Roku Inc (ROKU) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Roku's Fourth Quarter and Full Year 2020 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Conrad Grodd. Please go ahead, sir.

Thank you. Good afternoon, and welcome to Roku's financial results conference call for the fourth quarter and year ended December 31, 2020. I'm joined on the call today by Anthony Wood, Roku's Founder and CEO; Steve Louden, our CFO; and Scott Rosenberg, Senior Vice President, General Manager of our Platform business, who will be available for Q&A.

Full details of our results and additional management commentary are available in our shareholder letter, which can be found on the Investor Relations section of our website at ir.roku.com. The following discussion, including responses to your questions, reflects management's views as of today, February 18, 2021, only, and we do not undertake any obligations to update or revise this information.

Some of the statements made on today's call are forward-looking and are based on our current expectations, forecasts and assumptions, and involve risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of Roku, including our financial perspective for the first quarter and full year 2021, the future of TV, TV streaming and TV advertising globally, the impact of the COVID-19 pandemic on our industry, business and financial results, and the future growth in our business and our industry.

Our actual results may differ materially from those discussed on this call for a variety of reasons. Please refer to today's shareholder letter and the company's periodic filings with the SEC for information about factors, which could cause our actual results to differ materially from these forward-looking statements.

You'll find reconciliations of non-GAAP measures to the most comparable measures discussed today in our shareholder letter, which is posted on our Investor Relations website at ir.roku.com, and I encourage you to periodically visit our IR website for important content. Finally, unless otherwise stated, all comparisons on this call will be against our results from the comparable period of 2019.

Now I'd like to hand the call over to Anthony.

Thank you, Conrad, and thanks to everyone for joining today's call.

I am pleased to report that Roku had both a record 2020 and fourth quarter. As the leading streaming platform in the U.S., Roku is more important than ever to the TV ecosystem. We connect viewers, content owners and advertisers at scale in a virtuous cycle that creates value for all participants.

In 2020, Roku active accounts grew by 14 million accounts to over 51 million, and streaming hours grew 55%. Monetized video ad impressions were up over 100% in Q4, rebounding to pre-COVID growth levels.

Across the industry, the impact of streaming is increasingly evident. Consumers are cutting the cord. Fully 1/3 of all American homes are now nonpay TV households. Leading media companies are reorienting around streaming and launching new streaming services. The traditional TV upfronts are beginning to crumble as advertisers demand more flexibility, better measurement and a broader audience.

We are pleased with the progress we made in 2020 and excited about the large opportunities that lie ahead in the streaming decade.

With that, let me hand the call over to Steve.

Thanks, Anthony. 2020 was a year that showcased our strong position and resilience. Along with the rest of the world, Roku was forced to respond to wide-ranging impacts of a global pandemic. We executed well in the face of many challenges and delivered record results for Q4 as well as the full year.

Before taking your questions, I'll walk through operational and financial highlights and address outlook.

In Q4, we grew our active account base by over 5 million, resulting in a record 14.3 million incremental active accounts for the year, and we ended 2020 with 51.2 million active accounts. Our scale has expanded rapidly over the last several years. And to put it in perspective, Roku's U.S. active account base is more than twice the size of the video subscribers of the largest cable company in the U.S.

In addition to increasing our scale, we continue to see growing engagement with our platform, with 2020 streaming hours up 20.9 billion year-over-year to a record 58.7 billion hours. In Q4, we grew streaming hours 55% year-over-year, consistent with the year-over-year growth rate for the full year. Furthermore, we grew average streaming hours per active account 10% year-over-year in Q4, demonstrating the strong engagement of our user base.

As a reminder, please see our shareholder letter for the full financial details from the quarter and the fiscal year, but I'll highlight a few items. In Q4, total revenue increased 58% year-over-year to $649.9 million. Platform segment revenue was up 81% year-over-year to a record $471.2 million driven by strong advertising demand. Q4 player revenue growth of 18% year-over-year was slightly lower than the growth rate in Q4 2019 as COVID restrictions and economic uncertainty muted holiday store traffic and consumer demand.

Our key financial performance metric is gross profit, which grew a vigorous 89% year-over-year in Q4 to a record $305.5 million. Gross margin in the quarter was 47%, fairly consistent sequentially as improvements in Platform margins largely offset the seasonally lower player margins based on our holiday promotions.

Q4 adjusted EBITDA of $113.5 million produced the vast majority of our record $150 million of adjusted EBITDA for the year and was the result of a confluence of strong performance. Robust revenue growth, strong gross profit leverage as we continue to move into higher-margin Platform business and leverage on OpEx growth, in part due to our decision to be more conservative on head count growth in 2020. It also demonstrates the potential leverage in our business as we continue to drive scale and increase monetization of the platform. We ended the quarter with almost $1.1 billion of cash, cash equivalents, restricted cash and short-term investments.

