Executives claim that Roku menu additions are a win for users, partners, and advertisers. However, that data suggests the impact is a bigger help for revenue than for users.
Interface changes boost ad opportunities
The simple interface that has helped catapult Roku to the number 1 status in TVOSs in the US has had precious few advertising opportunities. However, that has changed of late with the addition of several new left-hand menu items. According to Gidon Katz, President of Consumer Experience at Roku, the company sees this as a win-win-win for users, content providers, and advertisers:
“Our goal when we think about those revenue streams and about creating new monetization opportunities is to help consumers discover great content, help content partners engage with consumers, and help advertisers organically and authentically help that value exchange.”
In the last year or so, Roku has added “What to Watch,” where users can discover new content and be reminded of what they have recently watched. Mr. Katz says half of Roku users can’t remember what they are watching. Other recent additions aiding users to find something to watch include “Live TV,” “Sports,” and “The Buzz.” Roku works with partners and brands to ensure contextually relevant advertising is included in these displays.
Interface changes could be helping revenue growth
From the revenue growth perspective, the approach seems to be working well. Ad revenue is a major part of Roku’s “Platform” business, and it has helped Platform revenue grow from $417 million in 2018 to $2.7 billion in 2022. Today, the Platform business contributes 87% of Roku’s revenue and all of its profit.
It is also helping drive growth in the average revenue earned per active user. In Q1 2018, ARPU (average revenue per unit) was $15.07.[i] In Q1 2023, ARPU was $40.67.
The impact on engagement is questionable
The approach, Mr. Katz says, has resulted in spectacular engagement through the platform:
“I mean, 3.9 hours per consumer count per day is huge engagement, and that’s been driven by the investments we started making a few years ago.”
It certainly is true that Roku users spend a lot of time streaming. In Q1 2023, the average active user spent 231.2 minutes per day (3 hours and 51 minutes) streaming content. However, it is hard to argue that engagement has grown over the last few years. Engagement reached its highest level in the teeth of the pandemic lockdowns, with users streaming 232.2 minutes daily in Q2 2020. It sank back to pre-pandemic levels in mid-2021, and 2022 saw small growth, with Q1 2023 3% higher than Q1 2022.
Other changes impact engagement, revenue
Roku has made other strategic changes over the last few years that could drive revenue growth. The Roku Channel has become a top-five channel on the platform and has been garnering a larger share of viewing time, according to Anthony Wood, Roku’s CEO:
“Engagement was up; streaming hours were up 65% year-over-year on the Roku channel.”
And the company is creating original content for The Roku Channel, which appears to resonate with viewers. According to Charlie Collier, President of Roku Media, the release of shows like Die Hart with Kevin Hart and Slip with Zoe Lister-Jones drive much interest from Roku users and advertisers like Progressive Insurance, Verizon, and T-Mobile. Expect to see more going forward:
“And so, we’ll continue to grow our investments in Roku Originals to create exclusivity for users and advertisers.”
Certainly, adding new menu items provides more places for partners and advertisers to engage with Roku users. And that likely has a positive impact on revenue. But perhaps it is better to say that the menu additions did not harm engagement rather than that they fueled a surge in viewing.
[i] Roku’s ARPU measure is an annual number recalculated each quarter over the previous four quarters.
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