TV Maker Vizio Is Building an Ad Business of Its Own
Author: Sahil Patel. Source: WSJ
Vizio Inc., a major maker of TVs in North America, wants to sell some of the ads that appear on its TV sets’ screens.
It is forming a unit called Vizio Ads to sell advertising on its SmartCast internet-connected TV operating system. Today those ads are largely sold by other companies whose programming appears on SmartCast.
The company plans to hire about two dozen ad sales executives across the U.S. through 2020 to work in Vizio Ads, which will reside alongside Inscape, Vizio’s TV data operation, within the company’s “platform” business, said Mike O’Donnell, senior vice president of the platform group. Vizio has hired six ad sales executives so far, Mr. O’Donnell said.
Vizio will offer marketers ad inventory such as commercial time on the company’s free streaming service, WatchFree, and display advertising units on SmartCast’s home, search and discovery screens. It also has the right to sell some inventory within various ad-supported apps that viewers access via SmartCast.
It can sell ads on roughly 13 million TV sets using SmartCast and previous operating systems.
The connected TV advertising market is becoming crowded as so-called over-the-top streaming viewing that eschews traditional cable TV bundles skyrockets. Other OTT ad sellers span TV networks, digital video programmers and tech giants such as Amazon.com Inc. and Alphabet Inc. Rival TV manufacturers such as Samsung Electronics Co. are also in the game.
Streaming video ad revenue on TV screens in the U.S. is expected to hit $4.4 billion in 2020, up from $3.4 billion last year, according to a forecast by ad-buying group Magna.
“It’s our largest growth driver,” said Molly Finnerty, senior vice president of strategic investment for Magna. “Our connected TV and OTT ad spend is starting to come from traditional linear investment as consumption is shifting.”
Vizio believes it can carve out a slice of this ad market, in part because it sells many of the connected TVs itself.
“You don’t have to buy a streaming box or a dongle to plug into your Vizio TV,” Mr. O’Donnell said.
The company’s platform business has revenue in the mid-eight figures, according to a person familiar with the matter. This includes Vizio’s cut of ad and subscription revenue generated by its platform, as well as revenue from Inscape’s data deals.
Such platform businesses seem to have plenty of potential for connected TV ad sellers: Roku Inc., one of the largest streaming ad sellers in the market, reported $481.2 million in platform revenue through the first nine months of 2019, far surpassing the revenue it makes from selling streaming devices.
TV manufacturers might be newer entrants into streaming ad sales but are valuable because of the data and relationships they have with people who buy their TVs, Ms. Finnerty said. “Think about how close their relationship is to people who are actually watching the glass,” she said. “Through attribution and [automatic content recognition] technology, we are able to understand who is consuming media on the glass, what they’re watching and how to attribute it to sales.”
In 2017, Vizio settled a lawsuit with the FTC over claims that it tracked consumers’ viewing habits and sold that information to marketing firms without getting customers’ consent. Vizio agreed to obtain express consent for collecting data as part of the settlement.
Today, customers are given an explicit option to share data with Vizio and advertisers, the company said. About 13.2 million users have opted in, the company said.
For Vizio, an ad business could improve tight margins for TV sets, which frequently get sold at a discount, Mr. O’Donnell said.
Vizio was the second-biggest shipper of TVs in the U.S. during the third quarter of 2019, with a 16.5% market share, according to data from market research firm IHS Markit Ltd.