With that, let's turn to our thoughts on the outlook. We believe we have sufficient visibility into Q1 to offer a formal outlook. But as we move further into the future, a number of uncertainties make a formal outlook for 2021 difficult. Rather, we have provided some directional color for how we see the full year playing out for Roku.

Historically, Q1 is our seasonally softest quarter from a revenue perspective. Typically, revenue has been roughly 25% lower sequentially than our seasonally strong Q4. Our Q1 outlook calls for similar seasonality at the midpoint of total revenues of $485 million, up 51% year-over-year, with the Platform segment comprising roughly 3 quarters of total revenue.

We anticipate total gross profit of roughly $238 million at the midpoint, up 69% year-over-year, implying an overall gross margin of approximately 49%. Platform gross margin is expected to be roughly 60%, while player gross margin is expected to be similar to Q1 2020.

As a reminder, Q1 player gross margin is seasonally high, reflecting the traditionally lighter promotional period within the retail calendar. For the full year, we will continue our established and successful strategy of managing player gross margins to roughly 0 given our focus on device sales as an important driver of account growth.

We anticipate Q1 OpEx year-over-year growth to be in a similar year-over-year growth range as Q4, and thus, showing strong leverage against revenue and gross profit growth, which is expected to result in a Q1 adjusted EBITDA of $31 million at the midpoint. For modeling purposes, please note that Q1 adjusted EBITDA excludes stock-based compensation of roughly $40 million and an estimated $10 million of depreciation and amortization and net other income.

In terms of the full year, we are mindful that in 2021, year-over-year comparisons are likely to be quite volatile. In the first half of the year, we expect strong financial comparisons against the first half of 2020, which includes early impacts from COVID-19 and the resulting economic lockdown.

While in the second half of the year, we anticipate much tougher comparisons in part due to our record performance in the second half of 2020, which will significantly pressure year-over-year growth rates. We expect our overall 2021 gross margin to be in the mid-40% range as Platform margin remains fairly stable, and we operate the player segment at a gross margin close to 0. Given the size of our opportunity and progress to date, we will continue to aggressively invest in our business to enhance our competitive differentiation and seed future growth. We anticipate the growth rate in operating expenses for 2021 to be more in line with 2019 year-over-year organic OpEx growth levels versus 2020 when we took precautionary steps at the outset of the pandemic to manage down the rate of expense growth.

As I was preparing for this earnings call, I read my remarks from a year ago. It was very gratifying to read that we've materially surpassed our original outlook for 2020 revenue of $1.6 billion despite an unprecedented global health crisis and the related economic hardships that took place over the course of the year. It was also very grounding to read a historical comparison from that call, which I will update and reprise here. Our 2020 revenue of almost $1.8 billion represents over 2x 2018 revenue, 3x 2017 revenue, 4x 2016 revenue and 5x 2015 revenue. This sustained level of robust earnings growth speaks to the strong fundamentals of our business, the strategic advantages we have achieved through our investments and our laser-focused leadership in streaming. We continue to be excited by the significant opportunities for Roku that lie ahead.

With that, let's turn the call over for questions. Operator?

(Operator Instructions) And our first question coming from the line of Cory Carpenter with JPMorgan.

I wanted to ask you about the Quibi content acquisition. I think it'd be good to hear just your thoughts on why now is the right time to make the move into exclusive content. And then maybe more broadly, should we think of this as more of an opportunistic one-off purchase? Or does it signal perhaps a broader ambition with exclusive content? And then just as a quick follow-up, any details you can provide for Quibi specifically just on when it will be available on the platform, or how long you have the exclusive rights?

Cory, this is Anthony. Thanks for the question. Let me start by just talking a little bit about The Roku Channel and then explaining how Quibi fits into that. It's a deal that we did for The Roku Channel. So if you just look at overall platform growth of the Roku platform last year, we added 14 million incremental accounts and crossed 51 million active accounts. But if you look at The Roku Channel specifically, it's growing twice as fast as the platform overall. So reach and streaming hours of The Roku Channel are growing twice the platform rate. We now -- The Roku Channel now reach households with approximately 63 million viewers. So The Roku Channel is doing extremely well for us, and we're adding content continuously to The Roku Channel for a bunch of different sources. We added almost 100 -- we added about 100 million linear channels in 2020 to The Roku Channel. We have content from Disney, NBC, A&E, Discovery and more. So The Roku Channel is definitely benefiting from this virtuous cycle where more viewers bring in more advertisers, more advertising dollars brings in more content, deeper content, better content, and then that cycle continues.

So with that sort of backdrop, that's -- as our scale grows, we're looking -- we're sourcing different types of content, and we're looking at different types of content. So Quibi -- the Quibi deal fits into that in the sense that it's premium content. It was great content. We think it'll appeal to Roku viewers. And so -- and we -- it was a transaction where we acquired the global content rights on a cost-effective basis. We're disciplined about making sure the content we onboard into The Roku Channel fits into the AVOD business model for The Roku Channel and the Quibi content fit into that model.

