Thank you, operator. Good afternoon, and welcome to Roku's Q1 2022 earnings call. I'm joined today by Anthony Wood, Roku's Founder and CEO, Steve Louden, our CFO, and Scott Rosenberg, Senior Vice President and 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 our investor relations website at roku.com/investor. Our comments and responses to your questions on this call reflect management's views as of today only, and we disclaim any obligation to update this information. On this call, we'll make forward-looking statements which are predictions, projections, or other statements about future events, such as statements regarding our financial outlook, our investments, future market conditions, and macro environment headwinds, such as global supply chain disruptions, inflationary pressures, and geopolitical conflict.
These statements are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. Please refer to our shareholder letter and our periodic SEC filings for information on factors that could cause our actual results to differ materially from these forward-looking statements. We'll also discuss certain non-GAAP financial measures on today's call. Reconciliations to the most comparable GAAP financial measures are provided in our shareholder letter. Finally, unless otherwise stated, all comparisons on this call will be against our results for the comparable period of 2021. Now, I'd like to hand the call over to Anthony.
Roku had a solid Q1 with platform revenue up 39% year-over-year, driven by higher content distribution and advertising revenue. This financial performance and our continued growth, even in a challenging operating environment, validates the strength of our business model. From day one, the Roku platform has been built to operate at the center of TV streaming, meeting the needs of each participant in the ecosystem. For consumers, we provide an excellent experience with trusted discovery tools that allow them to find and watch content the way they prefer, whether that's via ad-supported or subscription services. For content owners, we offer multiple ways to build and retain audiences and monetize content. For advertisers, we have data, tools, and technology that improve the return on every ad dollar spent.
Ad-supported streaming services are a huge and growing part of the streaming ecosystem, demonstrated by the continued success of The Roku Channel. It was a top five app on our platform in the U.S. by active account reach for the Q3 in a row, and for the first time, it was a top five app on our platform in the U.S. by streaming hour engagement. The Roku Channel's expanding reach and engagement is being driven by the increased quality and diversity of our content portfolio and our unique ability to promote it as the platform owner. As a leading platform in TV streaming, we expect to continue to grow both active accounts and platform monetization for years to come. This quarter, we launched new ad products, and we will present more ad product offerings and content to advertisers at Roku's first in-person upfront event next week.
Today in the U.S., Nielsen reports that audiences spend 46% of their TV time streaming, while eMarketer reports that advertisers spend just 18% of their TV ad budgets on streaming. Both of these will become 100% as eventually all TV and all TV advertising will be streamed. Roku is a leader in TV streaming with an established track record of platform growth and technology innovation, and we will continue to invest to capture the significant opportunities ahead of us. With that, let me turn it over to Steve.
Thanks, Anthony. Before taking your questions, I'll walk through highlights and discuss our outlook given the current macro environment. We continue to grow, adding 1.1 million active accounts in Q1 and ending the quarter with 61.3 million. As expected, year-over-year active account net adds moderated given the end of government stimulus payments that temporarily drove discretionary consumer spend in Q1 2021. Additionally, ongoing supply chain disruptions increased U.S. TV prices in Q1 2022, resulting in industry-wide TV unit sales that were below 2019 pre-COVID levels for the Q3 in a row. Roku player unit sales decreased 12% year over year, but remained above pre-COVID levels, and the average selling price decreased 9% year over year. Engagement was high. Roku users streamed 20.9 billion hours in the quarter, an increase of 1.4 billion from last quarter.
In Q1, total net revenue increased 28% year over year to $734 million. Platform revenue was up 39% year over year to $647 million, benefiting from higher content distribution and robust growth in advertising revenue, despite some continued softness in certain verticals. Q1 player revenue declined 19% year over year, but was up 20% versus Q1 2019 pre-COVID. In Q1, gross profit grew 12% year over year to $365 million.
Platform gross margin was 59%, which was down roughly 8 points year-over-year, reflecting a shift toward a greater mix of video advertising compared to a year ago period, which had significant growth of higher margin M&E and content distribution due to the launch of new services. Player margins continue to be pressured by supply chain challenges as we chose to prioritize account acquisition and insulate consumers from higher costs. Q1 Adjusted EBITDA was $58 million, and we ended the quarter with over $2.2 billion of cash and investments. Looking to the Q2 , we anticipate total net revenue of $805 million, up 25% year-over-year, gross profit of $395 million with a gross margin of 49%, and break-even Adjusted EBITDA.
