In what is becoming a continued trend for smart TV maker Vizio, the company reported strength in its advertising business, which grew 24% year over year in Q1. However, revenue from device sales slipped steeply.
Vizio’s advertising business launched in 2019 and has since expanded beyond media and entertainment clients to include category verticals such as pharmaceuticals, travel and quick service restaurants, “all of which have recently been growing rapidly for us,” said Vizio CEO William Wang during Tuesday’s quarterly earnings call.
He noted that Q1 ad revenue growth exceeded Vizio’s own expectations.
“Our results speak to the progress we’ve made in raising awareness of Vizio as a scaled destination for advertisers to reach viewers,” Wang said in a statement.
Executives did acknowledge constrained demand for smart TV device sales, citing a slow economy and inflation concerns, but similar to Q4 pointed to increasing use and monetization of its platform product.
Platform+, which includes the company’s Smartcast platform and free ad-supported streaming (FAST) service WatchFree+, accounted for a new high of 35% of total revenue. Still, total net revenue of $356.7 million was down 27% yoy from the $485.5 million generated in the same period a year ago. Contributing to overall revenue declines was lower device revenue, which plummeted a whopping 40% in the quarter to $231 million. Smart TV shipments in the period declined 32% to 900,000 – compared to the 1.4 million sold in Q1 2022.
But while Vizio didn’t sell as many TVs, Platform+ net revenue reached $126 million in the period, up 22% year over year. Within the Platform+ segment advertising revenue rose 24% to $94 million, with CFO Adam Townsend cited strong growth in video revenue, helped by a combination of deeper user engagement and steady improvements in advertising demand. Non advertising revenue on Platform+ grew 19% to $32 million.
SmartCast average revenue per user (ARPU) also climbed 23% year over year to $29.20. And Vizio’s Q1 net loss of $700,000 improved compared to a net loss of $11 million in the same period a year ago. Adjusted EBITDA of $6.7 million was up 52%.
During the call executives focused on the expanding advertising business, noting direct ad client relationships broadened by 77% with the company adding 148 net new advertisers in Q1. And advertisers who returned to the platform are doling out more money, increasing spend with Vizio by 53% compared to the same quarter of 2022.
The expansion of the ad business comes alongside usage growth on SmartCast, where active accounts grew by slightly over 1.8 million to reach 17.5 million, with 4.9 billion hours streamed. WatchFree+ continues to enjoy popularity as well and was the No. 2 free ad-supported app on the Vizio platform.
And when a Vizio TV is turned on, users in Q1 spent more than half of their time (54%) within the SmartCast platform, marking a new high and impacting the company’s ability to monetize. Time spent streaming “outpaced all other time spent by our users,” measured by a 90% increase in SmartCast hours against a 10% increase in total Vizio hours.
“Our users are spending most of their time on our TV streaming content within our SmartCast platform. They spend more time on Smartcast than cable TV, game consoles, or attached media players combined,” Townsend said. “This behavior is directly increasing our monetization opportunities in multiple ways, including our home screen advertising, video impressions, data and content distribution.”
Out of those factors he said that advertising by far is the largest element, representing 75% of the segment’s total revenue for the quarter.
“Through a powerful combination of more users spending more time streaming, more new advertisers coming to our platform and existing advertisers spending more money with us once they are here, we believe we once again gain share of advertising among CTV platform with our 24% growth in the first quarter,” the finance chief commented.
And while Vizio doesn’t specifically break out metrics for WatchFree+ yet, Townsend said it’s a key contributor to the company’s advertising growth. In Q1 alone WatchFree added 23 new channels such as Tastemade and others. On the content side the company just recently launched a Branded Content Studio unit as another avenue for marketers on the Vizio home screen, with the ability to sponsor or create data-informed content that integrates brand messaging. An initial test involved a mini-series called “3 Pointers” timed around the start of the NCAA March Madness college basketball tournament, sponsored by BetMGM.
Last week at the NewFronts Vizio also offered glimpses of a redesigned user interface that will be rolled out in the coming months, featuring not only user enhancements but new capabilities for more immersive advertising and new formats.
Article updated to correct Vizio Q1 Adjusted EBITDA was up 52% year-over-year. A previous version incorrectly stated 23%.