The growing scale of The Roku Channel allows us to do deals like this where perhaps we couldn't have done them a couple of years ago. We expect that to continue. As the scale grows, we'll continue to look more broadly at all the different types of content that we can acquire, and we'll be disciplined about making sure that, that content purchase price fits into -- whether it's licensed or purchased or whatever the financial details are fit into our AVOD business model.

In terms of rolling out the Quibi content, I don't think we've announced that. It'll be fairly soon. And I don't know, Scott, if you had anything you wanted to add about the specifics of the Quibi rollout and the exclusive rights and that sort of thing.

Yes. I'll tag in here, Cory. We're excited about the content, 75 TV series, hundreds of hours and Emmy nominations. We'll be rolling them out -- those out progressively through the year, and we do have a multiyear exclusive rights to exploit the content. So we're excited to get it out there. Stay tuned for our launch timing.

Our next question coming from the line of Mark Zgutowicz from Rosenblatt Securities.

Congrats, guys, on a great year. Just a couple, I guess, unrelated questions. First on the stable gross margin outlook for the year, Steve. Just curious if there's any new upward or downward pressures on Platform gross margin that we would like to point out that we should pay attention to.

Yes, Mark, yes. As you mentioned, we didn't provide formal outlook for 2021 overall. We did mention in the formal outlook for Q1 about the upper margins being around 60% and then remaining kind of roughly stable for the year.

As a reminder, there's a lot that goes in the Platform. So there's always considerations of the underlying margin structure, say, within the ad business or the content business and then the mix of the different pieces. But overall, I don't think there's -- there are any significant trends I would point out. I mean the business, in general, has very good momentum. And over the back half of 2020, we saw some good uplift in the Platform margin. So we're very happy with where the business is both in terms of strong growth on the top line and stable margins looking ahead.

Okay. And then real quick on -- that's helpful. On ARPU, just curious how much downward pressure you're seeing there in terms of outside U.S. It's obviously been strong. And just curious if that implies that OUS has not had a lot of downward pressure? Or when do you expect to see that and perhaps maybe break out OUS and U.S. separately there?

Sure. Yes. Certainly, the U.S. is by far the most lucrative ARPU potential market. And the U.S. as a market is much further ahead than the rest of the world. And historically, the vast majority of our account base has been in the U.S. Certainly, we're growing our international presence. And we mentioned in the letter some great stats around the fact that the playbook -- the kind of 3 phase playbook around growing scale, driving engagement and eventually monetizing is working well internationally. And so that is true, but we are focused on driving scale and engagement in the international market. So the ARPU is significantly lower on that. So it definitely is the dilutive effect on the overall ARPU.

In terms of visibility, yes, we understand that international is a strategic investment area, and that's visibility that would be helpful for investors. And so we're working on breaking that out. So stay tuned. In the future, we'll have some more visibility for you.

Our next question coming from the line of Vasily Karasyov with Cannonball Research.

I think I have a couple for Scott. Number one, you used to -- every quarter before the big SVOD services launched, you used to say that this is our overall streaming hours growth than SVOD streaming hours growing slower than that and then ad supported faster than that. So now that you have this massive apps launching, I wonder what that -- what those relative growth rates are. And also following up on that is, are you worried at all that Peacocks of the world and HBO Plus will cannibalize ad-supported streaming hours? And if not, where do you think their viewership is coming from?

Vasily, thanks for the questions. Yes, you're right. We've not delineated the growth of the different verticals recently, but it remains true that ad-supported viewing on the platform continues to grow faster than the platform overall than the other segments. And just as a reminder, when we talk about ad-supported viewing, we would include dual-revenue stream services like Peacock that are both subscription-based and carry ads.

Now with regards to your question about whether these services will cannibalize AVOD consumption, first of all, they either, in the case of Peacock, already carry ads or, in the case of HBO Max, plan to carry ads. I think we're led mostly by the fact that these services launching are drawing more consumers into streaming. They're creating an even better case for consumers to cut their cord and move more of their viewership to Roku, to streaming. And that then accrues to deeper engagement across the board, inclusive of ad-supported viewing. And it's furthermore helpful that all of the recent direct-to-consumer services have an ad-supported strategy in place because that bolsters the overall narrative in the market that we've been on for years now about the importance of advertisers investing in OTT.

So all in all, we continue the launch of these services to be a good thing for Roku, for consumers and for advertisers.

Very helpful. A quick follow-up. And do you see in your data that viewership, in general, aggregating to the bigger apps like the bigger ones that keep getting bigger and the smaller ones are falling by the wayside? Or does it stay equally fragmented? I wonder if you have any comment on that.

Well, what I'd say is that it's a very vibrant market now with all of these big well-funded services competing for consumer intention. That's good for Roku because we're in the business of distributing these services and helping them grow. So we've been able to partner more deeply with a broader set of content providers. And of course, it's great for the consumer because it just makes their streaming experience on Roku even richer. So we think it's good and has driven actually more robust competition among the services and that the consumer is ultimately the winner.

