Roku, Inc. (ROKU) Earnings Call Transcript & Summary

All right. Well, welcome to Citi's Global TMT West Conference. I'm Jason Bazinet, I cover the U.S. Internet and media sectors here at Citi. We do have disclosures available on the conference registration site, if you need them. And this afternoon, it is my pleasure to welcome Steve Louden, CFO of Roku. Steve, thank you for joining us.

Yes. Thanks for having us, Jason. Appreciate it.

Yes. Of course. Of course. So 2020 was a big year for you, a busy year for you. Maybe you could just -- for those that are new to the story that haven't been following the blow by blow, maybe give us just a high-level overview of what you accomplished in the last year.

Sure. Yes. And thanks again, it's good to be here today. Yes. And, in fact, kind of some breaking news, we had a release earlier today, and we rang the opening bell of NASDAQ, celebrating crossing 50 million active accounts. So we ended 2020 with 51.2 million active accounts. So we added roughly 14 million active accounts during 2020, which was a significant increase And then we also announced 17 billion streaming hours in Q4, bringing our total to almost 60 billion streaming hours, up 55% year-over-year both for the quarter and for the full year 2020. So significant progress on building scale on the platform. And we're America's #1 TV streaming platform. And so we had great progress. We built scale. We drove an increase in our average revenue per user. We talked about in this release today as well that The Roku Channel continues to grow nicely. It roughly doubled in 2020 as well as a leading position on the streaming TV side or smart TV side. We're #1 in terms of the OS, in terms of TVs shipped there as of Q3. And so a lot of progress both on driving scale and driving monetization on the platform.

That's fantastic. So I think that the space that you are in is one of the most exciting sort of in the broader sort of the Internet media ecosystem. And the reason I say that is, when I just look at third-party data for how big the global television advertising market is, it's something like $140 million. I don't know if you agree with that number. But it just seems like we're in such early days in terms of connected TV advertising that it just seems like there's a huge opportunity ahead of you. So just a few questions. Do you agree with that sizing of the potential opportunity on the linear TV side globally? And then how would you think connected -- the connected TV ad market is today?

Yes. No. It's a great question. There is significant opportunity as the world moves over to streaming. And obviously, that's what the vision of Roku has been that, eventually, the whole world will stream TV. And we aim to be the -- kind of the key platform in the middle of that shift. And so yes, we talk a lot about the advertising market for connected TV, that's the single biggest opportunity. Obviously, we have businesses within Roku, everything from selling players, our licensed partners on the TV side selling Roku TVs. And then we -- obviously, on the platform side, our monetization is primarily advertising, but then also we do share -- have rev shares with the subscription and transactions on the platform as well. But yes, there's some different sources. But in the U.S. alone, that TV advertising opportunity is about $70 billion, and it's -- yes, I've seen double, maybe even slightly higher numbers globally than what you mentioned, but it's a big opportunity. And what's interesting is the consumers are really embracing streaming more than ever. And so you have, obviously, the size of Roku with 50-plus million active accounts is a good indicator and certainly, the U.S. is kind of ahead of much of the world. But in terms of the advertising, it's still very early days. It's hard to get specific information. People have estimates. But what I've seen is largely the TV advertising budgets are probably still somewhere in the single digits of movement versus you have in key demographics during 2020, see Nielsen data that says key demographics, almost half of their TV is being streamed as opposed to the linear TV side of things, but the budgets are well behind the viewership. And so we see that over time that likely the advertisers will have to rightsize those budgets. And certainly, COVID has been an accelerator to that because it's basically testing a lot of the historical norms around things like the traditional TV upfront process on the advertising side as well as things on the consumer and content publisher side with the windowing of new movies, for example, starting to break down. So we think there's a strong impetus for those budgets and more content moving over to streaming and obviously, the viewers are voting by their time spent.

That makes sense. If you sort of thought about the 3 underlying enablers of the advertising opportunity, there's the consumer shift, which your 4Q release sort of alluded to; there's the content shift, which you just talked about with movies; and then there's the advertisers changing their sort of ad buy. It seems like all of those are sort of moving in the right direction sort of on parallel paths. But it feels like the advertiser might -- is sort of maybe where the biggest near-term opportunity is as we sort of get that catch-up and that sort of harmonization between the consumption -- consumer consumption and the ad budgets getting reallocated. Is that fair?

