Roku Inc's (ROKU) Neilsen Acquisition Opens Addressable Ad Market - Needham
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Needham & Company analyst Laura Martin reiterated a Buy rating and $550.00 price target on Roku Inc. (NASDAQ: ROKU) noting that beyond the company executing well on its current opportunities, management has been focused on expanding the TAM as well. The analyst believes these TAM expanding decisions are a large part of the reason the company has been growing revenue at 50% year after year. Now, the acquisition of Nielsen's Advanced Video Ad business expands the TAM even further.
The analyst cited 2 prior decisions that expanded TAM along with an analysis of the Neilsen acquiistion:
In Oct 2017, the creation of The Roku Channel (TRC), doubled Roku's ad rev share take rate from 25% to 50% of ads per hour.
In Oct 2019, the DataXu acquisition allowed ROKU to programmatically accept and place ads on Roku and other 3rd party CTV platforms, and to start selling direct response ads in addition to brand ads.This doubled Roku's advertising TAM, we believe. Also, it immediately captured for Roku the 15% take-rate that had been paid out to other demand side platforms (like TTD) when they had bought ads on Roku.
Now, in Oct 2019, Roku's acquisition of Nielsen's Advanced Video Ad business allows Roku to better guarantee its non-duplicated reach product during 2021 and, over time, to insert dynamic addressable ads into linear TV content. When that happens, it strategically positions Roku as an end-to-end 1-stop shop for TV ad buyers across both digital and linear ecosystems. We believe this capability expands ROKU's US TAM by $10-$20B. Also, we believe this deal gives ROKU important influence on how Nielsen Holdings (NYSE: NLSN) creates its evolving cross-platform measurement currency for linear TV plus CTV.
Shares of Roku Inc. closed at $368.00 yesterday.
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