Roku (NASDAQ:ROKU) debuted the first wholly original production from its advertising brand studio this month. The new weekly entertainment series, Roku Recommends, highlights the top five titles to stream on Roku's platform each week.
The new series is more than an opportunity to highlight all the great content Roku users can find on the platform. It's a chance to show off Roku's ability to mine its user data and produce results for advertisers and users.
Image source: Roku.
A sponsored program
At its base level, Roku Recommends is a sponsored program. That means the production team will provide deeper integration of brands and products into the show. Walmart is Roku's first sponsor, and Roku says it has several other national advertisers lined up.
In its press release announcing the new series, Roku noted advertisers will be able to "quantify whether their 'Roku Recommends' integration reaches SVOD-only streamers, adds incremental reach to their video ad campaign, shifts perceptions of their brand, drives consumers into stores/websites, or moves product off the shelf."
In other words, this is the first real test of Roku's advertising brand studio to show whether it can produce better results for marketers than simple national television campaigns or standard video ads. If successful, Roku could start producing more branded content for The Roku Channel, subsidizing the cost of producing a steady stream of content for the ad-supported video service.
A layer deeper
There are a couple of other opportunities here.
First, Roku's using its proprietary user data to surface these weekly recommendations. And it says it's going to recommend top hits as well as "hidden gems," suggesting its data can spot trends before they take off, at least in terms of popular video content.
If Roku sees traction with Recommends, it could lead to a more content-first user interface, which Roku management had talked of in its early days as a publicly traded company. Management seemed to have abandoned that idea in favor of The Roku Channel. But with the increasing number of streaming services available and content scattered all over the place in various services, putting a bigger emphasis on titles instead of silos could benefit Roku.
Second, Roku will be able to collect immediate feedback on the impact of its recommendations on user behavior. That could help it improve recommendations.
Moreover, combining those two factors -- trend-spotting and measurement -- could be a gold mine for advertising sales. Roku has acquired and built several measurement tools, and it's made strategic partnerships to feed them additional data. If it can apply similar tactics to its other user data as it does for video views, it could produce some very effective advertisements for marketers. Even if Roku only manages to produce good results for video views, it could use the insights to create new audience development advertisements for new streaming services.
Roku has a trove of data, and it's putting it to use
Roku has a lot of data on its users, and it's just getting started tapping that data to engage users and improve monetization. The company has continued to make investments to increase its ability to collect and analyze data, and ultimately that should lead to greater revenue per user. Roku Recommends could be the next way Roku uses its ability to comb through that data and produce results for itself, its users, media companies, and advertising partners.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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June 16, 2021 at 07:15PM
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