Yes. I think so. I mean the world was moving to streaming pre-COVID. But certainly, there's been accelerators to that, especially on the consumer side where we talked about both in terms of streaming hours and the number of accounts that we gained in the year. And advertising was moving over, content was moving over. But certainly, on the content publisher side, you have top-tier legacy media companies that have now fully embraced streaming versus traditionally, they maybe had a bit of a balance between the old world and the new world. Now they're getting very vocal about that this is the direction they're moving, which is great to see. Took some of them a bit longer than maybe we would have liked, but it's good to see that they're finding a focus on that. And then on the advertiser side, we were growing the Roku advertising business very nicely pre-COVID. And there was a bit of a blip, right, when COVID and the hit and the economy kind of shut down, but what you see now is advertisers taking a harder look at their budgets. They're understanding they've got more of an impetus to follow the viewership. And so we do see them catching up over time. I'm not sure exactly the pace, but I think what's interesting is before COVID happened, our Roku monetized video ad impressions were growing consistently 100-plus percent year-over-year. In Q2, during the first part of the pandemic, that dropped to roughly 50% year-over-year, which was still well ahead of overall advertising spend that was flat to down. But a lot of advertisers put a -- put the emergency brake on initially, not sure where the world was going. And then in Q3, we saw that bounced back to 90%. And we'll obviously announce our Q4 results here next month.

Okay. That's perfect. I should mention, if you do have a question for Steve, you can just e-mail me and we'll relay your question. I'm sure he'd be happy to answer it. In terms of the -- you must have a tremendous amount of data on the platform side about what consumers are watching. Do you see -- maybe I think about it a different way than the way you think about it, but I sort of break it into the SVOD bucket, sort of, I'll call, the Netflix bucket. There's the digital MVPD bucket where you're sort of streaming sort of live video, and then there's the part where I think you participate more directly, which is the AVOD part of it. Do you see sort of any material changes in terms of the composition of what consumers are doing? Are they leaning more one way versus the other in terms of those big 3 buckets?

Yes. You mentioned a lot of information. I mean that is one of the key advantages we have as the platform owner is we have a lot of good information on what's happening on the platform. We have that first-party relationship with those 50 million-plus active accounts. And so that is very helpful in terms of not only understanding the content side, but then leveraging that information for the advertising piece as well in our OneView platform. In terms of what we see, one of the things -- this is more historical, but one of the things that we saw pretty clearly in the data years ago was the fact that free ad-supported TV was very important, and it's an important part for a good group of consumers that are not only looking for choice. Obviously, everyone gets video on demand as streaming is highly adept at that versus a traditional linear stream. But the second reason that a lot of folks come to streaming is to save money. And so having great content in a free ad-supported world, especially if it doesn't have as big of an ad load as it does in the traditional world, our Roku Channel is set to roughly half the ad load -- half of a full ad load that you would have on traditional. And so that's really why we started The Roku Channel. We saw in the data that people were watching a lot of free ad-supported TV, but there wasn't really a good critical mass of a location to view that. That was kind of very much spread out. And so that's why we started The Roku Channel. And that continues to be a very strong category, if you will, in terms of type of content. The other thing within COVID that's been very interesting is a lot of people talk about the streaming services, of course. And we mentioned that a lot of the big names are kind of fully embracing that, and we've had a lot of big new services in the last year. But what's had a bit of a resurrection also is TVOD, right, transactional video on demand, and specifically, the premium TVOD component of that where you are getting -- early in the pandemic, you had basically direct-to-streaming titles like Trolls World Tour or the Scooby-Doo movie. You have Mulan and you have some other examples. You have a hybrid example of Wonder Woman 1984 kind of going day in date on streaming and in theaters. So that's really exciting as well. And so that category definitely picked up kind of within the pandemic, and it will be interesting to see the different approaches to that going forward.

So can I ask you a question about TVOD just for a second?

Sure.

So it -- on TVOD, is it fair to say, like if I sign up for, let's say, I don't know, pick one of these SVOD apps, you would only participate economically if you signed up through Roku, right? On the TVOD side, is there a way sort of where you don't get paid on a TVOD purchased by the consumers or a way around it? Or it's almost like you have to be sort of like in the Roku system, so any sort of TVOD transaction, you're going to participate?

Yes. No. Good question. Yes. In general, if there's a transaction on the platform, then we'll have a rev share as part of that transaction even if it's buried within, say, another SVOD app or something as well.

Okay.