Vasily, this is Anthony. I'll just add that as we've mentioned in the past, and it still continues to be true, if we think about "competition" in our advertising business, really, the -- it's not other services on our platform. It's the primary impediment to our ad business growth, which is still growing obviously very nicely, with monetized ad impressions doubled again in Q4. But the biggest impediment to growth is just the behavior of TV ad buyers and how they traditionally -- buy traditional linear TV and the shift of those behaviors to streaming, which the pandemic, I think, has definitely caused that to move faster than it was before. And that's the big -- that's probably the biggest obstacle to our -- and it's not -- obviously, it's not a long-term obstacle, but that's the biggest short-term obstacle to our ad business.

And our next question coming from the line of Ruplu Bhattacharya from Bank of America.

Congrats on the strong quarter. I was wondering if you can talk about the programmatic ad spend. Do you see industry ad budgets moving more towards programmatic spend? And in that vein, can you talk a little bit about how the dataxu OneView Platform is performing? And what percent of your ad revenues are coming from that today? And how do you see that progressing over time? And I have a follow-up.

Sure. That sounds like a question for Scott.

Ruplu, thanks for the question. Let me just take it in reverse order. So 2020 was a great year for OneView, a foundational year. And just a reminder of our value proposition with OneView, we have natively integrated Roku first-party identity, data and measurement capabilities, and enable buyers through OneView to access the same capabilities that have caused them to be buying Roku media for years now applied to when they're buying third-party media. OneView has deepened our agency holding company relationships and licensing of OneView is a component of the upfront agreements that we wrote in Q4 with all the major agency holding companies.

Just by way of example, we've got brands like Lexus using OneView to now measure and optimize their spend across linear television and OTT and using it to achieve better reach for the same dollar. So it's sort of a perfect use case for OneView is optimizing your TV spend across dozens of apps and linear television all at the same time with Roku data, powering it.

Now regarding your -- the other part of your question and the role of programmatic, it is true today that the majority of the spending in OTT is still a more traditional spending pattern, insertion order-based. And that's largely because most of the money, the early money that's flowed into OTT has come out of TV budgets, and that's generally the way TV has been spent historically. But programmatic is rising quickly. It's a key part of why we've been investing in OneView. And we do believe long term, although it's not the case today, that programmatic will be a majority of how OTT is bought and sold, not the least of which because programmatic is a superior way to leverage our data to leverage measurement to do dynamic optimization of your spend.

So in short, our strategy is to sell the way buyers want to buy. They're still buying both ways. It's still predominantly traditional, but we do believe that it'll be heavily programmatic over time.

Got it. For my follow-up, I just wanted to ask about international growth again, just to follow up on a prior question. How would you measure success in 2021? So if you can just kind of give us your playbook for this year. I mean what are your targets for international expansion? And overall, how would you measure success this year in international? I mean if you can just provide any details on what your thoughts are for international, that would be great.

Yes. This is Anthony. I'll take that. Obviously, streaming is a global phenomena. We got our start in the U.S. and are doing extremely well here. But we are investing internationally. And I would say a few things, I guess, about that and how that's going. First of all, one of our strategies is to take the technology we've developed, the strategies that have worked for us in the U.S., the products we've developed and the market trends, we believe, which translate from the U.S. to international markets and translate those strategies and market entry points to international markets. And so that's what we're doing, and that's working well for us. We're finding that the assets we have work well internationally as well as in the U.S., as well as our domestic market.

Another kind of high-level point, I guess, is our international strategy involves the same 3 phases business model that we adopted in the U.S., which is focus first on growing active accounts, then on increasing engagement and then on monetization. And so internationally, we're still primarily in the growing active account phase, although we are starting to make some progress on monetization.

I think just some examples of progress we've made recently in international as well as being the #1 TV OS in the United States. We're also the #1 TV OS in Canada with 31% of the TV market -- smart TV market. We expanded in Brazil about a year ago with those first with TVs and then also players. We recently added another TV partner to Brazil, which is also doing well. So our progress in Brazil is good. We're happy with that. We recently introduced a new player product called the Streambar, which is a 2 in 1 product that includes better audio for your TV as well as streaming. We launched that in the U.S. and the U.K., Canada and Mexico all at the same time. That product is also doing well.

So I think success for us in international is to keep doing what we're doing, which is adding more TV partners to international markets. We also announced last year that we were going to be working with TCL more internationally. So continuing to add more TV OEMs, continuing to grow the scale of each of the existing OEMs internationally. We're obviously going to continue to look at TV companies. And then as our scale starts to -- sorry, we're also going to continue to look at potentially new countries as long -- as that make sense.

And then I think just overall start -- as active account growth starts to build significant scale, leaning more into monetization. So far, we've launched, for example, The Roku Channel in the U.K. and Mexico. So we'll be doing more of that over time as well.

