Many local businesses still allocate the majority of their digital marketing budgets to search and social media advertisements. Roku aims to change this trend, redirecting a significant portion of that spending towards streaming platforms.
Roku is introducing self-service tools designed to simplify ad purchasing for smaller enterprises. However, a primary challenge for many of these businesses has been the inability to create high-quality TV commercials.
Jedda pointed out that generative AI offers a solution, stating, “You can use AI to create a professionally produced advertisement quickly. Businesses can get started in mere minutes.”
Roku has begun integrating generative AI tools into its self-service platform for smaller advertisers. The trend is not exclusive to Roku; earlier this week, advertising technology company Magnite announced its acquisition of Streamr, a startup recognized for helping numerous businesses produce TV ads using generative AI.
Jedda acknowledged that competition for local SMBs will intensify, asserting, “No single company will effectively market to a million SMBs.” Despite this, he indicated that Roku will make a focused effort with targeted marketing initiatives and dedicated sales personnel.
In essence, viewers should prepare for an influx of AI-generated advertisements within streaming environments.
This is Lowpass by Janko Roettgers, a column on the ever-evolving intersection of tech and entertainment, syndicated just for Technology News subscribers once a week.
