- Roku saw a massive hit with cancellations in March at the beginning of the pandemic, letting businesses out of deals as they saw fit.
- But the company's ad business bounced back amid a broader shift to streaming ads during the stay-at-home year.
- Alison Levin, Roku's VP of global ad revenue and marketing solutions, said the company gained a record number of clients in the third quarter.
In late spring 2020, Alison Levin was outside in her backyard with her young daughter and golden retriever. Both were running as quickly as they could — at one another, for the same ball. Inevitably, they collided.
"She went down, and we held our breaths," she said. "And then she popped right up and just kept running."
Levin, Roku's VP of global ad revenue and marketing solutions, saw this as a metaphor of sorts. Roku, where she's helmed the ad sales business since 2015, saw massive cancellations in March at the beginning of the pandemic. Roku let businesses out of deals as advertisers pulled or paused budgets across the board.
At first, it wasn't pretty. Roku stock had been trading at $127.50 on February 3, before pandemic volatility sent stocks diving. It cratered, shedding more than half its value to hit a low of $63.84 on March 16.
"We got hard at work doing what it was that we were there to do. Focusing on the things that were unique to us: Flexibility, precision, real-time analytics, all those things matter," Levin said. "Plus, the background of streaming was booming and linear was collapsing. We just kept hitting hard. We immediately released all of this data to the market about what's happening on linear, what's happening on streaming..."
Things started to bounce back. Then the company saw an inflection point for advertisers shifting budgets from traditional linear into streaming, where they could turn campaigns on and off quickly, and where they could swap out campaigns depending on what was open and what was allowed in that particular state or region.
For the streaming world, and for Roku in particular, it was a big moment.
"When things opened up in the third quarter ... we knew that the dam that would break and the tipping point would happen," Levin said. "I think we all were really pleasantly surprised that marketers leaned into this moment, and it happened in Q3."
Since then, the stock is up to $342.97 as of the close of trading on Friday, an increase of 437% from its low last March. Its market cap is over $45 billion.
Levin, a New Jersey native, had been working at video ad network YuMe as an ad seller before Roku recruited her. She was trying to talk about — and actually sell — the proposition of connected TV to the industry before it was really a known subject.
"At that point, it was nascent. A lot of buyers had no idea what it was," she said. "This was before Tubi, Pluto, any of those channels even existed — before a lot of people even knew what Roku was. I knew that I had wanted to focus on connected TV because I saw that's where it was going."
Roku had reached out to her in 2014, when it didn't even have an ad sales team. She said she met with Scott Rosenberg, today the SVP and GM of its platform business, as the company was starting to integrate into smart TVs as an operating system, and was about to launch a partnership with Nielsen for audience guarantees. "My head, like, exploded," she said.
"At that point, I just knew that if they were able to set up a team that could execute the products, [that] in and of itself would be something that the industry has never seen before and the industry needed. So I was sold right at that point."
The sales team was briefly just Levin. They brought on Jared Lefkowitz, now the senior direction of ad revenue strategy, then started staffing up.
"People weren't thinking about connected TV yet," Levin said. "We had to create the industry early on, because we weren't taking a slice of the pie, we were building, or baking, the pie."
Tal Chalozin, CTO and co-founder at adtech company Innovid, recalls Roku's early days duking it out on different pieces of the business with companies like Amazon and Google.
"They were always like this little engine that could, battling all those giants," he said. "They were always very, very nimble. And they always invested ahead of the curve in the marketing community, anything from building the sales force and going into the market and explaining the need for CTV ... They were way faster to innovate and to bring it to market."
Chalozin said he credits Rosenberg and Levin for much of this success.
"They built better adtech, faster adtech, and took it to market better and faster and bigger than anyone else," he said. Levin, he says, was able to translate that extremely complicated industry and the product and technology to advertisers. "She has just an amazing understanding of product and technology with the ability to explain it to a business-minded person that thinks about the bottom line."
Mike Law, president of Dentsu Aegis Network's media innovation and investment arm Amplifi USA, said early on some of his feedback around Roku was that the company would need to listen closely to the brands and agencies spending on the platform in order for it to compete with new entrants.
"It can't just be 'this is how Roku does it,'" he said. "[Levin] has done a great job of bridging that divide and being the voice of brands in the room."
David Cohen, CEO of the Interactive Advertising Bureau, said he and Levin struck a deal when he was in the agency space several years ago.
"She is one of those people," Cohen said, "that never say no, if there's something that you can imagine, 'Let's see if we can do it.' There is this kind of innovation and curiosity about her, which I always found refreshing."