Our next question coming from the line of Steven Cahall from Wells Fargo.

It looks like monetized impressions accelerated again this quarter. So maybe could you help us think about the drivers of that growth in monetized impressions? It'd be great if you could kind of split that out between growth trends in home stream ads and The Roku Channel and then the non-Roku content apps that have advertising. And if we wanted to kind of then layer in your ad revenue over that monetized impressions, maybe just help us think about what like the effect of CPM is kind of doing in all that. And then I have just a quick housekeeping one.

Sure. So Scott will take that. But before that, I just want to correct something I said. I think I misspoke. I said The Roku Channel is in Mexico. It's actually in the U.K. and Canada. But Scott, do you want to take that?

Yes. Steve, I'll take your question. The growth of our ad business is the result of, as we've highlighted in prior quarters, just ongoing major secular changes accelerated by the pandemic. Just for context, in traditional television, there's a 21% decline in broadcast primetime ratings last year according to Nielsen, even as rates in the upfronts have gone up 13% due primarily to scarcity and the median age of the -- of a viewer of the top 3 broadcast networks is now over 60 years old. This pattern is not sustainable for TV marketers, and it's -- and the pandemic really accelerated the decision by marketers, by advertisers to rightsize their investment towards streaming.

And then on the side of streaming, there's just all sorts of stats to support why there should be more spending. Half of adults 18 to 34 -- half of their viewing is now streamed, 1/3 of U.S. households are cord cutters. In our universe, 92% of Roku accounts who cut the cord very happy and don't plan to go back. Streaming hours, as we mentioned in the shareholder letter, up 55%. So all of these changes are really accruing to driving a major shift towards OTT streaming.

The -- in Q4, we mentioned in the shareholder letter the 6 largest agency holding companies more than doubled their spend with us. That's notable because those are the same agencies that control the vast majority of TV ad spending. So I think that's a pretty good indication of kind of a permanent reallocation of TV monies.

And then just digging down a level, we see strength in a whole bunch of categories beyond just traditional TV dollars, TV spending. Sponsorships was a very fast-growing segment for us. Performance-based advertising, this is advertising where the marketer is optimizing for something other than reach or demographics, nearly quadrupled in the year. We've seen strength in retail as well and CPG. And then our endemic category, app and content marketing is also seeing strength. So strength across the board but particularly strong growth in those segments.

Let's see here. Sorry. Go ahead, Anthony.

I was just going to add that if I think about bigger picture, these changes that we -- the progress that was made in 2020, more and more viewers shifting to streaming for their TV, more advertisers following their viewers to streaming, more content companies launching major new streaming services. I mean these are enduring structural changes that we don't think are just being pulled forward -- some business being pull forward. We think that the pandemic has accelerated and permanently changed the curve on the shift to streaming.

That's great. And then maybe just a quick follow-up on the outlook for cost. So it looks like a lot of acceleration this year. Could you maybe elaborate as a lot of that going to be in either R&D or marketing or kind of shared both? And I think it implies that maybe you'll have a little less EBITDA this year than you did in 2020. Is that conservatism? Or is that just that you really want to push the gas on investing in the business with the really strong top line and active account growth trends?

So this is Anthony. I'll just offer my thoughts, and I think Steve Louden can provide some more color and detail. At a high level, streaming is a huge global opportunity. We're still in pretty early days. I mean, obviously, it's mainstream, and we're seeing big changes. But given the fact that there's 1 billion broadband households in the world, and they're all going to wash their TV through streaming someday. So it's a huge opportunity, and it's an area that we're going to -- and we're a leader -- obviously, the leader in the United States and growing rapidly international. So it's an area we're going to keep investing in. We're going to invest in growth, investing and improving our -- and expanding our competitive advantages. But -- and so it's an area we're going to keep focusing on.

I mean we are focused, obviously, on building a large, profitable business, and that's what Roku will be. But at this point, we are trying to keep funnel as much as we can back into improving our competitive advantages and growing faster and some of our key investment areas like Roku TV, international, The Roku Channel and advertising.

But Steve, did you want to add something to that?

Sure. Yes. In terms of kind of the pacing of the OpEx, obviously, we have more control over that than we do some of the uncertainties around the full year on revenue growth and some of these external factors, which is why we've given kind of more specific color on OpEx versus the top of the P&L.

Just a reminder, the end of Q1 of 2020 was when the lockdowns started happening when the scale of the pandemic started to reveal itself. And so ourselves and a lot of other companies, we proactively managed down the rate of growth that we had been doing. We primarily did that through slowing the pace of head count. And then there's also some other OpEx and CapEx measures that we took that we thought were prudent at the time.

As Anthony mentioned, the business has proved resilient, and we think there's a lot of great opportunity ahead. And some of these structural shifts have been accelerated from COVID. And so we feel more comfortable investing aggressively.

