Image Credit: Mike Mozart
The product managers at the streaming hardware provider Roku had a bit of a problem on their hands. They were looking for ways to boost their revenue and they needed some new ideas. I’m not sure if you would call them lucky, but that pandemic thing came along and all of sudden they had a lot more customers for their product. Now just exactly how could they go about turning this windfall into a profit for their company?
Say Hello To Streaming Ads
The product managers at connected-TV giant Roku are betting big on ad-supported streaming. When millions of people suddenly became sequestered at home, it may have become just the right time for this new product. Streaming hours are up considerably. Viewers are now spending about 40% more time streaming both ad-supported and subscription TV, compared with previous time periods. Back in 2019 Roku said that its monetized video-ad impressions more than doubled. At the same time Roku added viewers, reported higher time spent viewing and increased its revenue per viewer.
Just like Apple TV, Roku offers a plug-in device that lets you watch any streaming service, including the Roku Channel that the product managers launched in 2017. This channel is also available through an app for computers and mobile devices. The Roku product managers have pioneered new ad formats designed specifically for streaming video. Last fall, the company started placing pop-up interactive banners over some commercials. The goal was to give users a way to interact with the ad. An example of how this works was a coupon that earned viewers a discounted movie-rental credit from Fandango.
The Roku product managers have seen changes in their customer’s viewing habits. The first big change is that there has been a big increase in viewing hours in the middle of the day. In the past, you’d have TV viewing that was very heavy in the morning and very heavy in primetime. What the product managers are seeing now is that between noon and six is showing the largest increases. Of course, primetime still remains the largest overall hours. After news, the product managers are seeing other categories that have been up. They realize that the whole area of fitness and well-being has gone up. Along with this, spirituality and uplifting programming is increasing, and programming that has to do with education and learning, projects that you can do with your kids.
How Roku Wants To Take Advantage Of A Changing Market
The Roku product managers have put together an umbrella initiative that they’re calling Home Together to help people find programming relevant to being at home with their family. A big portion of that has been for the product managers to work with their partners to make more video available for free. The product managers went to their top premium-subscription partners, like Showtime and Smithsonian, and they’ve gotten extended free viewing periods or extended free trials.
Going forward Roku’s media business is betting on ad-supported streaming video. The product managers think that streaming will support each of the business models in media. However, some parts of the industry have overlooked just how compelling free TV is to many consumers. The product managers believe that the opportunity to watch something without having to pay additionally is something that they see can building a very, very big audience. They think that essentially free TV will co-exist alongside some transactions like rentals and subscriptions. When the Roku product managers launched the Roku Channel, they made a very deliberate decision to have about half the ad load of traditional TV. Today about 70% of Roku customers are comfortable regularly stream free TV or ad-supported video on demand. Every family has the point up to which they want to spend on subscriptions, and they supplement with free TV.
Although the Roku product managers believe that they will be able to make a lot of money off ads, a number of other ad-supported businesses are warning that with the economic downturn they expect a lot of brands will pare back their marketing budgets. The Roku product managers realize that it’s not about the amount of money that’s being spent, it’s the options or solutions that many firms are thinking about. A lot of companies have invested heavily in sports advertising and that can be a problem when those sports are not happening. What the Roku product managers have seen is that some of the people who were sports viewers are streaming things like news, films and lifestyle content. So they’re still very, very much engaged. In some cases people are very much wanting to advertise, but their creative ad may feel less appropriate for the current times. One solution that the Roku product managers have done is to have these interactive pop-up overlays that could go over an ad. What this means is that hypothetically, if it were a restaurant ad that showed people enjoying it, a customer could do an interactive overlay that said, “Here’s a link to a home delivery service” or something that bridges a creative ad.
What All Of This Means For You
Over at Roku, business has been very good. During the pandemic more and more people selected their streaming hardware in order to watch shows at home. However, time moves on. The Roku product managers had to come up with the next big thing that was going to drive their revenues. They think that they know exactly what they want to do: ad-supported streaming. The challenge will be just exactly how to go about offering ad-supported streaming to their customers.
The Roku product managers have come to realize that their customers are spending more and more time watching streaming services. The Roku product managers have discovered that when their customers watch television has changed: more television is being watched in the middle of the day. The Roku product managers have created packages that are designed to allow families to watch television together. The Roku product managers believe that customers going forward are going to be interested in being able to watch free ad supported television. The Roku product managers are aware that other advertising firms believe that firms may be preparing to cut back on their advertising. However, they believe that this is still a good time for them to move forward with their advertising plans.
The Roku product managers have a fantastic opportunity before them. Their hardware product has become very popular and they now have a large base of clients. If they can come up with a way to successfully deploy an ad-supported streaming service, then they may have found a new source of revenue to tap into. They are going to have to carefully watch their customers and make sure that they continue to offer services that their customers are going to want to watch.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: Do you think that Roku should offer more or fewer ads then standard broadcast television does?
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What We’ll Be Talking About Next Time
I think that we can all agree that the Covid-19 pandemic was a huge disruption for pretty much the entire world. However, over at the Home Depot their product managers were able to make the most of the opportunity presented by having everyone stay at home with nothing else to do. They gained a lot of customers during the year that nobody went into work. However, now as the pandemic starts to ease up, can those same product managers retain the new customers that they have been able to get?