At a high level, we continue to navigate through a difficult near-term macro environment, which includes impacts from and further uncertainties related to ongoing supply chain disruptions, inflationary pressures, and geopolitical conflict. That said, we believe Roku is well positioned to continue to grow, and we intend to invest in the huge opportunity in TV streaming and to maintain our leadership position. I'd like to provide additional color on each of our estimates. Total net revenue of $805 million reflects our expectations that the ongoing macro headwinds I just mentioned have the potential to reduce or delay ad spend in certain verticals. However, we continue to improve our ability to monetize across our business, and we believe that this will be reflected in growing net revenue despite a very difficult comp. Recall that platform revenue in Q2 of 2021 more than doubled year-over-year.
Gross profit of $395 million reflects our expectation that in our platform business, we will continue to grow the portion of video advertising, which has slightly lower margins than other revenue streams. We expect that supply chain disruptions will continue to pressure the player business, resulting in a negative growth margin as we prioritize account acquisition and absorb elevated costs. Together, we expect this will result in total gross margin of approximately 49%. Finally, our outlook for Q2 adjusted EBITDA is break even, primarily due to our strategic commitment to invest in our business and the significant opportunity ahead of us. Recall that we curtailed spending during the early phases of COVID and then began ramping spending mid last year, and we therefore expect OpEx to increase approximately 90% year-over-year.
We also continue to expect full year adjusted EBITDA of roughly $150 million. As expected, we delivered solid performance in a challenging operating environment to begin the year. We believe that the near-term headwinds are dwarfed by the long-term opportunities in the secular shift to TV streaming and TV OS consolidation. The enormous value we deliver to consumers, content owners, and advertisers will drive our growth. For the full year, we continue to expect total net revenue growth of approximately 35% year-over-year. We believe that all audiences, all content, and thus all advertising will shift to TV streaming. We will continue to enhance our OS, our ad platform, and drive The Roku Channel flywheel with great new content. We will continue to provide content publishers with the audience and tools to grow successful streaming businesses.
Operator, we'll now open it up for questions.
Thank you. As a reminder, to ask a question, simply press star one on your telephone. To withdraw the question, press the pound or hash key. Once again, to ask a question, please press the star, then one on your telephone keypad. Question. Your first question is from Shyam Patil with SFG. Please go ahead.
Hey, guys. Nice job on the results. I had a couple of questions. First one, Anthony, can you talk a little bit about just your thoughts on Netflix introducing advertising and the potential opportunities for Roku? Second, can you guys talk about what gives you confidence in the second half growth acceleration? Thank you.
Hey, Shyam. This is Anthony. Sure. I'll take the first question, then Steve can take the second one. I think about. Well, first of all, I'll just say that, you know, I can't comment specifically on what Netflix may or may not do, but except to say that they're a great partner. We've been working with them since we launched the first streaming player in 2008. My thoughts generally on advertising is that advertising is a way to lower the cost of a subscription streaming service, which makes streaming services more appealing to consumers. I mean, as you lower the price of streaming, people stream more. Generally, advertising is good because it lowers the cost of streaming and increases consumer interest in streaming.
I guess another comment I would make is that Roku is a streaming platform, which is a different business model than an individual streaming service, and sometimes people confuse the two. Our business model, and the way we make money is to connect consumers with content and with advertisers. Anything that causes more streaming to flow through the Roku platform, is good for us and good for our business. You know, more generally, I think we believe that more AVOD offerings will accelerate the movement of traditional TV budgets into streaming. You know, just to recap where we are there, the traditional TV advertising in the U.S. is a $60 billion opportunity. It's larger globally.
You know, for the first time, the reach of TV streaming has surpassed legacy of paid TV in the U.S. for adults 18 to 49, and yet most ad dollars for TV have not moved to streaming yet. Only 18% of ad dollars, ad spend, traditional TV ad spend has moved to streaming, yet almost half of all TV time is streaming. It's gonna be 100% of ad budgets moving to streaming. Anything that accelerates that trend is also very good for us, good for our business model. Just in general, I think, ads as part of a streaming service is good for consumers and is good for Roku as well. Steve, if you wanna take the second question.
Yeah, sure. Yeah, thanks for the question. In terms of how do we bridge from, you know, solid Q2 performance with revenue up 28%, our Q2 outlook, which is in the same ballpark, and then, reaffirmation of our view that the full year will be kinda mid-30s revenue-wise. Like we said last quarter, you know, one of the factors that's involved here is that the year-over-year comps are easier in the back half of this year. Just as context from 2021, if you remember, revenue in the front half grew roughly 80% in 2021, front half of 2021, versus in the back half of 2020, and it grew 40%.