I'd point you to the shareholder letter. We talked about some examples. The OpEx is broad-based in terms of how we're going to invest. Certainly, we're an R&D company at heart, and we have a lot of engineers. So R&D projects on things like new features, technology, bringing more content to the platform, growing the sales and marketing efforts, that's really around continuing to drive increased scale and engagement of the user base.

And then the other thing we're investing for the future, and we think streaming is a global phenomenon. And so we're building out the G&A infrastructure to support a global scale business. So there's a lot of -- I mean we're very fortunate. There's a lot of great things on our road map. And so there's no dearth of high ROI projects to go greenlight. And so that's why we feel comfortable kind of moving the OpEx growth back to the pre-pandemic levels that we saw.

Our next question coming from the line of Shyam Patil with Susquehanna.

It's Ryan on for Shyam. Just first, how are you thinking about your contact strategy going forward for The Roku Channel post the Quibi acquisition? And then secondly, on -- grow through advertising, is there any update there? How is that progressing? And what's the progress on the cross-selling of traditional Roku O&O advertisers to off Roku CTV advertising?

Ryan, this is Anthony. I'll take the first part of that question, and then Scott can take the second part. I mean, like I said before, The Roku Channel is benefiting from this virtuous cycle of describing more advertising dollars, more content and more viewing. And that -- and I think that -- well, I'm confident that trend is going to continue for some time. It's growing faster than the platform overall, double the rate of the platform, which is also growing quite nicely.

And I would just say we're not going to -- we don't -- not going to detail specifically our exact content plans and strategy. But I think the big picture is that, one, we're focused on an AVOD business model, which means licensing or sourcing content that is profitable on an AVOD ad-supported basis. But two, as our scale grows, we have more options of the type of content that we can source that matches that, whether it's licensing or an acquisition of global content rights like we did for Quibi. I mean we're open-minded, and we're going to continue to look at ways to strategically source content that will drive growth of The Roku Channel in a profitable AVOD business model. And so that's what we plan to do.

Scott, I don't know if you want to add or take that second part.

Yes, let me add to that. And then I'll answer, Ryan, your question about advertising off-platform. I mean one -- I think just to build on Anthony's comments, one important thing to know about The Roku Channel is it's another increasingly essential outlet for rights holders to be able to reach an incremental audience apart from or in addition to whatever D2C strategy they may have. So there's a ton of inbound interest in participating in The Roku Channel because of its scale, because of its user engagement, because of our monetization potential. So it opens up just a lot of different avenues to source content for The Roku Channel over time beyond just, say, for example, the Quibi-type deal that we just did.

Regarding your question about off-platform advertising. So our greatest strength in working with an advertiser is the data, the identity, our optimization and measurement capabilities that we have, both when we sell media and when advertisers use our ad platform, OneView. And one of the most potent ways that we go off-platform is to show an advertiser that we can deliver off-platform effects resulting from their buying on Roku.

So just like as an example, we've talked in the past about our Kroger shopper data partnership. That is data that's about actual in-store activity, the purchase of CPG products. And we've used that with Kroger with brands like Jif, a peanut butter brand, to show that exposure of ads on Roku leads to a lift in site visits in product sales and, ultimately, for Jif, an increased share of wallet versus their competitors.

Likewise, Winn-Dixie, the retailer, we've been able to show through our device graph, through our data and through both an examination of on-platform traffic and off-platform traffic that their ads with Roku drove 56% more web traffic and increased the likelihood of a consumer going to a Winn-Dixie store by 76%.

OneView is a full omnichannel DSP. And so it can execute simultaneously across media that Roku is selling on the Roku platform, media that publishers on the Roku platform are selling, third-party OTT, desktop and mobile. But the particular sweet spot for us as a company is when we're able to help a brand bring data or activity off the platform on to Roku to retarget a user or to follow user of Roku to be able to verify and show site visitation lifts, retail store visit lift, product purchase lift. That's where our off-platform advertising capabilities really excel.

Our next question coming from the line of Laura Martin with Needham.

Maybe a couple of philosophical questions. Anthony, one of the big selling points when we were taking this company public was that you didn't have channel conflict. You represented everybody equally. But when you do a Quibi deal, and you give them money, and you only have like a 2- or 3-year license period, doesn't that create channel conflict because you're incented to drive viewers and ad revenue there? And while that might not matter in the U.S. because you're huge and what's anyone going to do, the minute you get offshore, if potential joiners to your offshore channels think you're going to go into competition with them because you're going to own or buy license -- local channel to local content. I'm just really interested in how you think about the economics of -- because you're -- there are data. I'm sure you can buy lots of content that makes money.

And then, Steve, for you, this is the call every year where you tell us the EBITDA is going to be breakeven for the year forward, and you are very careful not to say that during this call. So I'm wondering, Steve, philosophically, given the huge EBITDA number for Q4, do we actually have -- can we outlook a higher 0 EBITDA this year in 2021?