And then you're right. On the subscription side, our model, which is designed to be aligned where when our -- when we add value to our partners, we get to participate in that value creation. So on the SVOD side, yes, if you sign up through the Roku platform, our general model is we get a rev share for the life of that subscription. But if you, say, come to the Roku platform and you already have a SVOD account with someone, then we're not participating directly. We participate indirectly because there's other aspects of the platform and the UI, things like the home screen display ads, screen saver ads, buttons on the remotes. There's a lot of the tools we have to help promote content that we get paid for. But yes, in general, on the SVOD side, we have to basically be responsible for the sign-up to get the rev share.

Understood. So you guys have gone through I think a number of successful negotiations this last year. And I think the market sort of generally -- at least I haven't spoken to anyone that has any insight in terms of the specifics or particulars of any of the agreements. But I was just wondering if you could talk in a philosophical level about what you're trying to get done when you sign an agreement, let's say, with a Discovery Plus or a HBO Max or something. I'm just going to frame sort of 2 artificial poles and then just sort of get your reaction to sort of see how you think about it. I can imagine one pole being we really just want to make sure that the consumer does not have a tough choice regarding what operating system they want to use. And that means all of the content has to be available, and so let's not get in a huge fight sort of day 1 as all these services are launching. Let's just keep building the ecosystem. And so the economics may not be that attractive to you day 1, but the content is there for the consumer and that sort of reduces churn and helps grows ads. And then the other pole is now we're going to draw a bright line in the sand and we have these 50 million accounts and there's value to that and let's just set the tone day 1. Between those 2 extremes, is there a philosophy that undergirds how you approach these negotiations as these new apps are getting launched?

Yes. Sure. What I would say is, we want all content on the platform. Historically, one of the advantages of Roku has been that we have the most content. And like I said, we have the best content marketing tools in the industry to help content publishers build audiences, retain audiences, get their content viewed. And so yes, all things being equal, we want content on the platform and we want consumers to have the most amount of choice. Generally, there's a couple of reasons why content wouldn't be available on the platform if, say, a new service came on immediately, either they don't meet our certification requirements or we don't have a content distribution agreement that we've agreed on with the partner right away. What I would say is, again, our -- all of our revenue is designed to be we create value for our partners and we get to participate in that value. And we are very flexible in terms of how we get there. Being the platform owner, one of the advantages back to information is we have 10,000-plus apps on the platform: big ones, small ones, all different types, SVOD, AVOD, TVOD, hybrid models, et cetera. So we have a very good understanding about sort of what market is and we also have a very good understanding, given the underlying usage information and the other deals that we have we can benchmark around, on how much value the partner is getting from the platform and what the value -- what's kind of market for what we can participate in. So our goal is to have a win-win deal. Sometimes that can be challenging with different partners. They come in with different viewpoints on what are the terms that are most important to them. And I do think sometimes it takes a while. The streaming world is very different than, say, the legacy cable world. Because the legacy cable world, basically, the cable company is charging the consumers a lot of money per month, and then there's a negotiation about how to basically slice up the pie from those consumer fees. There's no access fee for Roku, right? You can have your Roku player, you can have your TV where Roku is already built into it, but we're not charging the consumer. And so the mind shift has to be around there's a lot of value to be created, we can help you do that. But for us, it's important because that's how we are -- we gain revenues, that's how we invest in the user interface, the operating system underlying and keep the platform running. And so it's important for us, and it's also very much we understand what market is. And sometimes it takes a while to get to a mutually agreeable spot.

That's super helpful. Can you -- do you -- I guess the -- when I sort of think about the evolution of your business and the other players that are out there, we sort of started with dongles and hockey pucks sort of on the player side, the way you report it, and it's sort of moving over to this, the operating system sort of embedded in televisions. And you've got some TVs that are -- some TV OEMs that have decided to make their own operating system. Do you have any data in terms of how many consumers might buy a television with an operating system that's already loaded into it and owned by the TV OEM, but they like Roku so much or maybe one of your competitors that they still plug in your device almost on top of it? And the reason I asked is we had an expert yesterday that sort of said he thinks there's a decent number of people that are buying smart TVs and are porting over whatever their favorite sort of operating system is from a third-party like Roku or from Amazon, as an example.