You know, that plus the you know the robust growth we're seeing in the ad business and the relative growth and monetization relative to peers gives us confidence that, you know, that we're reaffirming that full year guidance. The other thing that we look at is just on a sequential increase basis, those are also in line with historical averages. You know, whereas we're obviously transitioning through near-term macro headwinds, you know, that's dwarfed by the overall opportunity, and so we feel good about the continued growth of Roku and the thesis around the shift to streaming remaining intact.
Great. Thank you, guys.
Thanks.
Thanks. Your next question comes from Tom Forte with D.A. Davidson. Please go ahead. Victoria, you can check-
Hi. Thanks for taking my question.
Thanks.
Oh, sorry. Hi. Thanks for taking my question. So we're getting a lot of questions from our investors on the following, and we would appreciate your thoughts. What's the difference today between the state of SVOD and AVOD markets in the U.S. when it comes to the level of consumer engagement for SVOD specifically? Like, have we hit a saturation point when it comes to the number of subscribers for SVODs collectively? And then I've got a follow-up question after that. Thank you.
Hey, Tom Forte. Thanks for the question. This is Anthony. I'll start and then see if Scott has anything to add. You know, first of all, I guess I would just say that I think it's too early to say anything about saturation of SVOD. I mean, streaming is more popular than ever. It's still growing. You know, it's a large global phenomenon that is still spreading around the world. You know, Roku has 60 million active accounts, but that's still tiny compared to the one billion broadband households around the world that are all gonna get their TV through streaming.
You know, there's still a lot of room to grow and a lot of room for services to continue to expand as the world transitions to streaming. I mean, the dynamics are a little bit different in the U.S. versus globally. In the U.S., you've got this dynamic of pay TV, cord-cutting, consumers moving to streaming and saving money there, as well as having a better TV experience. You know, I think it's hard to say. I mean, I don't think we know yet what's the level of spend that consumers will settle out with on SVOD services in the U.S.
We do know that AVOD services are increasingly becoming popular in terms of, like, integrating ads into SVOD services and giving consumers a choice of lower prices with ads versus, you know, higher prices ad-free, all the way to services like The Roku Channel, which are 100% free and completely ad supported, which are very popular with consumers as well. The Roku Channel is doing extremely well. It's a top five channel on our platform by reach, and now it's a top five app on the platform by reach, and now it's a top five app on the platform by engagement as well. It's doing incredibly well for us.
If you look globally about the role of SVOD services, I mean, the way I think about it is streaming SVOD services are kind of the global version of pay TV. Pay TV was historically mostly a U.S. phenomenon, although there's some pay TV internationally, but just not a lot, nothing close to in the U.S. SVOD streaming services are a way for the global market to quickly and easily access a great content selection akin to that of pay TV, but at a much lower price and a better experience.
I think actually there's a huge opportunity around the world as I think most regions will transition from 100% free TV, which is the way it is in a lot of countries, to a lot of consumers around the world having at least one SVOD subscription and maybe more. You know, just in general, I think the streaming is more popular than ever. You know, there's a large number of TVs around the world that are gonna become smart TVs and we're not anywhere near saturation. I don't know, Scott, did you wanna add something?
Yeah, yeah. I'd like to double down on that, Victoria. We're nowhere near saturation. We mentioned the shareholder letter that we've just crossed the point where streaming can deliver more reach than linear television. 46% of TV time is now on streaming. On our platform, we see 3.8 hours out of a daily diet of almost 8 hours per U.S. household. I mean, just everywhere you look, we're nowhere near saturation in terms of consumers moving their television time to streaming. I think then if you look at the business models of SVOD versus AVOD, we're also not near saturating there. Certainly, there are more mature services whose growth has slowed down.
There are much younger services who are still very much in acquisition mode and competing, not just with each other, but for the time that's still spent in traditional linear television. We do see that AVOD has and for many years now and by AVOD, I mean fully ad-supported free, like The Roku Channel, or ad subsidized with a subscription. That category of apps has consistently been growing faster than SVOD, the pure subscription services, in part because of the reasons Anthony mentioned earlier, which is that, you know, free is a great price or subsidized is a great price, and so consumers are drawn to having more choice ultimately, when they can be offered ad-supported services. I'll just definitively say we're nowhere near saturation in terms of consumer appetite for streaming.
