In a move that will bolster Roku’s advertising capabilities, the streaming company has acquired Nielsen’s Advanced Video Advertising unit.
Terms for the deal were not disclosed. A person familiar with the transaction described it as “not material” to the overall business of Roku, whose market value is $53 billion. Nevertheless, the acquisition is a meaningful step forward for the streaming potentate. The company will now be able to serve viewers “dynamically inserted” ads on live, linear programming, opening up new horizons for its burgeoning ad business. Nielsen’s automatic content recognition tools for video will also come under the Roku roof, giving the company another important tool to offer marketers.
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Such brand messages, which fall under the industry heading of “addressable advertising,” are considered more relevant than traditional spots based on demographic markers like age and gender.
The deal comes as Roku continues to build on its formidable position in the streaming sector. Its connected-TV devices and smart-TV interfaces serving 51 million active user accounts by the end of 2020. The company has also found success with the Roku Channel, a free, ad-supported offering that now reaches households with 63 million people.
While the company does not break out ad revenue as a discrete category, its platform revenue, which includes ads, soared 71% in 2020 compared with 2019, reaching nearly $1.3 billion. The migration of ad spending away from linear and toward streaming has been a strong driver of growth and investor confidence. Roku started out selling streaming boxes and dongles, but has pivoted toward advertising and licensing as its core businesses.
Along with the transfer of the ad division, the two companies have also formed a strategic alliance. The agreement will see them will work to integrate Nielsen ad and content measurement into Roku’s streaming platform. Nielsen last December announced its plan to launch a new measurement offering, Nielsen ONE, in 2022. It will combine linear and digital viewing into a single set of metrics, a step seen as vital as media companies jump headlong into streaming.
Louqman Parampath, VP of product management at Roku, told Deadline in an interview that Roku and Nielsen have had an active relationship since 2015. That connection evolved into an outright acquisition instead of merely a partnership, he said, mostly because of scale. “The technology has been ready,” he said of Nielsen’s DAI and ACR operations. “What it has lacked is the reach and scale that Roku can bring to bear.”
Scott Brown, GM of audience measurement for Nielsen, said “addressable” advertising is a market worth about $3 billion today out of a total of $70 billion spent by all marketers annually on TV. But it is growing at a fast clip — more than 35% in 2020, with more upside ahead. Marketers who have seen results in digital understand the value of aiming ads not just at women aged 25 to 49 but at, for example, new mothers with an income of more than $100,000 who live in the Boston suburbs.
“This allows Roku to get into the addressable game in live, linear television,” Brown said. “Where we come in is we take our customer base — networks, ad buyers, agencies — they want to transact with our currency.”
About 100 million smart-TVs and connected devices served by Roku will be able to be tapped for Nielsen ONE after the close of the deal, which is expected in the second quarter.
Allison Levin, VP of ad sales and strategy at Roku, noted in an interview with Deadline that the “vast majority” of TV ad dollars are not targeted to anything beyond age or gender. “What we see on streaming is, over 95% of all of the buys we help clients place, are leveraging precise audiences and optimizing off of that based on the learnings they get on the measurement front.”
The deal comes about 18 months after Roku announced its $150 million acquisition of ad tech firm Dataxu in 2019. After the close of the Nielsen AVA deal, Roku will onboard its employees and take control of a sizable portfolio of ACR and DAI technology patents. Execs said the plan will be to continue to work with third-party clients who were previously in the Nielsen fold.
Under their strategic agreement, the companies will enter into a long-term commercial pact to leverage Total Ad Ratings on the Roku platform. Roku’s media sales and ad-buying platform, OneView, will natively integrate Nielsen Digital Ad Ratings for advertisers. Roku will also let publishers implement Nielsen Digital Content Ratings.
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