Sign up for our daily briefing

Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Denver news in your inbox

Catch up on the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Des Moines news in your inbox

Catch up on the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Minneapolis-St. Paul news in your inbox

Catch up on the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tampa Bay news in your inbox

Catch up on the most important stories affecting your hometown with Axios Tampa Bay

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Charlotte news in your inbox

Catch up on the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Roku user interface Credit: Roku

Roku, the connected TV hardware company, is quietly building a large software business, driven mostly by advertising revenue.

Why it matters: For the first time in its history, Roku says that last quarter it made more money from its platform business, which includes TV software and advertising, than from hardware through sales of its connected TV device.

  • The money it makes on digital services, like digital TV software and advertising, is now 55% of Roku's total revenue.
  • Platform revenues more than doubled Roku's ARPU (Average revenue per user) year over year — an astounding growth rate for a 16-year-old company that just went public less than a year ago.
  • The company is expected to bring in more ad revenue by 2020 than rival Hulu and other digital advertisers, like IAC, which owns sites like ask.com, Tinder and The Daily Beast, according to projections from eMarketer.
“Ad-supported viewing is the fastest growing segment on our platform ... Roughly half of our 21 million active users have cut the cord or have never subscribed to pay TV. These viewers simply cannot be reached through linear TV anymore ... [Over-the-top] advertising enables marketers to continue reaching these new TV viewers, and will eventually attract a majority of TV budgets.
Scott Rosenberg, GM/SVP Platform Business at Roku

Roku typically doesn't sell advertising through an open exchange (open bidding system), like some of the big tech companies do, but it does use programmatic infrastructure to digitally target those ads — a tactic commonly referred to as "programmatic direct" or "programmatic reserved."

  • By selling the ads directly to ad buyers, they are appealing to ad buyers who are used to buying TV in a non-automated fashion.

Roku launched The Roku Channel last year, which executives say contributes significantly to its ad inventory. The free channel, which syndicates content from other networks, is currently the third most-watched ad-supported channel on Roku.

The software play: Just as mobile hardware companies like LG and Samsung eventually migrated off of their own software platforms to market leaders' like Android and iOS, Roku CEO Anthony Wood argues that the smart TV industry is going through the same evolution.

Worth noting: Despite its push to software, Roku continues to beat out rivals Chromecast, Amazon Fire TV and Apple TV in connected TV device market share, according to eMarketer.

Go deeper

Texas AG sues Biden administration over deportation freeze

Texas Attorney General Ken Paxton speaks to members of the media in 2016. Photo: Alex Wong/Getty Images

Texas Attorney General Ken Paxton is suing the Biden administration in federal district court over its 100-day freeze on deporting unauthorized immigrants, and he's asking for a temporary restraining order.

Between the lines: The freeze went into effect Friday, temporarily halting most immigration enforcement in the U.S. In the lawsuit, Paxton claims the move "violates the U.S. Constitution, federal immigration and administrative law, and a contractual agreement between Texas" and the Department of Homeland Security.

Dan Primack, author of Pro Rata
1 hour ago - Podcasts

Carbon Health's CEO on unsticking the vaccine bottleneck

President Biden has said that getting Americans vaccinated for COVID-19 is his administration’s top priority given an initial rollout plagued by organizational, logistical and technical glitches.

Axios Re:Cap digs into the bottlenecks and how to unclog them with Carbon Health chief executive Eren Bali, whose company recently began helping to manage vaccinations in Los Angeles.