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Nielsen’s Agreement With Roku Will Accelerate Adoption Of Addressable TV Advertising

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Earlier this week, Nielsen and Roku announced an agreement that will have strong implications in accelerating the pace of the fledgling addressable TV ad marketplace. Roku agreed to acquire Nielsen’s Advanced Video Advertising (AVA) unit. No financial terms were announced. The deal is expected to close during the second quarter 2021. As a result, Nielsen’s AVA division of about 100 people will move to Roku.

This deal will provide Roku with access to Nielsen’s automatic content recognition (ACR) and Dynamic Ad Insertions (DAI) technologies. ACR collects tuning data used for programming recommendations. DAI enables marketers to better target viewers by serving individual ads across linear TV and streaming platforms instead of using traditional demographics. DAI also provides advertisers with a better return-on-investment than linear television.

Nielsen’s AVA division was launched in February 2019 and focused on addressable advertising for web-enhanced “smart” TV sets. Nielsen’s AVA uses ACR technology from Sorenson Media which is integrated with Gracenote and Qterics, a smart TV software provider. Nielsen’s AVA division has agreements with several large video providers, A&E Networks, AMC, Discovery, Disney DIS , Fox, NBCUniversal, Univision, ViacomCBS and WarnerMedia. Roku is expected to hold discussions about working with them along with reaching out to more smart TV manufacturers. In 2020, 38% of all smart TVs sold in the U.S. used the operating system of Roku.

For years, Roku has leveraged Nielsen’s Digital Ad Ratings (DAR) to provide advertisers with campaign level metrics. Now, with Roku integrating continuous measurement of DAR on their platform, the industry will have a more holistic view of ads on connected TV and streaming TV. This has major implications for advertisers who will have access to verified metrics for every impression and campaign on Roku’s platform. As part of the agreement, Roku will use Nielsen’s Total Ad Ratings (TAR) which will be critical to Nielsen ONE, the company’s cross-media solution. Roku plans to both use DAR and TAR for OneView, their demand side platform platform (DSP), a media sales and ad buying service that already uses first-party viewing data from Roku. 

Connected TV is a growing platform for digital video consumption and measurement of that content is crucial. With Roku’s implementation of Nielsen’s Digital Content Ratings, publishers will have a much clearer picture of their content on Roku as well as how they perform across all screens. Nielsen is now positioned to measure streaming content across the various apps on the Roku platform.

Additionally, by using Nielsen’s AVA capabilities and their own operating system, Roku will be able to know what content is being viewed and relay that information to their clients (e.g., broadcast or cable network). This will allow the network to swap out an ad for a better targeted ad which comes with a higher ad rate. Roku also will get a percentage of the ad revenue.

This is also another step in Nielsen’s strategy to bolster their advance TV audience measurement capabilities Last year, Nielsen announced several initiatives in measuring the viewing of addressable TV advertising and Nielsen ONE, that will measure cross platform audiences. Most recently launched a new “cookie-less” TV attribution model. With the Roku agreement, Nielsen will have access to millions more “smart TV” and OTT devices, up from 55 million. This will provide a more robust sample for the Nielsen ONE measurement initiative.    

"With the addition of Roku we have quickly grown our TV device footprint to nearly 100 million giving us the scale needed to measure addressable and the fast-growing streaming TV ad inventory," said Scott N. Brown, GM of Audience Measurement, Nielsen. "Those devices will also be crucial to our efforts to evolve the national TV currency and measure everything that hits the TV glass, giving advertisers and publishers the confidence to transact in today's ever-changing media ecosystem."

Despite advertiser support of addressable, eMarketer estimates ad spend will reach $3.6 billion by 2022, an increase of 75% from 2020. The Roku-Nielsen agreement is expected to accelerate the pace of addressable TV advertising from linear TV. Roku users watch live, linear and streaming video and they have been actively seeking to dynamically insert digital ads into linear TV, which, despite, the growth of streaming video, continues to garner a large majority of television ad dollars. 

Nielsen’s Brown adds, “The measurement of ads and content on Roku devices will accelerate the path to a single, deduplicated cross-media currency. As Roku brings the power of dynamic ad insertion to all forms of TV, we’re excited to help monetize the addressable market by measuring smart TV as a currency, which Nielsen can do at scale.”

After the agreement was announced, Louqman Parampath, the vice president of product management at Roku, in a statement, said, “Tens of billions of dollars continue to be spent annually on traditional TV advertising. Combining Nielsen’s AVA technology with Roku’s innovative ad tech and scale will enable us to deliver the benefits of TV streaming advertising to traditional TV. Roku will bring the promise of DAI to the market for the first time ever at scale — providing better targeting and measurement for advertisers, creating easy integration and additional revenue opportunities for programmers’ ad sales teams, and improving the TV experience for viewers."

Roku had a strong 2020, closing the year with 51.2 million active accounts, an increase of 39% from 2019. Additionally, for the entire year they reported a record 58.7 billion streaming hours, a year-over-year increase of 55%. In the fourth quarter, Roku generated a record 17 billion streaming hours, also an increase of 55%. With the pandemic, and the popularity of streaming video, Roku in fourth quarter posted record quarterly revenue of $649.9 million and a net profit of $65.2 million, exceeding Wall Street’s expectations.

Roku has also expanded its content library with the recent acquisition of over 75 original shows from Quibi. Quibi content will be available on the Roku Channel, a free ad supported app reaching over 60 million users with 10,000 movies, TV shows, sports, news and other videos, and 35 linear video streams.

The Nielsen-Roku NLSN agreement will benefit both parties. Also benefiting will be video platforms that can charge higher ad rates and keep dollars from being allocated toward digital. Advertisers are also winners since they can better target their messaging and improve their return-on-investment. Another winner will be viewers, who will be exposed to ads that are more relevant to them.

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