This is Anthony again. You know, I think it's also important if you're thinking about Roku's business, to remember that Roku's business is, we are a platform that connects content consumers and advertisers. We're not an individual streaming service, but we are seeing across our entire platform engagement continuing to grow, as well as of course the reach of the platform continuing to grow. The opportunity, you know, is huge because you know, just like we saw with phones where they consolidated around a couple platforms, the way we saw before that with PCs consolidating around a couple platforms, the same thing is happening with smart TVs. Smart TV platforms like Roku are consolidating to a small number of TV platforms.
I think it'll end up being two or three. You know, Roku is the number one TV streaming platform in the US. We are now the number one TV streaming platform in Canada. We're now the number one TV streaming platform in Mexico. If you think about that, in the future, a world where everyone is using a smart TV, those smart TVs consolidate to two or three platforms, and hundreds of millions of dollars of subscription and advertising revenue flow through those platforms, I mean, that's a great business, and it's a different business than a single streaming service.
Thank you for the color on that. If I can just sneak in one more quick question. Do you have any color on your current thoughts on the importance of both live sports and live news as it relates to Roku?
I'll let Scott, do you wanna take that?
Yeah, I'll take it. I mean, sports is certainly a key driver for a number of the services on our platform and a key way that some of these services, you know, whether it's Paramount or Peacock, Super Bowl with the Olympics, it's an essential content type that these services are using to draw viewers into streaming. In some ways, sports is the last pillar holding the traditional pay TV bundle together. As we see that onion peel and more sports become available through streaming services, we'll see continued acceleration of consumers out of traditional pay TV and linear viewership into streaming. You know, news has moved more readily. We've got some great news offerings in The Roku Channel. For example, ABC News, NBC, you know, Reuters.
We have a ton of offerings there. They do very well. There are standalone services as well. I think news has already moved and started to innovate in streaming. Sports is more of a mixed bag with obviously some content still locked up behind more traditional linear services.
This is Anthony. I think sports actually is a great example of how Roku as a platform can be valuable to our customers in the sense that sports rights are incredibly spread out across many different services. One of the important roles we play for our customers is to help them find and discover content across the platform, as opposed to like going into every app and looking what's in that app. We have tools today like universal search. We have things called zones. We have a Sports Zone. Those kinds of tools we're expanding to make it even easier for consumers to find out, you know, where the game they wanna watch is playing right now across the, you know, thousands of services that are available on Roku as a streaming platform.
Thank you. Your next question comes from Barton Crockett with Rosenblatt Securities. Your question, please.
Okay, great. Thanks for taking the question, and thanks for having me on the call here with you. I wanted to ask a follow-up on the discussion about the environment and then a related question. In terms of just to dive into this, the, you know, Netflix obviously is the dominant streamer in the area where you're dominant. They've hit a wall, you know, they're, you know, losing some subscribers. You guys are still growing accounts, growing hours. Where is the incremental usage coming from if it's not going into Netflix? I was wondering if you could talk about is that going into AVOD or the new subscription services, or just some color about what you're seeing there would be helpful.
Sure. This is Anthony. I'll start, and then Scott probably could add. You know, generally, what we're seeing. If you look at Roku as a platform, there's lots of different services that consumers can select to stream from. Streaming has never been more popular. The viewers have just a tremendous number of options, and that's causing overall engagement across our platform to grow. You know, any particular service might be going up or down or whatever, has some specific dynamics, but in aggregate, we're seeing streaming grow.
You know, we've talked about the stat that if you look at the number of hours viewed by a typical household in the U.S., which is about eight, and you compare that to Roku's hours, we're about half of that. There's, you know, and that's because consumers are using other ways of watching TV besides just streaming, but they're switching more and more of their time to streaming, and so that's causing streaming hours overall to grow. As far as different kinds of categories, I mean, AVOD is ad-supported content is a fast-growing category on our platform. The Roku Channel is doing extremely well, you know, because it's free, and the quality of the content's getting better and better. You know, everything from back catalog content, you know, all the way up to Roku Originals and everything in between.
We did a output deal with Lionsgate recently for movies. You know, we signed a deal recently with A&E to access some of their content. ad-supported content's growing, but SVOD content's growing as well. There's a lot of services. I don't know, Scott, did you have anything you wanted to add?
No.
Did that about do it?
I mean, just simply the offer keeps getting better for consumers. We just see, you know, such substantial investment in these services and the content that's going into them, that you know, the appeal of what you can get on streaming just continues to get better and better. With advertising, it opens up more price points and more accessibility to more consumers. That's ultimately, Barton, the thing that's driving incremental streaming consumption.
