Vizio's IPO Reveals How It Wants to Take on Connected TV Giants

Vizio has long been one of the top-selling TV companies in the U.S., selling around seven million TVs a year and generating nearly $2 billion in revenue in 2020. While its competitors are typically considered to be TV manufacturers like Samsung, LG and TCL, Vizio wants investors to know it can compete with connected TV providers like Roku, Amazon and Google as well—especially as the number of U.S. pay TV households continues to decline, and time spent viewing on connected TV platforms skyrockets. Today, as the smart TV company prepares to go public with a roadshow and an IPO that values the company at $4.2 billion, Vizio is touting its traditional hardware business to potential investors. It's also showing off a rapidly growing ad-supported streaming service, WatchFree, along with SmartCast, a hub for streaming apps. As the connected TV advertising arms race heats up, this focus underscores Vizio’s ambitions to lean into the rapidly accelerating connected TV advertising space and build out its own data and advertising capabilities. “The TV is the best available screen sitting in the middle of your living room, and today it’s really just used for streaming,” Mike O’Donnell, Vizio CRO, told Adweek in an interview. “We think there's massive opportunities for having both the hardware and software.. That'll enable us to build better solutions for the future of the connected home.” Multiple revenue streams Introduced in 2016, Vizio’s SmartCast hub allows users to access a majority of streaming services (with the exception of HBO Max), along with paid and free OTT channels. The idea was that the company could build a fully integrated experience if it also developed software optimized for its devices. That decision also introduced other avenues for revenue: Vizio could make money from the purchase of a device as well as the ads running on the platform for an entire life cycle. The average lifespan of a TV is 6.8 years, O'Donnell said, and the company views that entire time as a revenue opportunity. “From our standpoint, now that we have both the integrated experience, we now have the ability to make recurring revenue off the bat,” said O’Donnell. And that opportunity for recurring revenue is growing. In 2020, SmartCast accounts rocketed up 61% year over year to 12.2 million monthly users, and saw an increase of 156% in 2020 in usage hours. Vizio generates revenue from advertising on home screens and shares of subscription sales from streaming services, as well as revenue shared when users rent or buy programming through a transactional video-on-demand or premium video-on-demand platform via SmartCast. Expanding advertising opportunities Advertising is where Vizio believes it can really compete, and the company is courting television programmers and marketers in an effort to build out that part of its business. In January 2020, the company created Project OAR, an advertising consortium bringing together programmers, agencies and ad-tech companies to standardize the way networks sell addressable TV inventory across smart TVs. Project OAR has a particular focus on dynamic ad insertion on linear TV. This May, the company will also participate in the IAB’s NewFronts for the first time, allowing it to court even more advertisers. TV ad spend to reach $18 billion While Vizio is emphasizing new advertising opportunities on its devices, O’Donnell says the hardware itself is an important component. Vizio manufactures its own televisions and is consistently a top three vendor when it comes to units sold. This is a slightly different approach from streaming device-makers like Roku, which distributes its software through partnerships with manufactures like TCL, Hisense, Phillips and Sanyo. (Roku, one of the biggest players in the connected TV advertising space, boasts a 38% share of all smart TVs on the market.) “We invested in not only the technology—we needed to invest in both the hardware and the software to solve .. what is effectively the holy grail of linear addressable,” said O’Donnell. “The advantage that we have in the space is that we've already made the investment, we've already formed the partnerships publicly around the open standard in the marketplace.” Vizio’s IPO comes as the connected TV space is rapidly growing. Industry-wide, connected TV ad spend is expected to jump from $8 billion in 2020 to $18 billion in 2024, according to data from eMarketer, IAB and Innovid. Other companies are bulking up to capitalize on that advertiser interest. Earlier this month, Roku struck a landmark deal with Nielsen to buy Nielsen’s advanced video advertising business, including the measurement company’s automatic content recognition and dynamic ad insertion (DAI) technologies. Roku is working to launch an end-to-end DAI solution for TV programmers, a technology which Vizio believes it’s already ahead of the game on. “I think it's a validation,” O’Donnell said of the Roku deal. “The momentum of ground dynamic ad insertion solutions is a validation of all the work we've done. It's an important component, I believe, for all platforms in the future in terms of the shift from linear to streaming, and how to leverage the hardware and software to capture monetization opportunities on both sides.” Roku Acquires This Old House as Part of an Expansive Content Strategy