Yes. That is kind of an interesting phenomenon, but it is fairly common, although -- because there are a lot of -- notably, there's -- there are some big names in TV OEMs in the U.S. and globally that have their own operating systems traditionally, right? So namely, Samsung and LG, to name a few. There are a lot of folks that have those TVs. They buy them because they're -- they -- it's a well-known brand, good picture quality. And then yes, we know that they'll add a Roku player to that. In fact, that's how I got into streaming even before I joined Roku, which is I wanted to cut the cord. I was not very happy with my local cable company. I had a Samsung TV, and then I started using the operating system, and I didn't find it very helpful. And so I researched and found Roku -- I'd never heard of it -- because it won a bunch of reviews, and I added my Roku player to that. So yes, there are a lot of people that still do that. But increasingly, what we see is that a licensed operating system and Roku is the best-in-class. And now we've actually surpassed Samsung in the U.S. and Canada. We're the #1 smart TV OS as of Q3 was the latest data we have for the 9 months of 2020. Roughly 1 in 3 smart TVs in the U.S. that's sold is running the Roku operating system. So we have surpassed Samsung. And what you see is, and this is similar to what happened in the phone system when the Android phone operating system came out is the TV OEMs, they're focused on manufacturing, they have that software, but it's hard for a proprietary OEM software stack for that OS to compete with a best-in-class licensed operating system. And similar to phone, what you see is more of the market is moving over to licensed. And because Roku is the only purpose-built operating system for TVs, like it's designed from the ground up to run on low-cost hardware like player boxes and sticks or the TVs themselves, there's a significant advantage for Roku. And our Roku TV program is only about 5 years old, a little over 5 years old, and we've gone from no market share to now #1. And we're starting to see a lot of progress as the Roku TV program rolls out internationally, adding OEM partnerships, adding market share in places like now we're #1 in Canada, like I mentioned, and the U.S. Mexico, we were making tremendous progress. We added the Roku TV program last year into places like Brazil and the U.K. So you see the world moving to Roku TV as an operating system in the licensed operating systems.

Do you -- when I talk to my research counterparts over in Asia and I say, give me your smart TV shipment or whatever, the number looks a lot larger than I think the number of customers that are actually using it. So is there a dynamic where there's almost this pent-up demand where someone buys a new television set, it is enabled to be a smart TV but the consumer for whatever reason has not really turned it on, and so there's almost like a catch-up trade as the consumer becomes more comfortable or receptive to this mode of consuming entertainment? Is that a reasonable hypothesis? Or do you think that's wrong?

Well, I think it depends on the TV. And I think in general, for the industry, I'm not sure what the exact data is in terms of the activation rate of the smart features of TV for streaming. Traditionally, they have been somewhat low, certainly much lower than Roku for a couple of reasons. One, the TV operating system and the streaming capabilities are not necessarily front and center in the TV. And second, they're -- like I said, they're just not as good as a best-in-class licensed operating system like Roku TV. But you contrast that with Roku, our sort of activation rate of streaming features are quite high in there. And part of the reason is, and this is a unique feature of Roku, when you buy a Roku TV and you turn it on, it boots up to the home screen that looks -- which is basically the same home screen as you get on a player. So it's actually streaming first. And then you have your inputs at the top of that screen, and you can go to a different input, say, if you had a cable box or a game console or something else or you wanted to just watch linear -- live linear TV some other way, be an antenna or something, but the streaming experience is front and center on the Roku TV. And every time you turn it off, a normal TV or a traditional TV, let's call it, will go back to the same channel that you started with, right, or that you ended with last time versus the Roku TV goes again back to the Roku home screen. And so part of it is a better mousetrap and part of it is designed kind of with streaming front and center.

Super helpful. So maybe you could indulge me a bit and sort of help me understand Amazon. And the reason I ask this is that I sort of think about the players that were selling dongles or hockey pucks that were sort of allowing older TVs to become streaming TVs. And then I move over to this OS world, I can see where Alphabet has sort of made that jump, you guys have clearly made that jump. You mentioned some of the OEMs that do their own operating system like Samsung, they didn't sell a dongle but now they're an operating system. And then there's Amazon where they seem to have been quite successful with Fire, but I don't really see a lot of evidence of them sort of having an operating system that's gaining a lot of traction in the marketplace. And I don't know whether that should make me excited because you've already made that transition and so it feels like the strategic wins are at your back as we move more towards the OS being inside the hardware or if it should scare me because we're going to open up the newspaper one day and Amazon is going to have this brand-new operating system that doesn't require a dongle. Does that make sense?