Laura, it's nice to hear from you. So yes, philosophically, the way I think about our platform is that it's the content distribution platform. Obviously, there's other important components to it. It's an ad platform. It's a great experience for viewers. But at the core is we help content owners and publishers distribute their content, and there's a lot of content out there that's available on a lot of different business models. Content owners are looking for ways to monetize their content. And so we have multiple ways to do that. We don't -- you said -- used the word channel conflicts. We don't view anything. We do really is channel conflict.

I mean, if we think -- if you think about The Roku Channel as versus, say, someone building an app and publishing it in our app store or channel store, I mean, those options are both available to content owners. Sometimes content owners like, say, ABC News, they'll do both. They'll distribute their content through The Roku Channel or they'll write an app. Some content owners do just one. Some content owners -- so some of them do -- just do an app or just distribute the content to The Roku Channel.

The -- I think the point is that there's only so many companies to have the scale and expertise to launch a successful direct-to-consumer service, but there's lots of other midsized or large content services that want distribution. And The Roku Channel for many of those is a better way to distribute that service because we build the audience for them. We provide the monetization, whether it's billing or subscription or advertising. We work -- we manage retention. We do recommendations. I mean we have an incredible UI team. I mean it's very complicated proposition to build a successful AVOD or SVOD service. And so aggregating those viewers and being that solution works well for a lot of content owners. So -- and content services. So I think we see them as all very complementary.

I think you mentioned 2 or 3 years for Quibi. I don't -- I'm not sure if we've ever talked about what the actual deal terms were, but that's not -- it's not 2 or 3 years. So -- and then -- so Scott, I don't know if you have anything to add to that before I move on to EBITDA with Steve.

Yes. I think that was great. Steve, do you want to take Laura's EBITDA question?

Sure. Yes, in terms of our perspective, we still think it's early days in the shift to streaming. But certainly, we're getting more and more proof points that the -- our position is strong, and there's a lot of opportunity ahead in streaming. And so for us, one of the things that's important is to invest, to maintain and grow our competitive differentiation and to see future growth. And so that's why we're going to continue to invest aggressively in different aspects of the business model.

Certainly, we didn't give formal guidance around the top part of the funnel in terms of the revenue growth. Obviously, the business has had very strong momentum, especially in the back half of 2020. And we put out formal outlook for continued growth -- robust growth over 50% in Q1, but then we're going to be facing tougher comps.

So difficult to say where the EBITDA will line up for the year, but I do think Q4 is a great example of a confluence of continued driving scale, robust growth on the monetization coming together and producing significant EBITDA in Q4 and shows -- really does show the potential leverage in the business model. And we think over time, we'll grow a large and very profitable business.

Our next question coming from the line of Michael Nathanson with MoffettNathanson.

I have a couple. Can I ask you a bit about The Roku Channel. You have a trend there on Amazon. I know you announced the development of Amazon, The Roku Channel and Amazon. Is there a noticeable difference in consumption maybe on the Roku platform versus off the platform? That's one. And two is, can you help us at all getting on the hood of maybe advertising revenue number? I know people are trying to ask that, which is anything you can help us on maybe Roku sellout levels, fill rates there? And I guess price per impression, how that's trended over 2020, that'd be really helpful.

Scott, that's for you.

Yes. Okay. Michael, I'll take both those questions. So with regards to The Roku Channel, our biggest opportunity, as we've said in the past, is on our own platform where we know the consumer deeply, where we have full access to the promotional tools, the ability to personalize the experience for the user and great monetization capabilities. We do and will take the opportunity to take The Roku Channel off platform where we see an opportunity. But to be clear, the biggest and best growth opportunity and our primary focus is on The Roku Channel on our own platform.

With regards to your question about the composition of ad revenue, the way I'd say this -- you asked about fill rate, sellout levels. We've mentioned in the past that we still exist in a supply-rich environment and that our biggest challenge, our biggest competition ultimately is competing dollars away from the traditional TV spending pattern. We're making great progress there, as I mentioned earlier in the call, in tracking those dollars. And I do think that there's a fundamental shift that was affected in 2020 as a result of the pandemic.

OTT remains a premium product, and so price is quite well relative to television generally. But I think it's also important to recognize that there's a whole other class of advertisers coming into OTT who either couldn't invest or couldn't invest much in television because as a medium, it didn't work for them. It didn't give them the performance credentials, the measurement that they needed. And so these are advertisers who may have historically invested much more heavily in social media, in search, in display advertising who are now able and interested in participating in OTT because of the ability to measure and optimize. And those advertisers are not always going to be buying on a traditional CPM basis.

Some of them are going to be buying on a performance basis, a cost-per-click, a cost-per-action basis. And this, I think, is one of the most interesting characteristics of OTT as a medium is its future is not simply a top-funnel branding medium like television or a bottom-funnel performance media like social and search. It's both. As the advertisers of all shapes and sizes are going to be competing in, ultimately, a common auction to reach the user and the pricing models, the variety of financial and marketing tactics that those marketers use are going to be quite varied. I hope that answers your question.

