Roku is the latest company to report a negative impact on earnings this quarter due to a slowdown in ad spend.
The company missed second-quarter revenue expectations with revenue of $764 million, missing estimates of $805 million. Active accounts grew by 1.8 million to 63.1 million this quarter, adding more accounts than the previous quarter but maintaining the same year-over-year growth rate.
“Consumers have started to moderate discretionary spending and advertisers have significantly reduced spending in the ad scatter market. [TV ads bought during the quarter]. We expect these challenges to continue in the near term as economic concerns continue to pressure global markets,” Roku said in a note to investors on Thursday.
In the second quarter, the company said it took steps to combat the backlash. “This will significantly reduce operating costs and staff growth.” Speaking to media ahead of Thursday’s investor call, Roku CFO Steve Lowden said the majority of the company’s content spending is concentrated on third-party licenses, while programming spending on Roku Originals is a “minority.” ” of these expenses. However, he said, both areas are being considered.
“We’re really looking at the overall spend that we have for the Roku channel, as well as the wait time that we can control on the Roku Originals side,” Lowden said.
Currently, the company has a major debut, a feature film Strange: The Al Yankovic StoryIt is scheduled to premiere on the channel on November 4th.
In a letter to investors, Roku said that “content must be consistent not only with the scale and growth of The Roku Channel, but also with the broader macro environment.”
The company has not implemented layoffs or a hiring freeze, Ludden told reporters, but has reduced hiring after four years of “very rapid growth”.
Roku released guidance for the third quarter, saying it expects revenue to grow to $700 million and total gross profit to reach about $325 million. However, the company withdrew its full-year earnings guidance due to “uncertainty and volatility in the macro environment”.
Roku shares fell 26 percent after hours on Thursday.
Despite the challenging advertising environment, Roku said it has closed preliminary deals with all seven major agency portfolio companies for the 2022-2023 television season, resulting in $1 billion in total commitments, which the company will implement at a later date.
As for the current advertising climate, Roku CEO Anthony Wood said he believes advertisers are cutting spending in the scatter market, primarily because of its flexibility.
“We are seeing advertisers worried about a possible recession. So we’re seeing them cut costs in areas where it’s easy for them to turn it off and on,” Wood said.
Snap executives made similar comments last week when the company merged with Meta, while Alphabet’s YouTube cited falling ad demand as the reason for lower revenue this quarter.
However, Roku executives remained optimistic about the company’s long-term prospects as they see more ad dollars moving from traditional TV to streaming and active accounts on the platform continue to grow.
They maintained that perspective even when asked about increased competition from Netflix and Disney+, as both plan to launch ad-supported offerings to compete with the Roku channel, saying the two companies would make streaming advertising “more accessible”. . Which.
Source: Hollywood Reporter
Camila Luna is a writer at Gossipify, where she covers the latest movies and television series. With a passion for all things entertainment, Camila brings her unique perspective to her writing and offers readers an inside look at the industry. Camila is a graduate from the University of California, Los Angeles (UCLA) with a degree in English and is also a avid movie watcher.