Yeah. I mean, just for our viewers, the golden age of TV. I mean, there's just so many different options, so much competition that just didn't happen before, between content providers for viewers. Viewers have lots of options. It's getting better all the time for them. For services, and for Roku as a platform, that competition is good for our business because we provide a lot of tools that allow viewers to find content. I was talking about, like, searching across the platform. You know, those kinds of user interfaces provide opportunities for us to put promotional impressions or ads, which we, you know, make money on.
We have lots of tools to allow content providers to build audience too everything from billing to, you know, promotion, and other just other ways for them to build audience. Just, you know, for our business, the competition that's happening in streaming is good and for viewers is good as well.
Okay. Just one other kind of topic that I wanted to address quickly if I could, the consolidation of services. Obviously front, top of mind with Warner Bros. Discovery. I'm just curious about what happens, you know, what's where you can talk about the contractual circumstances of consolidation to the extent that if one big service is buying a smaller service, is it like we see in TV where the smaller service gets on the bigger service's more favorable economics? If two networks are combined, is that just a loss of revenue from one of the networks, or is there something different in your model that protects you somewhat? I was wondering if you could discuss.
Scott can take that question.
Yeah. Barton, what I'd say is that, back to Anthony's earlier point, our role as a platform is to help these services get in front of consumers and drive consumption. In general, we're in favor of any development, whether it's the launch of new ad-supported business models or the merger of companies that ensures that these companies can continue to bring bigger and better services to our consumers. I won't comment specifically on our deals or relationships with Warner before the merger or Discovery, except to say we have a deep enduring relationship with both parties. We expect it to continue afterwards. We've just launched discovery+ inside The Roku Channel. We're very excited about the potential there to deliver for our consumers a great experience and extend the audience that Warner Bros. Discovery can reach with Discovery+ through The Roku Channel.
We've got a robust relationship with both sides of the house in terms of marketing their content and services to our users. You know, in general, a robust competitive ecosystem is good for us as a platform.
Yeah, I would say, I just add that I mean, the number of content services and the amount of content available through streaming is growing. I think the consolidation that's happening is around existing media companies consolidating to build better streaming services. Those are generally new streaming services that didn't exist before.
Thank you. Your next question comes from Shweta Khajuria with Evercore ISI.
Okay, thank you very much. Let me try a few, please. One, can you please comment on the supply chain headwinds currently, and when you think you'll start to see the headwinds sort of dissipate? Perhaps are you seeing that already? Where are you right now versus what you saw earlier in the year? That's question one. Second, is it possible to comment on the overall ad environment, the demand trends that you're seeing right now? There has been conflicting commentary from some of the other companies that have already reported on brand spend and perhaps potential weakness in brand spend, but you are reiterating your full year guidance for top line growth. Just talk about the demand trends that you're seeing for brand spend, especially.
Finally, just if you could talk about growth margins for platform revenue, for your platform segment as we think about the rest of the year, that'd be great. Thanks a lot.
Steve can take the first question on supply chain. Scott will take the second question on the overall ad environment. I guess Steve can also take the gross margin question.
Yeah. Hey, Shweta. Yeah, in terms of, you know, I'll talk about the supply chain impact, you know, mainly on the account acquisition side, and Scott can chime in with some commentary on the monetization side. Yeah, the situation is similar to last couple quarters. If you remember, you know, starting in Q3, Q4, and now into Q1, we've had dealing with similar situations where we've got, you know, continued elevated pricing in terms of components, as well as some availability challenges and then you know, the kind of shipping and logistics costs and delays there. You know, some of those portions have come off their all-time highs that we've seen, but in general, costs remain elevated.
You know, the Roku team's doing a great job of being nimble in terms of alternate sourcing and doing some reworking to make sure that we have availability on the player side. The situation is fairly similar in terms of the impacts of the TV industry and then how that impacts, you know, kind of our unit sales. On the TV side, similar to the last couple quarters, you know, we can see that these elevated pricing of new TVs is causing, you know, the overall size of the market in terms of units sold to be down, and they're still down below 2019 pre-COVID levels. That is definitely a headwind for the industry as well as our TV partners.
