While Roku may have beaten the Street's expectations with its latest quarterly report, the company is warning consumers and marketers that it may not have as much spending power during the next few months.
"As we enter the holiday season, we expect the macro environment to further pressure consumer discretionary spend and degrade advertising budgets, especially in the TV scatter market," the company said in a letter to shareholders. "We expect these conditions to be temporary, but it is difficult to predict when they will stabilize or rebound. We therefore anticipate Q4 Player revenue and Platform revenue to be lower year over year."
Roku reported a loss per share of 88 cents, which came in ahead of the Refinitive estimate of a loss of $1.28. Revenue came in at $761 million versus the $694 million estimate. Shares plummeted up to 22 percent on the news that the company was worried about smaller advertiser budgets and less shopping up ahead.
According to a recent Digiday survey, 34 percent of advertising agencies said they were increasing budgets, and 31 percent said they were keeping similar levels throughout the year. But 33 percent said they were decreasing their allocations, with the majority saying it cut a "small" 10 percent to 19 percent.
The company said while viewers are shifting to streaming — as evidenced by 2.3 million new incremental active accounts and 1.1 billion more viewing hours from Q3 2022 levels — advertising budgets are not moving as fast from traditional linear and cable television. It has added new measurement tools like Nielsen Total Ad Ratings to make it easier to compare the success of a marketing campaign.
"Viewers continue to move to TV streaming more quickly than ad dollars, and many advertisers cite crossplatform measurement as a key need to also make the move to TV streaming," it explained.