Yes. Absolutely. I mean there are -- in terms of how do you build scale on a streaming TV platform, certainly selling the players, right, the sticks and the boxes, is traditionally the way you would do that. But as we've shown, increasingly becoming the default operating system for the TVs as they're sold and obviously the consumers have to use them, it is a strategic position going forward. And so that's very important to us. And like I said, we're the #1 TV operating system in the U.S. and Canada, and we've gained a lot of market share. I don't want to speak too much to Amazon or Google's motivations or their strategy, but I think one of the things you see for both Google and Amazon is -- well, let's start with Google a little bit. So Google, their Android TV platform is primarily a phone platform, and they kind of stripped some of it out and they use it for TV as well. But as a result, that's one of the reasons we have a significant cost advantage over some of these other licensed competitors is because ours is the only one purpose built for TV versus Android TV and Fire TV edition is a fourth version of Android. So they have kind of a similar problem in the mobile operating systems. Every year, they're trying to increase the memory footprint for more services and better features on the phones. They're using the latest high-power chips, and there's a bit of an arms race on the iOS versus Android side on the mobile device. As a result, it's harder for these guys on the TV side to keep up from a cost competitive standpoint. And so that is a thing that they suffer from, and it's been basically an impediment for them to gain share on the licensed TV operating side. The other thing for Amazon is they do have that TV OS. They haven't made significant progress on that for probably a couple of reasons. One, a lot of the retailers are -- they don't think Amazon is their friend, and so they will not carry Amazon consumer electronic products, right, most notably Walmart, which sells a lot of TVs. And so you see Amazon a while back did an exclusive brands deal with -- for some TVs in Best Buy. That's kind of -- aside from amazon.com, that's probably the second biggest piece they have, but they're not in a lot of retailers because the retailers are wary of what they're doing to their business.

That's super helpful. And what about Comcast? How do you see Comcast evolving as a competitor?

Well, I think like Google and like Amazon, Comcast is both a competitor and a partner, right? So one of the interesting things about the streaming world and as we try to position ourselves in the middle of this massive trend, like we talked about over to streaming, is a lot of the partners we have are also competitors in different areas. And so I think, certainly, there's been press around moves from Comcast in terms of things like their Flex box for streaming. Obviously, they own NBCUniversal and Peacock and all that, so they're moving into that. But I think one of the difficulties is just the standard innovated -- innovator's dilemma, right? The core part of that business is still in the cable world. And so they're making some incremental moves. But all we do and all we have ever done at Roku is work toward that vision that all TV will be streamed. And we don't have the sort of encumbrances of the old world that we're trying to disrupt. And so that obviously is much more of a consideration for some of these other competitors and partners.

Makes sense. If I look at that OEM layer, there's -- most OEMs, I think it's fair to say, are partnering with someone like you for their operating systems. Some have their own. There's 2 things that I don't have a view in terms of how it evolves. Do you think over time, more TV OEMs are going to develop their own OS? Or do you think it goes the other way where more maybe some of the TV OEMs that decided to build their own OS end up using someone like you? That's my first question. And the second question is, when I go through and I look at sort of the agreements that OEMs have with particular operating systems, it seems like there are some OEMs that have quite often deals with more than one. They'll do a deal with Android and a deal with Roku. And you sort of unpack that and there are different model numbers, right? And it just -- it sort of gets very, very confusing from my perspective. So any color you could provide in terms of, one, do you think over time, more TV manufacturers will develop their own OS? And two, what do you think happens over time with TV manufacturers having agreements with more than one operating system? Do you think that...

Good questions. Yes. The world is moving to these licensed operating systems, just like that analogy with the phone world. It's getting increasingly difficult for TV OEMs to maintain their proprietary OSs, And it's -- there's so much investment we and others have in our operating systems. I think that's one of the things people underestimate is just how much IP, how much work goes into these operating systems and how much we're investing, especially as we grow scale each year, in not only maintaining the existing operating system, but making it better in terms of the features and rolling it out to more places. So the data is very clear that the world is shifting away from OEMs that have their proprietary operating system. Even the biggest names like Samsung and LG have lost significant share, market share since we've introduced the licensed operating system. And most of that share has gone to Roku TV partners. And so I think that will keep going. And you'll get to a point where there's one primary licensed operating system in the market over time. And then you might have 1 or 2 other sort of more niche things where there -- it might be a proprietary operating system. But that's a pretty clear trend we've seen in the data. And then secondarily, in terms of the OEMs, I think there's a couple of reasons they may have multiple licensed operating system deals. One is for the Roku TV program, it just historically hasn't been available in a lot of places internationally. And so we have TV OEM partners that work primarily with us in the markets where Roku TV exists, but they might license it for at least some of their models elsewhere. They might use another operating system because we're not available. And certainly, we get that feedback when we go into new markets with the Roku TV program. Especially when we launched in the U.K. and we announced that at -- announced that we're kind of coming to Europe, we got a lot of great feedback of like, great, okay. We've been waiting for you, right? Like here we go. Secondarily, I think a lot of OEMs have a strategy of saying we want a broad base of consumer options, be it screen sizes, be it different types of features, like higher-end features like Dolby Atmos. And one of the other ways I think increasingly they are looking at differentiation is just differentiation of operating systems. Now we feel that Roku OS is the best. And certainly, we've won more than our fair share of awards both from consumers as well as the professional reviewers. But a lot of times, you'll have the OEMs that want to kind of spread that choice around.

