Click-Through Rate (CTR): What Is It & How to Calculate
by Cat Hausler
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One of streaming’s top players released their Q2 earnings report, with slowing revenue growth despite a growing subscriber base. Here’s our take on the matter.
4 Min Read
Could economic circumstances be to blame for Roku’s lackluster earnings, or is there more that lies beyond the surface? Last week’s earnings report showed that they were $30 million short of its peak of $703.6 million in Q4 last year—resulting in their shares dropping more than 25% in extended trading on Thursday after they missed expectations on both the top and bottom lines. Meanwhile, their subscriber growth wasn’t affected, with a 14% year-over-year growth in subscriber accounts, bringing their total active user base to 63.1 million. “There’s a lot of historical precedent for advertisers at the start of the recession or an economic downturn or in periods of extreme uncertainty, like the start of the pandemic…[where they] effectively hit the emergency brake,” said Roku Chief Financial Officer Steve Louden.
Roku’s earnings report doesn’t only reveal dollar amounts—it is also a telling tale of where the industry is moving. It’s a clear sign that performance optimized (rather than brand marketing) channels will always weather the storm better, and ad platforms that are built for top-of-funnel outcomes (like Roku) are putting themselves in a precarious position. Why? Because when advertisers need to generate ROI, they turn to ad channels that are able to deliver a stronger, measurable return. We’re seeing this same narrative play out on Connected TV as well—with advertisers (and yes, even some CTV adtech platforms like Roku) making the mistake of treating it like brand-focused ad channel, not realizing that it can (and should) be utilized as a performance marketing channel. However, industry numbers indicate a different story that counters this mindset, as the growth in CTV advertising ad spend will soon offset the negative trend we’re seeing on linear TV. CTV ad spend will more than double from this year through 2026, and will equate to more than half of linear TV’s ad spend by the end of the period.
The current state of the economy is magnifying this issue—with nowhere to hide. “Macroeconomic issues like we have right now impact short-term spend, but it accelerates the conversation about maximizing ROIs and investing in growing audiences, not shrinking audiences like linear TV,” said Alison Levin, VP of Ad Revenue and Marketing Solutions at Roku.
We’re also seeing other power players, like Amazon, taking a performance marketing stance by introducing updates to their ad platform, such as the introduction of data and marketing services like Amazon Marketing Stream in June this year to collect and send real-time analytics (and compete with Google).
Mark Douglas, Chief Executive Officer of MNTN, had a thing or two to say to Bloomberg about how the growth of digital advertising is playing out—which has everything to do with reaching consumers where they are instead of expecting consumers to meet them. “Everything that is closest to the consumer is going to do well in tough times, and everything else is going to struggle. So, in the case of digital advertising —Roku is furthest away, as their brand ads are not really at the point of purchase.” So, if performance channels are winning the long-game, and Roku’s ad revenue is slipping away, why are their subscriber numbers continuing to grow?
The fact that Roku’s ad revenue took a hit doesn’t change at all the narrative that we’re continuing to see in the advertising space: consumer interest in Connected TV remains steadfast. Market research firm eMarketer forecasts that 109.3 million households will own a Connected TV device this year, accounting for over 83.6% of total households. Similarly, Ad Age recently shared the latest numbers on FAST (Free Ad-Supported Streaming TV), which showed that household penetration has double within the past year, with over half (60%) of houses with a smart TV are using FAST services, and set to reach $30 billion in ad spend by 2024. While the rest of the year plays out, one thing is for sure: tough times expose weakness, but if advertisers can learn to jump on the performance train (and FAST), it’s full steam ahead.
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