Roku's Video Ad Estimates Lowered, Streaming Slowdown Forecast

Roku’s future video advertising revenue could be far less than estimated, according to MoffettNathanson Research.

The company has downgraded the set-top box/streaming platform’s stock, due to its lowering of video advertising estimates by the year 2025 -- now expected to be $4.9 billion, down 24% from a previous $6.4 billion projection.

This year, Roku is estimated to see $1.25 billion in revenue, and is forecast to see $2 billion in 2022.

MoffettNathanson estimates roughly that two-thirds of Roku’s “platform” revenue comes from video advertising, with the remaining money coming from subscription-fee revenue from apps on its platform, its OneView DSP (demand-side platform) and media/entertainment promotional spending.

It also sees U.S streaming subscriptions slowing, which will have an effect on video advertising. In the third quarter, for example, U.S. streaming subscriptions rose just 3% from the second quarter, now totaling 234.3 million.



“This is a notable slowdown from the double-digit quarterly subscriber additions over the past couple of years,” writes Michael Nathanson, senior analyst at MoffettNathanson Research.

Roku is expected to see $7.5 billion in revenues in 2025, which is 17% lower than its earlier projections.

In addition, revenue from “performance obligations” -- money coming from content agreements with publishers -- “should begin to moderate, especially after Roku laps the launch of new DTC [direct-to-consumer] services in 2020.”

It also notes rising competition from ad-supported video streaming services, such as Pluto and Tubi, is expected to hit $964 million and $544 million, respectively, in video advertising revenue this year.

This also means a slowing of advertising revenue Roku collects from advertising-video on demand streamers it carries on its platform, such as Pluto, Tubi, Peacock and the ad-option HBO Max.

“While the standard agreement is for Roku to take 30% share of advertising inventory from third-party services on the platform, we hearthis share may be just 10%-15% (or even lower) for AVOD services like Pluto, Peacock and Tubi.”

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