Roku on Monday announced that it is acquiring Nielsen's advanced TV advertising division as it works to help traditional television ad dollars migrate more quickly to streaming.
Why it matters: The deal will give Roku, the top smart TV operating system in the U.S., access to the technology it needs to help grow the digital TV advertising landscape broadly.
Catch up quick: While most people think of Roku as a smart TV hardware provider, the company actually makes the bulk of its money off of the operating system that runs on its devices.
The company said it made $1.2 billion in "platform" (operating system) revenue last year, driven largely by ad sales on the Roku Channel, its free ad-supported news and entertainment network.
Digital TV ads are typically found on streaming services. But increasingly, because so many people in America use smart TVs to also watch live TV broadcasts, smart TV operators like Roku are trying to insert digital TV ads into linear TV broadcasts, where most TV programming dollars are still transacted.
This adoption has moved slowly, because the providers of such advanced TV advertising technologies, like Nielsen, haven't had access to smart devices at the scale that an internet TV software provider like Roku has. (Roku as of this year has more than 50 million active accounts.)
Details: While deal terms are not being disclosed, executives from Nielsen and Roku tell Axios that about 100 people from Nielsen will join Roku once the transaction has closed.
In acquiring Nielsen's advanced TV ad business, Roku will own Nielsen’s video automatic content recognition (ACR) system, an opt-in recognition technology that helps it evaluate what ad is currently running on live TV so that it can be replaced with a more personalized digital ad instead.
It will also acquire Nielsen's dynamic ad insertion (DAI) technologies, which replaces linear TV ads with personalized digital ads. This will allow Roku to partner with programmers to convert more TV ads over to digital.
"This is in many ways for Roku an expansion of the path we've already been on in bringing forward more advanced TV advertising," says Scott Rosenberg, the SVP and GM of the Platform Business at Roku. "It's been embedded in our TVs for years now."
The deal also includes a newly-formed partnership with Nielsen and Roku to integrate Nielsen's ad and content measurement products into the Roku platform.
Nielsen has been using Roku's data since 2015 to help it more accurately measure ads and content on smart TVs.
The partnership means that the two companies will work together more closely to help verify Nielsen's data for content consumption across smart TVs, but it doesn't mean that Roku will have a say in ad or content ratings, according to Nielsen.
"We will remain an independent measurement company that is a strategic partner with the largest OTT platform," says Sean Cohan, Nielsen Global Media's chief growth officer and president of International.
Be smart: Nielsen is trying to focus on what's long been its core focus: media measurement. The partnership gives Nielsen additional scale there, with access to over 100 million internet-connected TV devices, up from 55 million.
Last year, Nielsen debuted a new effort called Nielsen ONE, a program that aims to modernize its tech to create a single, cross-media measurement standard.
"We think they're well positioned to grow the business and we are well positioned to measure the business," says Cohan."Our expanded partnership allows us to together shape the future of media and TV measurement."
The big picture: Advanced TV ad buying, or "audience-based" ad buying, while growing, is still a very small portion of overall TV ad-buying. Collectively, "audience-based" buying only accounts for roughly 10% of the $70 billion TV advertising market today.
Data: eMarketer; Chart: Sara Wise/Axios
The bottom line: "We view the deal with Nielsen as another step in expanding the breadth and variety of TV advertising we can help positively influence," says Rosenberg.
My opinion: Targeted, relevant ads are going to be a good thing. I remember, one time, we were watching a free, ad-supported TV show on our Roku and we saw an ad for some food that looked interesting. So we bought some and we liked it. Now we often buy that food. So imo when that happens, it's like a win-win-win. A) The advertiser made a sale; B) We discovered a new food that we can buy regularly; and C) Roku gets some ad money. I don't watch Roku to discover new things to buy. I watch Roku to see the free TV shows and movies. But hey if the ads are relevant to me, personally, and if I discover something useful to me that I could buy, then hey, it's like a bonus. Not only did I get to watch my favorite show for free, but I also learned something useful (from a relevant ad). So, I'd say, yes, I'm looking forward to more relevant, targeted ads coming to Roku. To say it the other way, irrelevant ads are just a waste of the advertiser's money and my time watching because I was never going to buy that product or service.
I have zero tolerance for any ads or commercials. I don't waste my time watching any free channels on Roku like the Roku Channel or standard TV channels that have commercial breaks either. I don't have one second of my time to waste on any ads no matter how 'personalized' they are, I still won't buy it! The best way to watch is subscription channels or purchased content so you never see any ad garbage.
One other small related thing. Modern day ad breaks freshen up classic TV programs and help to give them a more up-to-date feel. For example, imagine that you are watching "Bob Barker era The Price is Right" on Pluto TV and then there is a short ad break and you see some 2021 commercials. Then you go back to Bob Barker and The Price is Right. What effect this has to me in my mind is it "freshens up" the old show and causes it, in my mind, to seem more updated, more current, more relevant. Did anyone else also think this? Just curious.
Congratulations is in order here for Roku. Especially during these trying times for this company.
Keep up growing and branching out. You will survive and even thrive in spite of problems dealing with other mega companies (like Google).
Are there published instructions on how to opt out of this as a user? Being digitally profiled is sadly the norm nowadays, but it is not something I agree with.
Recently, I bought something on Amazon, and now I'm seeing commercials for that same product sometimes when I watch Roku. I'm wondering if that's a coincidence or not.
I've felt all along that Roku was more interested in data gathering than fixing their issues with updates.
According to CEO Anthony Wood, Roku is in the ad business, not the hardware business.