Bulletins

Roku warns investors: It’s early 2020 all over again

The streaming company is seeing a significant slowdown in TV advertising spending.

A TV sitting on a credenza with Roku’s interface on the screen.

Roku is seeing significant slowdowns in ad spending.

Photo: Roku

The ad market is starting to get very rocky: Roku warned investors about a “significant slowdown in TV advertising spend” as it reported its second-quarter earnings Thursday.


Citing a recent advertiser perception study, Roku CFO Steve Louden told reporters during a media call Thursday afternoon that almost half of all advertisers had paused some ad spending during the second quarter. “It was a challenging quarter for Roku and for a lot of others,” Louden said.

"We are in an economic environment defined by recessionary fears, inflationary pressures, rising interest rates, and ongoing supply chain disruptions," the company wrote in its letter to investors, which also likened this moment to uncertainties during the early months of COVID. “We believe this pullback mirrors the start of the pandemic in 2020, when marketers prepared for macro uncertainties by quickly reducing ad spend across all platforms.”

“The quickest and easiest way [for companies to slow spending] is to pull back on marketing temporarily,” said Louden. However, he admitted that the company was nonetheless taken by surprise. “The severity of the pullback … was not expected,” he said.

As a result of these challenges, Roku execs said that they had begun to slow down hiring and content spending. Roku hasn’t instituted a hiring freeze, according to Louden, and also didn’t have any layoffs in Q2. However, he said that the company had begun to adjust spending on original content for the Roku Channel.

Roku’s Q2 revenue was $764.4 million, with net losses of $112 million. The company added 1.8 million new accounts during the quarter, but streaming hours declined by 200 million quarter over quarter. Roku forecast a loss of $190 million for Q3, and withdrew its full-year guidance. Roku's share price, which had already fallen by nearly two-thirds since the beginning of the year, was down another 25% in after-hours trading.

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