Roku Loves Instacart (But Not Wall Street), Pluto TV Loves The Tonys

1. Roku Loves Instacart (But Not Wall Street)

Roku has had the same problem for some time now: consumers really like them, the industry doesn’t quite know what to make of them and Wall Street really doesn’t know what to make of them.

Unfortunately, their latest earnings report and Newfront-adjacent announcements don’t do much to help change that. 

Before diving in, let’s review just how we got here.

Consumers like Roku because its iPhone-esque design is simple to use. It’s ideal for people who just want to go in, watch a specific show on Netflix and get out. Or they want to go in and watch reruns on The Roku Channel, which, despite not being the first thing you see when you launch the device, has managed to attract a sizable user base.

Consumer love for what is often dismissed as a simplistic inelegant design is thing number one that baffles the industry.

Or thing number two, to be exact.

Thing number one was that Roku succeeded in the first place.

Why It Matters

Roku beat out three of the four big “GAFA” companies— Google, Amazon and Apple at a game all three should have easily won.

And yet one by one, they all made baffling forced errors.

Google forgot to give their Chromecast a remote (they finally remembered a year or two ago, when it was already too late.)

Amazon forgot to focus on user experience and for too long, the Fire TV interface was just a wet hot mess. (They fixed that, eventually. But also way too late.)

And then there’s Apple, purveyor of the $69 iPod Mini and $49 iPod Shuffle. 

Somehow it never dawned on them that the $189 Apple TV was getting its lunch eaten by the $29 Roku stick and that maybe it would be a good idea to roll out a less expensive option in order to gain market share, especially given the lack of any clear competitive advantage on Apple’s part. (I will guarantee you I will get angry comments from Apple Fanbois for this, claiming that Apple did not need to come out with a cheaper version because they are just so far above being a volume play, that the Apple TV is clearly a superior product and besides, it’s all part of Jobs’ master plan he is orchestrating from The Great Beyond.)

But I digress.

All that fucking up meant that Roku wound up with the lion’s share (or at least the puma’s share) of the U.S. market, first via their dongles and then via licensing deals they had with Chinese OEMs like Hisense and TLC and now via their own Roku-branded TVs as well.

They also have a sizable ad business whose user base is far too large for any advertiser to ignore.

And still, Wall Street hates them.

Partly, or maybe even largely, because they can’t seem to wrap their heads around the fact that Roku sells devices but also has an ad business. To many investors I speak with, I might as well be telling them that it is both a floor wax and a dessert topping. (10 bonus points if you know what that’s from.)

The other reason of course, which was on display again in this week’s earnings call, is that Roku consistently loses money.

It’s not all that dire; they did beat expectations this time, losing $1.38/share versus the $1.44 they were expected to lose. 

They also posted revenue of $741 million for the quarter, which considerably exceeded the $711 million estimate, while adding 1.6 million “active accounts” for the quarter, which left them with 71.6 million in total, a 17% YOY jump.

All of which sounds like good news until you get to the part where they reported a $69.1 million adjusted EBITDA loss.

So no wonder Wall Street is confused.

On the ad front, Roku has been making some moves and getting some press pre-Newfronts.

Their biggest news is that they now have a deal with Instacart where they can report to advertisers how many people added items to their Instacart cart after seeing a commercial on The Roku Channel.

And if your reaction to that is “yes, but how many people actually use Instacart and how representative are they of the total population regardless,” I’m with you.

It’s clearly a reaction to the rise of retail media and the desire of CPG brands to know exactly how effective their ad dollars are, only it skips over the fact that many of those brands largely see TV as an image building exercise and The Roku Channel, with its collection of old movies and network reruns, as a place to reach all those viewers they are missing on network prime time.

Speaking of which, Roku is also guaranteeing that advertisers can reach a larger audience on Roku than they can on certain cable TV channels during prime time.

I feel fairly confident in assuming that they have already done that math on this and figured out which cable channels to include in that guarantee so that the house always wins.

It’s further proof though, of our theory that FASTs Are The New Cable (at least for advertisers), with ad-supported SVOD being the new prime time. [If you haven’t read the report, the theory has that happening in about four or five years from now, not this year or next.]

The guarantee, and the news around it should help all of the other FASTs during the upcoming Newfronts, given that advertisers rarely put all their eggs in one service’s basket.

What You Need To Do About It

If you’re Microsoft, just buy Roku already. You know you want to. It would give you control of a huge slice of the US market though you would then have to figure out how to make their struggling overseas expansion happen.

And if you don’t buy them, Google should. Imagine the juggernaut of Roku + YouTube + Android and how that pretty much solves Roku’s international issues and Google’s US ones.

The problem of course, is that if you can imagine it, so can Congress and there would likely be extremely choppy waters ahead. Because anything big tech does is assumed to be evil these days, regardless of whether it is or not and this would seem like an easy thing for Congress to get behind.

If you’re Roku, stay the course. Your move into owning your own TVs is proving to be a wiser pivot than first imagined and, as noted above, consumers really like you.

So resist the urge to change. Especially the interface (that goes for anyone who buys you.)

It may be ugly, it may violate all sorts of UX design principles, but there are a whole lot of people who really love it, and, more than that, it sets you apart.

Hold the standard.

2. Pluto TV Loves The Tonys

In a very ingenious move, Paramount announced that the pre-show for this year’s Tonys will be televised on its Pluto TV FAST, with the main event on CBS.

This is a great way to achieve several goals: create more awareness for Pluto TV with an audience that might not have been aware of its existence, experiment further with live events on the FASTs, drive ad revenue, promote shows on CBS and Paramount+ to Pluto TV viewers while creating deeper ties between various Paramount properties.

So a whole lot of upside, minimal downside (it’s the pre-show, not the Tonys themselves) and better yet, it’s something we can expect to see a lot more of.

Why It Matters

One advantage media company FASTs like Pluto TV, Tubi and Xumo have is that they can be included in any larger deal their parent companies are taking part in, from the Tonys all the way up to the Super Bowl.

More than that, they can create a flywheel with the parent company’s subscription streaming product(s) helping to promote them and to drive subscriptions.

Live events are also going to be a big deal for the FASTs. 

Not the Super Bowl obviously, but smaller events with dedicated audiences like the Tonys pre-show. Paramount has shown a willingness to take the lead here, airing the CrossFit Games, another event with a dedicated niche audience on Pluto TV last summer.

So look for other FASTs to follow suit, both the media company FASTs, the independents and those owned by the OEMs.

It’s a win-win scenario, and live events have the very important benefit of making them feel like “real” TV networks and all that implies, especially for advertisers.

It’s not like when Twitter runs something and people watch on their phones. This is TV and people watching it on their TV, so a broader and more important audience taking advantage of all that sight, sound and motion on a 75 inch screen.

All of which helps cement the FASTs in the minds of both viewers and advertisers as an important part of the TV ecosystem. 

What You Need To Do About It

If you are Paramount, take a bow. This was a smart move, you publicized it well and if your live broadcast goes off without a major tech glitch, you will be fine. (Watch for that though. Live streaming is not all that easy to pull off.)

If you are one of the other FASTs, watch and learn, though I suspect you all already have similar(ish) plans in the works.

If you are an advertiser and “people who love theater” are part of your target audience, this is a great way to reach them, with the added benefit that they’ll likely give you points just for showing up and supporting the show.