No. of Recommendations: 14
Ok on to the GM for ads.

ROKU shares ad revenue with publishers in 2 ways.

From their developer page.

Ad split. 30/70. The publisher remits 30% of their ad inventory to ROKU to sell on their own. This is the higher margin type. This would similar to the “Net” revenue I believe.

The other way is via this arrangement:

Roku manages 100% of the channel's advertising inventory and will share 60% of net revenue earned on paid ads served in the channel with the publisher (net of a 15% operational and serving fee).

I believe this is similar to the “Gross” revenue where they account for the entire 100% in revenue and then account for the amount they pay out to the publisher as COGS. Pass through revenue.

I have not been able to verify this with statements from management. It just makes sense for the ad margins to be 50+%. I will see if IR at ROKU could spill the beans on this.

Interestingly I think if you were to work through a hypothetical you will see that the “Gross” type would yield more gross profit to ROKU for a given amount of ad spend occurring on the Roku platform than for the “Net” type, despite being a much lower margin. Once again sacrificing Gross Margin for Gross Profit.

Darth
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