The Roku platform is a huge opportunity for video publishers and media companies in 2020. Nearly ⅓ of all US smart TV watchers are on Roku, and that number is still rising. But the question for many businesses remains: What is the best way to create a Roku channel? And how do you make money with a Roku channel?
So let’s start with the basics: How do you make money with a Roku channel? There are two main ways to do it:
Ad-Based (AVOD) vs. Subscription-Based (SVOD).
Ad-based Video on Demand (AVOD) are channels that sell ads to make money. This is the most traditional TV route, with everything from cable TV to YouTube having ads before, in-between or after content. These ads can take many shapes, from typical pre or mid-roll ads to sponsored content, banner images, infomercials, direct sponsorships, etc.
Subscription Video on Demand (SVOD) are channels that charge users a monthly or annual fee to access content. Think Netflix, Hulu, and other major “cord-cutting” services. This is a more recent development in video but has already become wildly popular, especially among businesses with high-quality content and loyal audiences.
If you’re interested in learning more about building AVOD or SVOD streaming apps, get in touch with us.
3 Ways to Make Money with Ads on Roku.
Generally speaking, selling ads is the simplest method. There are plenty of monetization tools that can help channels quickly run ads and make money. But most of these tools come with a price.
#1: Roku Direct Publisher
Roku’s Direct Publisher helps US brands launch a channel for free and start running ads. This allows Roku to sell ads on your behalf, no development or work needed from you. The tradeoff is that Roku takes 40% of revenue earned. Plus, you don’t have control over what ads get chosen or when they run.
#2: Video Advertising Networks (VANs)
Video Advertising Networks (or VANs) are a similar third-party option. With a VAN, making money on Roku is as simple as signing up and dropping their code to your channel. However, you may run into some of the same drawbacks: You can’t control what ads run or when. Most services only fill 40-60% of available ad breaks (leaving money on the table). Plus, they take a cut of your revenue.
#3: Custom Ad Servers
Lastly, you could develop a custom ad server and control of your own ads. Here, you get to decide when and where to serve ads. You can also reach out to advertisers directly and set your own prices. The drawbacks here are obviously that this is much more work for you, both on the development and business side.
Pros and Cons of Going Subscription-Based.
Many video businesses, magazines, newspapers and blogs are instituting paywalls over ads. This is for a few reasons: First, ads can interrupt and annoy users. Also, ads require thousands of impressions to even begin driving any revenue. Subscriptions allow you to make exponentially more money per viewer, so you can build a strong business model with a smaller, more concentrated audience.
But to succeed as a subscription-based business, you’ll first need to build a loyal fanbase. With so much free content in the world, viewers are hesitant to pay for content they don’t need. In our experience, finding a niche is a more effective method for driving loyalty than trying to please everyone with every type of content (even Netflix is shifting towards more original content while dropping franchises like Friends and The Office).
There are also businesses like Hulu which institute both ad-based and subscription-based revenue models. This can be a “best of both worlds” solution for your business, if you’re able to balance it out properly!
Other Ways to Monetize? Get Creative.
Just like in any industry, sometimes the best way to make money on Roku is to think outside the box.
For many nonprofit and on Roku, donations are an important part of how they stay afloat. Or if you’re producing original content, in-video sponsorships or product placement can be another excellent source of revenue.
And while Roku may not have a great solution for it just yet, e-commerce is another big route you could take. If you have a dedicated fanbase, selling apparel and swag could be just as effective as monetizing the content itself. The only trouble here is that you’ll likely have to encourage users to visit your website or shop outside of Roku.
Looking at the big picture.
At the end of the day, the most important step in monetizing a business on Roku is thinking about how your audience operates.
If you have a fleeting, but large audience that loves binging through content, AVOD (ads) can be an excellent way to profit off of the momentum. On the other hand, if you have a smaller but more dedicated fanbase, setting up a subscription or SVOD style channel could be a huge win.
If neither of these two fit your needs, it’s time to consult an expert. If you’re serious about making money on Roku, or just want some guidance on the video business at large, get in contact with our team.