It does. Can I ask you a quick follow-up? When we see social have really strong impression quarters, you see with Facebook, the price from impression drops because of what you said, the auction brings in a lot more types of advertisers, all different types of requirements. So is it fair to assume when we see big surges in impressions, is potentially the price per impression is just gets weaker simply by the supply of impressions to the marketplace? Is that a fair assumption? We're trying to build a model to try to predict advertising growth.

Right. Yes, it is the case in social media that when supply goes up a lot, auction prices go down. Ultimately, that's not necessarily a bad thing for the social platform because the greater volume allows them to drive more effect for the advertiser. And of course, if you cut the other way as pressure in the auction increases, it can drive prices up, and that may be disconnected from what the advertiser thinks the impression is ultimately worth.

We mentioned in our shareholder letter, I think, an interesting case study with Frndly, a virtual MVPD service who actually took social media money and moved it to Roku. Their goal was, of course, to acquire subs, and they saw a near 16x lift in sign-ups and a 65% better return relative to their social media investments. And so while it's still early, I think, in terms of OTT competing in that pond, in that bucket, it has all the credentials, all the data and identity, and it's been a big part of our investment with OneView to be able to compete for advertiser budgets when those budgets are mostly focused on bottom-funnel impact. I recognize that might not get you where you're looking for in terms of the model, but that is the dynamic we see playing out.

Our next question coming from the line of Rich Greenfield with LightShed Partners.

If you're a brand and you want to reach connected TV viewers, I was wondering if you could just help us understand the difference between 2 different scenarios. One, you go out and you buy Hulu or Peacock Direct, and a portion of that ad time that you're buying ends up on Roku devices. Choice 2 is you buy Roku directly, and a portion of your spend may end up on a Hulu or a Peacock or even both. I guess if I'm thinking about this, if I'm a marketer brand, why do I buy Roku Direct versus the other way around? And what is buying Roku Direct achieve that simply can't be achieved by buying from the programmer directly and ending up on a Roku device?

Scott, do you want to take that?

Yes. Rich, I guess the short answer is it's both and, not an either/or. These content partners are our partners. And our goal as an ad business is to compliment, not compete with them. There are many reasons, of course, that you might buy directly with a network or an app on our platform. For example, it could be part of a broader cross-platform buy, your upfront commitment. You maybe buy...

Sure. But if I leave it aside, like if I just leave the upfront aside and say there is no upfront in a world where like if you just had to put dollar to work, why would I put a dollar into direct -- like what are the advantages that I get by buying Roku that I can't get by throwing it into a broader buy?

Yes. So go ahead, Anthony. Yes.

I was just going to say one advantage is the ability that we also have access to what linear ads that you've been seeing through our ACR and our Roku TVs. And so in terms of unduplicated reach, we can help you do that. An app who doesn't have that data can't really do that.

Yes. Yes. So just to build on that. So one key reason, Rich, is the ability to reach users that you aren't going to reach just through those select couple of publisher direct buy. So one of the things we regularly do with our advertisers is produce and only both view of who they reached with each of their buys. And we do that with linear, too. And we regularly show them that even though, for example, they're heavily invested in Hulu, they didn't reach this whole other big class of users because they're either not active with those other publishers or they're not holistically optimizing across linear and their whole OTT buy.

There are a lot of other reasons that advertisers invest directly with us. One is we excel at optimizing for performance using data. I mean we've been investing for years in our data and our ad stack, and we excel there. We're not in the business, as you know, of selling context. So if you got to buy the office, you got to buy a specific show, you're going to do that directly with the network. But if you're optimizing for reach and frequency and performance, investing with Roku is a key factor.

The other thing I'll mention here is that OneView is a key component in this discussion. One of the reasons we've invested so heavily in the OneView capability is -- so that in the case where you're doing a publisher direct buy, you can still leverage Roku identity, Roku data and capabilities to help optimize that publisher direct buy against all your other activity.

Right. So -- but I'm just thinking out loud. Like if the ultimate -- what you just said, Scott, to me is the most important. But I want to optimize for reach, frequency and performance. I can't think of anything else. Just optimizing so that I can be on this is us seems suboptimal to optimizing for reach, frequency and performance.

Look, our focus as a company is on data and performance and outcomes for advertisers, but there are lots of reasons why advertisers also care about context and want to be in that show. And that's not our lot. That's the focus and capability of a lot of networks. But look, we agree. We're focused on leveraging our data and our tech and capabilities to drive outcomes for advertisers and help them orchestrate their OTT investment even in the case where they're doing it directly with a publisher.

And that's all the time we have for questions today. I would now like to turn the call back over to Anthony Wood for closing remarks.

Thanks. Before we end the call, I do want to say one more thing. 2020 was a challenging year for businesses, but it was also a difficult time for people everywhere. The team at Roku did an incredible job under extraordinary circumstances, and I want to say thank you to everyone. Together, we have a great future ahead of us.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may all disconnect.