Roku smart TVs mean opportunities for advertising, new formats

Roku kicked off 2023 with the announcement that it will build its own line of branded smart TVs, set to debut this year. It’s a move that may arguably be less about device hardware ambitions than it is data and advertising opportunity, including the chance to try out new formats.

Although Roku has seen its hardware sales of streaming devices declining -  including the third quarter when streaming device revenue dropped 7% year over year - platform revenue, which includes home screen advertising and that within its free ad-supported streaming TV (FAST) service The Roku Channel, has been on the uptick and grew 15% in the September period compared to the same quarter in 2021.  

Roku is already the number one TVOS in the U.S. and Mexico (licensed by OEMs such as Hisense and TCL), but by building its own TV sets the streaming player has a chance to innovate on the ad experience as it collects more data and works to attract both viewers and advertisers to the platform. Roku VP of Marketing Dan Robbins told Fierce that the move means the company will able to test and introduce compelling new features on Roku TVs that it hasn’t before.

“For marketers this is exciting because it’s really an extension of the broader shift from traditional TV into streaming TV,” Robbins said in an interview with Fierce Video. “It’s going to be yet another opportunity for them to use an ad platform built for TV streaming to reach an audience that isn’t on traditional television, to go beyond a traditional spot, and to bring all of the data and measurement of the digital world onto the largest screen in the home.”

It comes as advertisers look to reach viewers who are increasingly tuning into streaming, alongside a growing roster of ad-supported streaming platforms. Roku itself recently hit 70 million active accounts on its platform.

Marketers join content discovery process through smart TVs

A big focus for Roku in serving marketers and brands within the smart TV environment is discovery, according to Robbins.

Roku already focuses discovery on driving users to the various streaming services it supports, but with Roku TVs, he said, it presents an opportunity for brands outside of the streaming space to help curate and enable the content discovery process for viewers.

For example, brands could be present outside of the typical 30-second ad spot to help consumers search for a new show, offer a free movie, or be integrated into the Roku City screen saver.

It’s exciting for marketers, Robbins added, because “it means they’re really going to be able to not only reach more consumers but surprise and delight them in a way that they never have before and in a way that they can’t anywhere else.”

As mentioned, when it comes to advertising Roku also already generates revenue from The Roku Channel. But as it leans into branded smart TVs, at least one analyst has questioned why its FAST service isn’t as prominent as that of competitors who give their respective FASTs prime real estate within the interface (such as Samsung’s Samsung TV Plus or Vizio’s WatchFree+).

Robbins said that with more users on the platform through Roku TVs, they will naturally see The Roku Channel displayed in the interface and that the company is going to continue to test ways to make all of the content available within The Roku Channel “front and center.”

Still some competitors don’t seem too worried about Roku smart TVs. Mike O’Donnell, CRO at Vizio, suggested during a January investor conference that the smart TV maker isn’t overly concerned with competition from Roku TVs, noting the company's own long-standing relationships with retailers including Walmart and Target that give it favorable placement.

Roku itself does have a streaming-related relationship with Walmart, as last year it kicked off a shoppable TV ad pilot program with the retail giant that lets users purchase products directly from the TV, fulfilled by Walmart, with a click of the remote.

Shoppable TV ads

In terms of the Walmart partnership, Robbins said Roku is “very encouraged by the consumer response” and early results with charter partners.

One learning so far, he said, is that having creative and messaging that’s really focused on commerce is important. At this point the integration has been very easy and seamless for the customer, he added, while Roku continues to learn how to best engage and encourage a new form of consumer behavior in ordering products directly from the TV screen.

While it’s still the early days, a shoppable TV ad format “has the opportunity really make television more performance driven and close the loop from ad all the way through to sale,” he commented.

Shoppable ads are poised to play a role within Roku branded smart TVs, with Robbins saying it presents another avenue for the company to continue to try out and expand the format and footprint.

Curt Larson, chief product officer of programmatic sell-side advertising platform Sharethrough (which doesn’t work with Roku), also sees several ways for Roku branded smart TVs to help usher in more engaging ad formats.

That includes the tactic of bridging the TV to phone divide, where shoppable ads could come into play.

“Roku could not only bring a much needed boost to the quality of content available for shoppable ads but also innovate on existing ad offerings,” Larson told Fierce via email. “For instance, while watching a show like Inventing Idea House, Roku could easily add a number of options, like a specific light or piece of furniture, to allow viewers to buy that product.”

Leveraging first-party data

Roku’s ad efforts also benefit from its first-party data, coupled with machine learning that’s built into the tech stack to help fuel recommendations and personalization.

“That’s unique to having an ad platform that is built first for TV streaming and to have an operating system that is purpose-built for television,” Robbins said.

Building smart TVs could give an additional edge as the likes of Samsung and Vizio also benefit and glean data from automatic content recognition (ACR) in devices to provide so-called “glass-level” insights – aka information on what programs and ads viewers are consuming on the screen, no matter the platform.

While Roku already has ACR data through its OS presence on OEM partner TVs, owning the hardware will give it more ownership and control to utilize for advertisers.

As Kristina Shepard, head of U.S. brand sales at Roku, told AdExchange, Roku TVs will give more granular targeting data for advertisers and information on conversion and sales.

“We want to make sure brands can use our first-party data – including ACR – to target their audiences and tie ad exposures to conversions and sales across different retailers,” Shepard told the outlet.

Roku has already worked to pull its first-party data in for advertisers to help build creative and ad spots that are more tailored and personalized.

A little over a year ago the company launched the Roku Brand Studio, “focused on helping marketers build advertiser-driven storytelling specifically for streaming,” Robbins noted. That could mean an advertiser creates short- or long-form content that’s distributed on The Roku Channel or places them somewhere in the discovery journey through the Roku user interface. Roku also has around 20 third-party ad measurement companies through its partner program to help with targeting and measurement of ads on the platform.

Innovating on existing ad formats

In addition to shoppable ads, Sharethrough’s Larson highlighted a few other ways Roku smart TVs could improve existing advertising opportunities, such as quicker and more advanced product placement.

“Traditionally, product placement requires months of advanced planning to include the right product during filming,” Larson said via email. “Recent advancements in video rendering could make the product placement component more scalable.”

He pointed to the example of using well-defined objects like a “soda can” or “laptop screen” within Roku Originals “that could eventually be replaced in real time.”

Back to his tactic of bridging the TV to phone divide, Larson pointed to pause screens as valuable real estate, as well as a key time when viewers might also reach for their smartphones – noting Hulu has static banners on pause screens and Amazon Prime Video shows information about the content’s actors.

“Roku could go a step further by displaying all relevant products from the show in the pause screen that also either include QR codes or remote click options to shop the products,” he said.

And while Roku has a repository of first-party data, one area where it lacks (and Amazon excels), according to Larson, is shopping intent behaviors.

“Roku could combat this by offering reduced ad loads in exchange for short surveys that reveal what types of products that consumers are in the market for so they can better target ads to those consumers at a higher premium to advertisers,” he commented.