So this is going to be a naive question. But it would seem to me if you were developing sort of an operating system and you're having a negotiating with a television manufacturer, it would almost be easier to do a global deal as opposed to sort of a geographic deal. So as you sort of move into these other markets, what is the piece that I'm missing that sort of enables you to launch the operating system in a particular geography with a television manufacturer? It just seems like it would be like -- it would be ubiquitous because it's just a piece of software. So...

Yes. So historically, a lot of it has to do with just resource constraints on the Roku side as when we were smaller. You would think it's a piece of software and you can just make it so globally immediately. But TV is an interesting world in that there are these regional tuner standards, and so you do need to develop those, and we chose to develop them internally. There's certainly off-the-shelf ones you can get from third parties. But to really integrate properly with the rest of the operating system and have the performance that we wanted, we were developing our own regional tuner standards. So for example, Latin America has got one that's different than Europe. They might be different from Asia. And so that's a lot of engineering work on our side. The other thing is each country has decided that they know how to do TV best. So you'll have these country-specific requirements that you have to engineer for. So for example, in the U.S., it might be something like the closed captioning system, right? That's a U.S.-centric requirement. In the U.K., it could be something called Freeview Play, which is kind of a consortium of the public service broadcasters, right? And so there's extra work. But I think over time, you'll get more -- you'll get deals that are sort of multi-country or region. An example would be, right, we have a very successful partnership with TCL in the U.S. And so we announced in 2020 that we were expanding that to other countries in -- around the world, not necessarily a global deal right away, kind of say, but that we're going to move that to other markets. So I think as the world moves more to streaming and we're bigger, we're investing more, you'll see more of those kind of regional deals or maybe eventually some global deals.

That's fantastic. So one of the big questions that comes up with investors all the time on your stock is there's this debate around The Roku Channel. And some investors look at The Roku Channel, and I guess there's 2 debates. One is no one really knows how big this is inside in terms of your overall revenues today. And then the second debate is people aren't quite sure about how excited they are about it relative to the platform business, right? Investors seem to get more animated about Roku being sort of this platform gateway and you get a -- you shared a little bit of the economics with all of these different partners. They get less animated about the idea of Roku's slogging it out in a very competitive world with thousands of apps. This just feels less differentiated, I guess, is maybe the buy side view. So can you talk about both of those -- one, in terms of just rough sizing about how big historically The Roku Channel is from your total revenues? And then two, strategically, how important is it? How important is it going forward? Is it at the heart of your strategy or is it more peripheral?

