Roku: Reaction to 2025 Predictions

Published in partnership with Roku

We were able to take an early look at Roku's 2025 predictions. While we had immediate reactions to their predictions around AVOD growth and sports, we chose to focus on the one expecting 20,000 new small and medium-sized advertisers to enter the CTV ecosystem. On one hand there might be too much optimism about the impact on the industry for sellers of TV ads – even with Roku’s scale and data – and on the other we recognize there could be real benefits that follow for the marketers who prefer to buy CTV ad inventory. There will still be some obstacles to overcome that proponents of CTV will need to be mindful of, especially if they intend to grow the overall TV pie instead of shifting share from linear to streaming.

To start, let’s try to level-set what the 20,000 new advertisers buying CTV (and thus television advertising) might mean to the business.

Parsing data extracted from corporate tax returns compiled by the IRS, we can roughly estimate that the 20,000 largest advertisers who don’t buy television at present probably have annual advertising budgets of around $500,000. If these advertisers shifted half of their spend into television, this would represent $5 billion, which equates to 7% of all TV advertising or 24% of CTV advertising, according to Madison and Wall estimates. While that’s not nothing, it’s unlikely that a large group of marketers would make such a shift all at once. At best we would expect it to occur over many years, and so underlying declines would only be slightly mitigated, as these advertisers would only be partially replacing other advertisers who continue to shift spend away from linear television.

Whatever the advantages of CTV might be, we have to consider that there's potential duplication of reach in many instances, as a marketer whose goals depend on conveying their message to as many people as possible might be able to do so more efficiently with other media channels. There are also extra workflows to consider. Even if they are relatively inconsequential, the additional labor required to manage a new media channel can be a meaningful source of friction.

So long as using the medium makes sense in the first place, it should be the case that the availability of new self-serve tools can be helpful in encouraging marketers who are curious about using television to make use of the medium through CTV, as they can eliminate the process-driven friction that might otherwise prevent spending from occurring. This would be especially true for marketers who don’t work with agencies or managed services and aren’t contacted by traditional sales representatives.

On the other hand, the biggest digital platforms already provide self-serve tools that can access inventory broader in reach and more tangibly connected to the business goals most of these marketers have established or will establish (typically tied to online or web-based KPIs), absorbing almost all of the budgets that smaller marketers have. This is independent of whether those marketers have the right goals in mind, such as whether they should be trying to focus more on brand-building or other things that television (or CTV) might lead to better than alternatives can.

Put differently, for a smaller marketer to consider diverting some spend away from the biggest platforms, the benefits of making a shift need to be unambiguous. To the extent that the benefits of buying CTV are meaningful enough, then it’s likely that a significant number of new advertisers would shift at least some spending into the medium.