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Roku's New Plan To Stay Competitive In The Streaming Wars: On-Player Advertising

In a world of unlimited options, how can TV companies get consumers to watch a particular channel or show? Advertise it!

Traditional advertising is running into a problem: When it comes to television, more and more people are cord-cutters. According to a recent study, about 2.5% of Americans dropped their cable service in 2015, with many of them getting streaming television adapters such as the Google Chromecast, Apple TV, the Amazon Fire Stick, and Roku.

This has led advertising companies to see streaming players as the next frontier—and Roku, facing pitched competition by rivals like Apple—who can afford to burn through cash in order to attain market dominance—has embraced advertising. New features rolling out over the next few weeks are streamlining the way Roku’s ads work. Most notably, they will allow users to subscribe to specific channels or follow a certain television show by clicking a button within the ad.

Innovid, one of the main adtech companies working with Roku on this functionality, told me that it sees the future of streaming television advertising as resembling social media more than cable television.

Roku 4

According to Tal Chalozin, Innovid’s CTO, "Roku has 3,000 different apps and it’s clear that it’s the same thing as we’ve seen in mobile. The ability to develop apps opens floodgates, and what happens right after is that we take a lot of stuff from the mobile and Facebook playbook—it’s something similar to a paid model in order to promote apps."

"As opposed to old school television, where Time Warner or Comcast declares what Channel 2 or Channel 100 is, everyone now defines their own platform. HBO Now, CBS All Access, Crackle, and Hulu all need a simple way to promote or tell people that their channel is now available."

This means advertising that’s designed to turn watchers of other channels (also known as apps) into subscribers of other services that either cost money or promote a particular brand. For instance, Showtime was given as a hypothetical example of a client who could use the service to show in-Roku ads that target users who don’t have streaming service Showtime Anytime installed on their Roku boxes. The app can then be installed with one click.

Scott Rosenberg, Roku’s vice president of business development, says, "Two years ago, we observed that the ad-supported segment of Roku was accelerating, as opposed to other verticals we have like subscriptions and transactional services."

"Consumers like value," he adds. "They like free, even when it comes with advertising. We saw an explosion of free, ad-supported apps on Roku, and wanted to do what we could to make sure that’s successful. That meant enabling a lot of supporting ad tech directly in the Roku OS so brands could advertise better."

Ad, Meet Feed

The other new form of advertising utilizes Roku’s Feed feature, which was introduced in mid-2015 as a way to follow availability of new television episodes and specific movies, but was largely underutilized until a new version of Roku’s operating system came out this past fall.

New advertisements appearing on Roku in recent weeks for television programs or specific channels now direct users to add the show to their Feed. As my colleague Jared Newman wrote this past fall, Roku is now using the Feed functionality as a central discovery tool for shows, putting it on a par with the individual apps from Netflix, Hulu, Amazon, and other vendors. Now the company is using it as an advertising tool as well.

Chalozin says that the new advertisements Innovid is deploying for Roku allow users to add a program or movie that’s being promoted by an ad buyer.

"If CBS runs an ad for a new fall season of shows that include The Good Wife’s new season, or FX has a new season of Fargo, with one click you can say, 'Yes, this is cool. I want to follow Fargo.' You press the button, and this goes across the experience. We’ll add it to your feed, and the next time that Fargo goes to FX, you can press one button to start watching it," he adds.

Rosenberg says that a quarter of the advertisements on conventional television are for other television shows, and that the new tech "gives publishers a way to promote themselves to a customer while they’re engaged with another tv show."

Roku calls its advertising platform Roku Audience Solutions. According to Roku, other firms working on the new advertising technology along with Innovid include Nielsen, Brightline, and LiveRail.

Update: This article has been updated to clarify that Showtime was offered as a hypothetical example of an organization that could use the new advertising product.

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