You know, the good news is that our market share has actually gone up sequentially. You know, as we have inventory availability, that's good with our partners, you know, that has gone well. You know, we're still the number one TV OS out there in North America. We continue to compete well on that despite the headwinds on the TV side. On the player side, you know, similar to the last couple quarters as well, you know, what we've been doing is, you know, using our scale, our relationships, and the flexibility to go ahead and absorb the price increases. You know, our increase in ARPU gives us more flexibility. Like I said, the supply chain and operations team's done a good job of keeping that.
The player unit sales, while they're down year-over-year, in part due to a tough comp based on the stimulus payments last year, what you're seeing is that they remain above 2019 pre-COVID levels. That's kind of the impact. In terms of, you know, how long that will continue, we think that situation will be similar. You know, that's what we talked about in our outlook for Q2, that at least in the short term, those conditions will persist. Certainly, there's a lot of uncertainty out there, not only around the supply chain, but continued pandemic impacts, especially in China, as well as knock-on effects from the war in Ukraine. Scott, we'll maybe turn it over to you on the ad side.
Yeah, Shweta. You know, on the ad side, yes, absolutely. There's still some uncertainty out there. There's certain verticals that are more affected by supply chain than others. We're still putting up very robust growth for the ad business, and that's largely because we're still early in the movement of budgets into streaming. In the shareholder letter, we cited 46% of time spent in streaming, but only 18% of ad budgets being spent. You know, for us, that translates into, hey, are we gonna be able to grow this account 100% year-over-year or 40% or 50% year-over-year? Our per account spending is up 50% year-over-year, and we see significant increased commitments across every one of our segments, our large customer segment, our growth performance segment, our M&E segment.
You know, the uncertainty does affect us, but it, the magnitude of the shift is still very substantial. We're still putting up very substantial growth figures. We're going into the upfronts next week. It's our first live upfront. We're excited about it. Rolling out a bunch of great new content offerings, great new ad product innovations, and we're bullish about our ability to drive yet further substantial commitments for the ad business.
Yeah. Then on the growth margin for platform. In the quarter, platform gross margin was about 59%. That was down roughly eight points year-over-year relative to Q1 2021. The primary difference there is it reflects the shift toward the advertising, video advertising. If you remember, in Q1 of 2021, we had extremely strong performance from M&E and content distribution sides of the business related to, you know, new streaming services. That was a higher mix, and those are very high margin parts of monetization. That change reflects the overall move toward video advertising. Then we mentioned as part of our outlook, you know, kind of a similar overall company gross margin to what we had this quarter.
That reflects that kind of continued mix of video advertising.
Okay. Thanks, Steve. Thanks, Scott.
Thank you.
Thank you. Your next question comes from Ralph Schackart with William Blair. Your question please.
Great. Thanks for taking the question. Scott and Anthony, a couple times you've referenced in this call and others about the 18% of ad budgets that have shifted to streaming. You know, on this call, we're talking about 46% of consumer streaming time occurring in the streaming environment. I know the macro is tough, but what are the conditions do you think that you would need, let's say we finally get through this macro tunnel, to sort of accelerate that shift? Maybe another question to ask is if you're not allocating larger budgets to streaming today, what is the hold up? Is it just that TV is sort of, you know, established and has more predictable measurement capabilities? Just sort of, you know, provide some color along that question would be helpful. Thank you.
Hey, Ralph, this is Anthony. I'll take it from my point of view, and then I'm sure Steve probably has a better answer. You know, I just think the big issue is just people take a while to change behaviors. TV ad buyers been buying ads a certain way for a long time. They understand it. You know, the percent of TV ad budgets that were spent on streaming, I mean, not long ago, was a lot smaller. The gap was even bigger. The gap is starting to close. I think really what it is just time.
I mean, the other thing that will accelerate things or has in the past is anytime there's, you know, macroeconomic stresses on businesses, then they start to get more serious about how they should be efficiently spending their money. I think this is just something we've seen before in other industries. You know, the transition of ad dollars to mobile, for example, took a lot longer than it took for viewers to shift to mobile, but eventually it catches up. I don't know. Scott, did you have anything else to add?
I mean, it's happening. It's just inertia, as Anthony said. It's a big industry with a lot of players, a lot of strategies, but it's happening. The CTV ad segment is the fastest-growing segment among all media, all advertising segments. I think we'll continue to see acceleration just 'cause of the sheer amount of money that's still locked up in-
Yeah
In linear television.
