Discussing Our Roku Valuation with Nick Grous and Andrew Kim

Please note: as of 3/31/22, ARK’s clients own greater than 1% of the shares outstanding of Roku Inc.

We believe there’s a major shift taking place in the TV ecosystem in terms of people moving from linear (cable) TV to connected (streaming) platforms and it’s only going one direction. The advertising world hasn’t quite caught up; In Roku’s first quarter earnings call, CEO Anthony Wood reiterated that US audiences spend 46% of their TV time on streaming while advertisers spend only 18% of their TV ad budgets on streaming.[1] We believe there is an enormous investment opportunity here, and in today’s episode we are going to be talking about why we believe Roku, the only purpose-built operating system for TVs today, is positioned to be a prime beneficiary of the shift from linear to connected TV. Tune in today to hear our predictions for the next five years, the factors required for our thesis to crystalize, exciting developments taking place at Roku, and more! You can read the full Roku valuation blog here.

“The way that we think about Roku in this new digital TV ecosystem is as the new cable box.” — @GrousARK Key Points From This Episode:

• An overview of what Roku is.
• How the TV ecosystem has shifted.
• The drop that we expect to see in the number of households using cable/broadcast (linear TV) in the US in the next five years.
• The number of households that we expect to be using connected TV (streaming) in the coming years.
• The mismatch between advertising dollars spent and engagement in the streaming space.
• A comparison between the amount of advertising dollars spent on connected TV and linear TV.
• How we predict global and US advertising spending will change in the next few years.
• Three key variables that our assumptions about Roku’s future depend on.
• How we expect Roku’s daily hour stream per account metrics to change by 2026.
• Roku’s approaches to driving revenue dollars.
• Live sports; what we believe to be the linchpin holding the linear TV advertising space together.
• The growth that we expect to see in global digital advertising spending by 2026.
• Why we think connected TV targeting can improve but linear TV targeting cannot.
• Our calculations of Roku’s gross platform monetization rate.
• Benefits of the Roku Pay offering (that we are monitoring very closely).

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