Roku, one of the most popular streaming platforms in US homes, is acquiring Nielsen’s video advertisement business as it tries to become a central hub for TV advertising.

Specifically, Roku is acquiring Nielsen’s Advanced Video Advertising unit. The acquisition means that Roku will also acquire Nielsen’s automatic content recognition (ACR) and dynamic ad insertion (DAI) technology. DAI technology simply means that advertisers will be able to receive “better targeting and measurement” capabilities so they can hyper-target a specific audience instead of more broad demographics like age and gender. Think of ads for products people might actually want playing before a YouTube video compared to seemingly random ads playing on CNN.

It’s often referred to as addressable TV advertising because of how advanced the targeting is compared to previous ad tech. For networks, this allows them to maximize their ad inventory value, while advertisers can better track return on investment for ads on a specific show or network. Effectively, the acquisition is going to allow Roku to work with different linear TV programmers to turn traditional TV ads into digital ads.

So, why does this matter for Roku? Think of the power dynamics at hand. There are more than 51.2 million Roku accounts using the platform to stream everything from live, linear television to streaming services like Netflix and Disney Plus. With Roku controlling Nielsen’s advanced advertising technologies, it puts Roku in a good spot when it comes to negotiating with advertisers who are looking for the best way to target viewers consuming television in a litany of ways. Roku will be able to use its tech platform, and the new advertising tools, to provide the best, focused advertising for firms across both linear TV and streaming video.

Prior to the announcement, Nielsen’s advanced advertisement group “struck deals with Disney, CBS, Discovery, Fox, NBCUniversal, WarnerMedia, A+E Networks and AMC Networks,” according to Variety. Those companies are expected to have “renewed conversations” with Roku, Variety adds, specifically about “working with Roku to enable addressable ads.” Nothing in life is free, and it seems possible that Roku’s new deal means it’ll be able to take a cut of the ad inventory that would come with new deals.

When NBCUniversal executives were trying to negotiate with Roku over bringing their new streaming service, Peacock, to Roku devices, a large part of the delay came from disagreements over advertising inventory. NBCUniversal executives didn’t want to give up a significant portion of their advertising revenue (Roku typically takes 30 percent of ad inventory, but works out specific deals with each partner depending on the offering). Peacock is also ad-supported, and NBCUniversal developed its own targeted digital advertising technology to try and persuade advertisers to place commercials on the platform. Giving up a percentage of that advertising revenue is a tough pill to swallow.

Roku’s biggest advantage — and what seemingly tipped the negotiations — is its scale. The company grew its user base by roughly 40 percent between 2019 and 2020, according to fourth quarter earnings. Even more impressive is its ad-supported Roku Channel, which doubled its audience and reached approximately 61.8 million people in the US in the fourth quarter. Roku’s tech platform and scale is exactly what Nielsen’s Advanced Video Advertising unit needed. So many people in the United States have Roku devices, that not having a channel or streaming service on it is detrimental.

While executives feel strongly that addressable TV advertising is the future, it still only makes up about 10 percent of the overall US linear ad business, according to Axios. Now, the unit will work off more than 100 million connected devices instead of 55 million, Axios adds, giving Nielsen even more insight into the potential of digital ads on linear networks. Spending on addressable TV advertising in the United States is expected to hit “$3.6 billion by 2022, up 75% from August 2020, according to recent estimates by research firm eMarketer,” Variety reported.

If the industry eventually shifts into more being spent on addressable TV advertising, Roku will hold the key position. This also helps explain why Roku spent $150 million in late 2019 to purchase Dataxu, an ad tech company, as noted by Protocol. Roku’s business is increasingly more reliant on its digital platform, which is powered by advertising. Making it so everyone else may have to pay a fee to reap the benefits of being on the platform seems like a smart business move for Roku.

https://www.theverge.com/2021/3/1/22308141/roku-nielsen-video-advertising-business-acquisition-linear-streaming-tv