If you think about ad growth generally from Roku's business point of view, you know, there's the shift of traditional TV ad dollars to streaming in the United States. In the rest of the markets around the world, you know, Roku is much more focused at this point in the life cycle on building active accounts, and we barely started monetization. We just recently in Mexico launched ad sales, but almost no ad monetization in the rest of the world. That's also gonna be. I mean, the whole world is gonna switch to streaming, and all TV advertising switch to streaming. The other big pool of ad dollars that I think is not fully tapped into yet is performance-based advertising or the kinds of ad dollars that are spent on digital advertising.
I mean, if you look at traditional TV advertising, you know, it was Nielsen demographics. It was there was no way to directly measure how effective your ad is. In the case of connected TV and in case of Roku specifically, we've invested a lot in our ad stack over the years, and we have a very high quality, high tech, big data-targeted measurement performance-based advertising stack. You know, we are starting to see performance-based advertisers and digital advertisers starting to move to our platform, and there's a lot of room to grow that as well.
Okay. Thanks, Anthony. Thanks, Scott.
Thank you. Your next question comes from Steven Cahall with Wells Fargo. Your question please.
Thanks. Maybe first, I think that platform ARPU in the quarter was up around 20%. The hours per account were down a little bit. I know it's a really tough comp as there were still some lockdowns going on last year. Nonetheless, I was wondering if you could just maybe help us deconstruct that ARPU a little bit. It seems like either you got really good pricing or maybe you had some content sales or other bounties that you might have had in the quarter. I'd love to get a little more color on just ARPU. Then Anthony, I got a quick follow-up for you.
Okay. Well, actually, ARPU was $43 in the quarter, up 34% year-over-year. Steve, I don't know if you wanna add any more color to that.
Yeah. Yeah, you're right. So, for trailing 12 months, roughly $43, up 34% year-over-year. Yeah, we continue to see great progress on monetization. You know, that's obviously the three big parts to that are the advertising business, the content distribution revenue shares, as well as the media and entertainment spend. You know, from a year ago, we've seen a shift more to the video ad business. You know, all three aspects of that have been making good progress. We continue to innovate on the ad side and obviously have our upfront coming up next week where we'll announce even more, and then we continue to see good progress, you know, partnering with content publishers on content distribution revenues and media and entertainment.
You know, that ARPU is not necessarily directly correlated with the streaming hours. As you mentioned, streaming hours on an active account per day, streaming hours per day is, you know, a little bit down year-over-year, but that still is a bit of a difficult comp, just given where we were in the COVID and lockdown cycle a year ago. We feel pretty good about the, you know, how that's been growing over time, you know, minus some of the demand flips in the lockdown phases. You know, just a reminder, that's still, you know, roughly half of the average U.S. TV household in terms of their total time viewing. There's a lot more opportunity on both the engagement side with streaming hours as well as on the ARPU potential.
Thanks for that color. Anthony, I mean, you seem really convinced on this notion of operating systems consolidating down to just a couple of players. Yesterday, there was the announcement by Comcast and Charter that they're going into this market in a little more aggressive way than they had been in the past. I guess, how do you kind of think about the risk that that market rationalization takes quite a long time? You know, it's obviously baked into a lot of your investment guidance for the year. When do you kind of think we might be coming through to that rationalization where you might enjoy stronger economics? Thanks.
You know, if you just think about competition for a second. You know, we've got over 60 million active accounts and growing fast. We're the number-one selling TV operating system in the United States. You know, I mean, a few years ago, Roku TVs didn't even exist. Now, you know, we're the number-one selling TV OS in the country. You know, every region we compete in, active accounts are growing. We've been competing effectively against big, strong companies for years. You know, we compete with Google, compete with Amazon, and we compete effectively.
You know, the reason we win in these markets is because we built the only purpose-built operating system for TV. We're incredibly focused on streaming. It's all we do. We've got a great team. They, you know, and our A-team comes to work every day to build the best streaming products in the business. You know, the way we grow active accounts, we sell streaming players, and we sell licensed Roku TVs, or we don't sell them, but their Roku TVs are in the market which we license. Both TVs and streaming players are critical strategic assets for us in terms of growing our active accounts.
If you look at our competitors, you know, there's competitors that only do TVs, and then there's competitors that do both players and TVs, but they're really strong in only one or the other. Whereas one of the key things about Roku's success is we're very strong in both streaming players and smart TVs.
Yeah.
Both those assets are doing well for us. In terms of why, you know, why is it gonna continue to consolidate, it's because the amount of money that goes into building a competitive TV streaming platform is very large and growing. I mean, we're funneling all, you know, a big chunk of our gross profit back into building the strength of our platform. It's very hard for a certainly for a new player. It's hard for me to imagine how they're gonna be successful given the long number of years we've invested in our platform and our competitors have as well.
