The Rundown: Roku tops 60 million active accounts, but audience growth slows as hardware revenue sags

The key numbers:

• $865.3 million in total revenue, up 33% year over year
• $703.6 million in platform revenue, up 49% year over year
• $161.7 million in player revenue, down 9% year over year
• 60.1 million active accounts, up 17% year over year
• 19.5 billion hours worth of video streamed through Roku, up 15% year over year
• Average revenue per user of $41.03, up 43% year over year

Hardware hardships

Considering the otherwise across-the-board increases, Roku’s declining hardware revenue stands out. The decline in sales of smart TVs with Roku’s CTV platform built in was primarily responsible for the revenue drop, but sales of Roku’s player — ex. its streaming sticks that can be plugged into otherwise unconnected TVs — also fell, though only by 4% year over year and “above pre-COVID 2019 levels,” Roku CEO Anthony Wood and CFO Steve Louden wrote in a letter to shareholders published on Feb. 17.

Perhaps it’s not a coincidence that on the same day that Roku reported these hardware ships, Insider reported that the company is considering manufacturing its own smart TVs. Louden declined to comment on the report during a call with reporters following the company’s earnings report release.

From player to platform

To be clear, Roku’s hardware business has been a somewhat supplementary revenue stream for the past few years as the company’s platform revenue — the money it makes from selling ads and receiving a cut of subscription sales — has been its primary moneymaker.

But there is a relationship between Roku’s two revenue streams. Hardware sales are key to account growth, and account growth is key to ad revenue growth. And Roku’s executives acknowledged seeing a correspondence between the declining hardware sales and slowing account growth.

“We believe that the slowdown in Q4 was, in large part, attributable to global supply chain disruptions that have impacted the U.S. TV market. Similar to Q3, overall U.S. TV unit sales in Q4 fell below pre-COVID 2019 levels,” Wood and Louden wrote in the shareholder letter.

Asked whether Roku sees any difference in its revenue per ad impression based on whether an ad is served on a smart TV (where its automated content recognition technology can facilitate targeting and measurement) versus on a streaming stick (where the ACR technology is not available), Roku svp and gm of platform Scott Rosenberg said that the company does not sell ads based on device type.

Advertising on an upswing

Despite the hardware hardships, Roku’s advertising business chugged along during the fourth quarter. The company doesn’t break out its actual ad revenue, but it did provide some numbers to indicate that business’s relative strength.

• The number of monetized ad impressions increased by 67% year over year in Q4.
• Roku’s total number of advertisers — excluding political advertisers — increased by more than 20% in 2021.
• Of the advertisers that spent at least $1 million on Roku ads in 2020, more than 95% spent money on Roku ads in 2021.

But even Roku’s advertising business had to deal with impacts related to supply chain challenges. While ad spending from restaurant and travel advertisers grew in Q4, there was “softness in advertising spend” from automotive and consumer-packaged goods advertisers, per the shareholder letter. 

Looking ahead to the rest of 2022, Roku expects the supply-chain issues to continue to be a challenge that will affect its hardware business and that may delay ad spending from affected advertisers. Having said that, the company wrote, “we view all these factors as temporary and for the full year, we expect total net revenue growth to be 35%.”