Got you. Yes. Lots to unpack in that but yes, it's a very interesting topic. What I -- yes. Look, if I take a broader level back, when we talked about different types of content, I mentioned AVOD and I mentioned understanding the consumer behavior and how important that was to folks, led us to develop The Roku Channel. And The Roku Channel was predicated on the fact that a lot of people want to watch free ad-supported TV, ideally not too painful from an ad load perspective. But if you looked at it, there were no critical mass players on the AVOD side on the platform. Whereas on the SVOD side, there were significant players. Obviously, Netflix is the granddaddy of SVOD streaming services. And part of the reason that I think that historical juxtaposition was true where you have a very significant player on the SVOD side but not critical mass on any player in the AVOD side is a simple fact that if you're a free ad-supported service on Roku or any platform, in order to maximize your traffic, you don't have a gate, right, like a sign-in. You don't have an account, you just click on the app and you can look around and watch stuff. Now the Achilles heel of that is the fact that if you're that AVOD service, you actually do not know who's watching your content. And hence, and this -- a lot of people don't really understand this difference. They think because it's streaming that they would know what that is. But the actual app owner, unless you have a log-in, does not know who's watching. As a result, that when they're trying to monetize that content, they're monetizing it very similar to traditional TV where they can only sell that as a broad Nielsen demo or maybe a run of network. And so the CPMs are very low there. And hence, it's a structurally challenged model versus if you can get viewership in subs on the SVOD service, that's a good way to have a flywheel to justify spending original content. But on the AVOD side, it's structurally harder, unless you're the platform owner, right? The platform owner, we know who's watching because you're signed into your Roku account to be on the platform. And hence, that gives us an advantage of being able to know who's watching. We can get better recommendation for content because we have a sense of who you are, what you may like based on some other behaviors you had. And then when we go to monetize that same content that might be on a stand-alone AVOD service that's getting monetized at a low CPM, we can serve a targeted CPM there. So it allows us to monetize it as a much higher CPM rate than they could. And that is a big advantage around The Roku Channel. And so when we look at like the overall long-term views of streaming platforms and how it's going to view, what we think is there's probably over time going to be less apps out there. And a lot of the library content, long-tail content will naturally gravitate to a place like The Roku Channel where, again, we know who's watching, so we have a better sense of how to basically unearth content that you or I might like but others may not like, right, but we can differentiate more because we start with better insight. And then we can monetize better. As a result, that's a better vehicle for people to get their content need. One of the important things, and I think a lot of people miss this, is The Roku Channel is open to anybody on the platform, any content focused around the platform, they want us to put that content in The Roku Channel on a free ad-supported basis on our terms, right? And so what we see from that perspective is that some of the folks that are a bit more progressive, they'll understand they're going to get more traffic for that because we're monetizing at a higher CPM. Even with a rev share with Roku, they're likely making more money than they would otherwise be because a lot of that content is buried in some app that a lot of people might be interested in, but they would never find on their own.

Got it.

And thus, The Roku Channel we do think is strategic for us because it's going to be this increasingly important avenue where a lot of that nonexclusive marquee content in SVOD services is getting viewed from.

Okay. So it's an integral part of the strategy. That's -- okay. That's super helpful. What -- can you talk a little bit about OneView as our last question?

Sure.

Yes.

Yes. So OneView is our rebranded name for dataxu, right? We acquired dataxu a little over a year ago, Q4 of '19. And the deal thesis there or the primary deal thesis was the fact that we have this great first-party relationship with the consumer, we have this information, this proprietary data set. We talked about it in the context of how that might be used in TRC, but the same type of usage is more broadly as we get ad inventory and third-party apps on the platform. One of the pieces that we were missing and that a lot of advertisers were talking to us about, which would say, hey, I really like buying inventory on Roku, targeted ads. You guys have the most scale on the connected TV world as a platform, that's great, but I have to buy from you and then I have to go over here. I would love to basically be in a spot where I could buy Roku. I could potentially buy inventory from other sources, be it -- if it's on the consumer publisher inventory on the Roku, if it's on other OTT platforms and then be able to retarget them kind of any channel, right? And so OneView allows us to leverage all the great advantages we have on the platform, but then have DSP capabilities and omnichannel reach to then go ahead and retarget off platform, offer other things. We've also incorporated some pretty cool new features in there as well, things like the Kroger shopper data program, which has been awesome. That basically turbocharged our CPG segment and things like the ACR data, automated content recognition data, that comes from our large footprint of opt-in Roku TVs. That allows us to do very unique things like going to an advertiser and saying, hey, simultaneously run a campaign over linear TV in -- on Roku and we'll performance guarantee you that you're only paying for the unduplicated audience on Roku. And we know that because of our ACR footprint. And so we can understand who's been exposed to that campaign in linear TV and just go ahead and look for the folks who have it that meet their target segmentation. There's a lot of cool features, and OneView is basically the planning and buying tools that allow the advertiser to have a much more holistic view of the world, but really anchored in the advantages of the Roku platform.

Fantastic. Great summary. Well, Steve, thank you for joining us today. I know you're very busy, but it was great to spend some time with you, and I'm sure that investors appreciate it as well. So great, great start of the year.

Yes. Yes. And thanks again, Jason, for hosting me and hosting Roku. And yes, Happy New Year to you and all the other folks out there. Appreciate it.

Thank you. Thank you so much. Have a good day.

Take care.

Thank you.