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Understanding the Roku IPO: What It Means for TV

Internet streaming company Roku made its debut on the NASDAQ  September 28, 2017. Initial demand for the stock was high, with opening day trading pushing the share price up by 65% above the original asking price. But beyond the good news for investors, those in the TV and advertising industries should also be paying attention to Roku’s performance. That’s because this increasingly important “TV” company’s success is closely linked to broader shifts in consumer viewing and ad buying. Here are a few examples of what Roku’s success can tell us about the current state of television.

TV ad buying is becoming more personalized
TV has always been a medium that’s great for reaching large audiences. Advertisers understand the value of great scale, even when targeting is less precise. But as new types of digital-style TV experiences like Roku get more popular, they create new ways of targeting TV viewers using sophisticated tools based on viewer habits and granular demographic data. One great example of this is a new ad product from Nielsen, which plans to offer real-time interactive ads that can be personalized on a viewer-by-viewer basis using approaches like geo-location.

More TV content is moving to the streaming model
Consumers are watching more TV using more types of screens and devices than ever before. In fact, one recent study by Omnicom Media Group found that half of adults between the ages of 22 and 45 watch almost no content using “traditional” TV platforms. What that means for TV broadcasters and advertisers is that they need to adapt and evolve their content for this new digital viewing environment. Just consider the example of Disney, which recently announced it was launching its own streaming service, or CBS, which chose to premiere its highly-anticipated Star Trek show using its digital subscription service. Today, many of these streaming services are built around a subscription model. But as more and more consumers move to services like Hulu, Amazon, and Netflix, the advertising opportunity for these services will be hard to ignore — and may well open up new venues for advertisers.

Consumers and advertisers want more options
In its early days, much of the streaming world was siloed into distinct kingdoms. Consumers had to go to one place to watch Netflix, another to connect with Amazon’s video offering, and a third place to check out their favorite shows on AMC. That hasn’t been the best experience for consumers, or for advertisers. One of the great advantages of Roku is that it collects all of this emerging digital content in one convenient interface. “They’re like the Switzerland of the streaming box world,” said Jan Dawson of Jackdaw Research, in an interview with the LA Times. “They’re an open platform, which is a big part of their value proposition.” Dawson has a point: after all, what makes TV so compelling for advertisers is the ability to reach lots of different viewers from various consumer groups all on the same platform. Roku is well-positioned to help advertisers achieve this goal.

Where will Roku’s business head in the months to come? It’s hard to predict. We’ll all be watching. The options that the company has helped to pioneer, including more personalized TV ads, more digital TV content and more consumer choices are here to stay. And the industry has moved forward as a result.