Roku was able to ingratiate itself so well with advertisers in part because she was willing to meet them where they were.
"The needs of an agency are different than the needs of the client direct," Cohen said. "Auto is different than CPG. So I think that she has a very good, keen sense of understanding what it is we're trying to solve, looking within her kind of universe of how she can solve it, and then coming back with a customized solution."
For the connected TV space, the pandemic crystalized a shift that had already been happening -- but just ended up happening much more quickly.
Levin said the company gained a record number of clients in the third quarter, even while sectors like travel were still troubled.
"We'd been working on it for six years, we were ready for this moment," she said. She said at one point during the year, the company looked at the top companies who were not spending on Roku and were still relying on linear TV.
"We started to notice that a lot of these clients that were holding on to legacy buying ... one by one, the reasons that they were [holding onto that] were falling away," she said. "Live sports was gone, live programming was gone, cord-cutting started to accelerate, half the time spent for 18-to-34-year olds was on streaming, all of these things."
Levin said that certain marketers may have recognized these trends over a couple years, but the Covid pandemic made that speed up into a single quarter.
The IAB's Cohen said the company was able to build off the work it had done in previous years to be ready when this past year happened.
"I don't know if anyone would have predicted what has happened over the past year, and they have been in the right place at the right time with the right assets," he said. "They have been very smart about adding things to their strategic arsenal. So whether it's a kind of DSP asset, whether it's original content, whether it's Nielsen's business that they're buying -- they've been very thoughtful about the things that they've been going to market [with]. So I think that they have earned every bit of their growth over the past couple of years."
In early March, Roku announced that it would be acquiring Nielsen's advanced video advertising business, including technology to do "Dynamic Ad Insertion," allowing Roku to offer ads that can be swapped out in real-time depending on the viewer.
The move positions Roku as more of a one-stop shop for ad buyers across both digital and traditional linear TV. Needham analysts said the deal expanded Roku's total addressable market in the U.S. by $10 to $20 billion.
Levin said the deal will help Roku grow in two different areas. First of all, she said the vast majority linear TV advertisers target audiences by age and gender.
"One of the most powerful things about streaming is that you can find the right audience at the right moment," she said. This brings in linear inventory into what Roku was already offering, and lets publishers sell advertising in a more targeted way. "It's why Google and Facebook work so well. It's the data targeting aspect to it that was missing in linear TV."
Another piece is measurement across the places that consumers are viewing content. And it's real-time, "So you don't have to sit here and wait multiple weeks to get that information… you can actually make an action off of it," she said.
With ad revenue continuing to grow as a percentage of Roku's revenue, Deutsche Bank analysts said they expect the company to continue focusing on expanding its influence in the ad market. The Nielsen deal, they argue, "gives Roku an opportunity to take part in the ad market for linear TV, although we view dynamic ad insertion (DAI) in linear TV as unlikely to be a meaningful revenue contributor for Roku in the near term."
The company has made other recent strategic moves: Roku recently launched a "brand studio" to create new types of ad formats and TV programming tailored for marketers. It also acquired "This Old House" and content from defunct streaming provider Quibi, making it more attractive for advertisers that might still want to buy against a particular piece of content, instead of buying an audience of consumers.
Law said this content strategy should help Roku continue growing.
"What brings people to these platforms is content," he said. "There's so many people who have a Roku, but I still think there's some brand recognition that needs to be done. There's still some growth opportunity for them in terms of distribution. And I think that content will help that a little bit."
On Monday, Levin will present to the industry media investment bigwigs during the IAB's NewFronts, where companies like Amazon, YouTube and Twitter will show off reach, new content and ad innovations to convince them to take brand spend to their various platforms. Roku's pitch in particular focuses on the scale of streaming, the ability to do innovative marketing around tentpole events and the ability to conduct both brand and performance marketing using Roku.
"We believe the upfront process has changed forever and not going back, so we can't wait to show the market what we're going to be putting out," she said. "We're really focused on ... what are the other key areas or pockets of the industry that need better data to move faster..."
But outsiders say there's still room for improvement in connected TV overall.
"It still is nowhere near as easy to execute a CTV buy than it is to execute a linear television buy," Cohen says. "There's still tremendous fragmentation. There still is lots of folks doing things differently, either calling things differently, different creative opportunities, different measurement opportunities, so it's a lot harder to get the same scale and reach and exposure in CTV as it is [on linear]."
There's also work to be done for advertising across the many players, "Whether it's Roku, or Amazon, or YouTube, or NBCUniversal, or Disney having a universal way of thinking about that, measuring it and being charged for it," Cohen said.
Disclosure: NBCUniversal is the parent company of CNBC.