Mm-hmm.
also just, you know, you have to amortize that cost across a larger and larger installed base to be competitive. Scale is super important. It's the exact same phenomenon. I mean, in PCs, there used to be lots of different PC operating systems. In phones, there used to be lots of different phone software stacks. Now there's only a couple. The same thing is happening in TVs.
Thank you.
Thank you. Our last question comes from Vasily Karasyov with Cannonball. Please go ahead.
Well, thank you. I have a quick one and then a more substantial one. The quick one, can you please tell us how fast the monetized video ad impressions grew in the quarter? I'm sorry if I missed it in the letter. Then my second question is about your relationships with major apps that were launched in recent years and how they evolve over time. If I look at your disclosures, they show that spending by your biggest platform customer grew 39% last year after a significant growth in 2020. Obviously relationships grow in years as after an app launches. Can you give us some color on how the revenue mix changes over time between distribution revenue and M&E?
Speaking of M&E, how do you see the M&E revenue dynamic change as an app goes from the initial subscriber acquisition phase to churn control and subscriber retention? Thank you very much.
Steve, I'll
Oh, you're muted.
Hey, Vasily. Yeah, just in terms of Roku monetized video impressions, we didn't denote a specific number on that. You know, obviously, the ad business continues to grow, and as we said, we're mixing more into the video ad business. In terms of, you know, kind of the rev mix between, you know, content distribution and M&E, I'll give some thoughts, and then Scott can give more color on the dynamics there. What we see over time is certainly we talked about the shift from last year into video advertising. So that's becoming a bigger mix of the platform overall.
When you think about, you know, the kind of revenue specific to the content publishers, you know, we obviously had a situation of late 2020, early 2021, where you had a lot of new services. A lot of especially legacy media companies were pivoting their focus towards streaming. That was very helpful in terms of short-term revenues related to the launch of those services. What you really see is that, you know, we have the most engaged audience. We have significant reach with our 60+ million active accounts. You know, we have industry-leading tools to help them grow their business. Increasingly, what's important is that they will need to drive engagement and retention of those account bases. That's the shift that you're seeing in terms of spending specifically on the M&E side.
We've been sort of moving that business for a long time, even before some of the players have reoriented that way. Where that's all going, they're gonna have large bases. My analogy is they need to start thinking like scaled wireless carriers in terms of focusing just as much on the engagement and retention as they've historically focused on building new subscriber bases. Scott, do you want to add-
Would it be fair to say that an app can spend more in the second year after launch with you than in the year when they launch?
Hey, Vasily. This is Scott here. I mean, what I'd say is that generally, our relationship with these app partners deepens over time. It's not just a function of their marketing, their M&E spend with us. It's multifaceted. It's buttons. It's revenue shares from their subscription services. It's collaboration on advertising. It's marketing trades between the companies. When we keep getting bigger as a platform, we keep improving our tool set. Partners look to us, especially after they get live and they see the performance of our platform in terms of the ratio of new subscribers and engagement that we can drive relative to other platforms. They tend to lean in and engage more deeply with us, not just monetarily, but strategically.
I know we just announced the dynamic linear ad beta work that we're doing with Discovery, Paramount, AMC, Crown. There'll be more to come. That's just an example of where there's yet another lane to collaborate with these big partners on. You know, I think you're also probing the M&E category itself. Yes, generally partners do increase their spend over time. It's not just for user acquisition. You know, even as partners hit, quote, "saturation," and very few of our partners actually have, they need to keep driving engagement and driving retention. You know, there's clear precedent from the traditional TV world where, you know, up to about a quarter of all air time, all advertising time is used to cross-promote shows.
Obviously linear TV is not growing. The importance of these services investing in marketing, collaborating with us to feature their content organically in the paid form in our experience doesn't diminish over time. They've got to keep competing for consumer attention, driving tune in, which drives loyalty and engagement. This is even more important in a streaming world where the traditional tactics of cross-promoting across different properties and content is harder than it was traditionally. They look to us as a platform to help continue driving tune in. Vasily, I hope that answers your question.
Yes. Thank you very much.
Thank you. That ends our Q&A session for today. I will turn it back to Anthony Wood for his closing remarks.
Thanks. I want to thank our employees, customers, and partners for a solid quarter. We have built the best TV streaming platform for audiences, content publishers, and advertisers alike, and we're focused on continuing to be the innovation leader among streaming platforms.