Last Thursday’s Q4 and 2020 earnings reports from The Trade Desk and Roku provide further evidence of connected TV advertising’s surge and also viewers’ significant adoption of streaming video. Because the two companies are heavily invested in connected TV advertising and provide lots of thoughtful insights on their earnings calls (transcripts here and here), their results and sentiments are valuable in gauging the state of the market. Together they provide a holistic picture of the market since The Trade Desk operates on the demand side and Roku on the supply side (primarily).
For some time, The Trade Desk has talked about the rising importance of CTV advertising on its overall business, which continued this quarter with the pandemic accelerating key trends. Founder and CEO Jeff Green said that advertisers’ CTV spending on the platform more than doubled in 2020 (total spend, including CTV, was $4.2 billion with Q4 revenue up 48% to $320 million). Green said “more than 1,000 brands spend at least $100,000 on CTV on our platform” and that “those brands spending more than $1 million on our platform in 2020 more than doubled from a year ago.”
Note The Trade Desk doesn’t specifically break out CTV spending on its platform but said CTV “continued to be our fastest growing channel.” On the earnings call Green highlighted macro trends like viewers’ increased streaming (at the expense of pay-TV subscriptions and linear TV consumption) and advertisers’ demand for more data-driven, targeted and real-time performance measurement as critical market factors. The pandemic caused many advertisers to value flexibility and agility, which have been limited in traditional upfront TV ad buying.
Meanwhile, as Colin and I discussed on last Friday’s podcast, Roku’s Q4 “platform” revenue jumped 81% to $471 million, primarily driven by advertising. The addition of 5 million active accounts in Q4 brought the total increase in active accounts in 2020 to 14.3 million. Streaming hours increased by 55% in Q4 year-over-year. And Founder and CEO Anthony Wood said that The Roku Channel’s streaming hours grew at “twice the platform’s rate,” so that may imply 80% or more, with The Roku Channel “now reaches households with approximately 63 million viewers.” All of this adds tangible evidence of streaming’s robust growth.
Wood described the virtuous cycle Roku is pursuing - more active accounts, more viewers, more engagement, more advertisers. This was reflected in the continued increase in average revenue per user of $28.76 for the prior 12 months, up 24%. Yet SVP/GM of the platform business Scott Rosenberg once again noted that “the majority of (ad) spending in OTT is still a more traditional spending pattern, insertion order based because most of the early money that’s flowed into OTT has come out of TV budgets and that’s generally the way TV has been spent historically.”
So while The Trade Desk is already showing significant CTV growth with programmatic, for Roku it’s still early innings in programmatic (outside of its OneView DSP). That means big opportunity ahead for Roku, as more brands and agencies proactively allocate spending to programmatic and away from upfronts. Scott noted “we do believe that, it (ad buying) will be heavily programmatic over time.” He also added that non-TV ad spending on Roku is also growing, particularly for performance-based ad buyers who optimize on “something other than reach or demographics” which quadrupled in 2020.
Of course The Trade Desk and Roku aren’t the only barometers of CTV advertising’s growth. Others including YouTube, Wurl, Tubi and Pixability have all recently shared certain details of their record metrics in 2020. No doubt there are many others that are benefiting as well from the important tailwinds of viewer and advertiser changes.