Vizio Focused on Selling Data, Banner Ads and Pricing TVs to Sell: CFO

As a “new player” that didn’t have an ad sales team prior to 2020, the company is modeling $450 million-$500 million in platform revenue this year, up from $50 million three years ago. The company is focused on getting more content on its SmartCast platform to drive more user engagement and raise average revenue per user (ARPU), and it’s anchoring the strategy to its ad-supported WatchFree service. The more that Vizio sources and promotes “the right content” and creates a smooth user experience, it can serve more ads, drive revenue “and bring a great value proposition to viewers,” said the executive.

Vizio’s relevance in the marketplace has “expanded dramatically” as the company has “become more known as a place to buy and reach viewers that are coming into [connected TV,] Townsend said. He touted the 15 million monthly active users as an important metric for advertisers to reach viewers. The company is riding secular trends: the shift away from broadcast TV to streaming, growing content libraries in the over-the-tip video space, and an easier-to-use streaming experience. "It’s all sort of coming together,” he said.

Vizio’s SmartCast home screen represents about 50% of platform advertising revenue, Townsend said. Home screen banners are promotion opportunities for content partners to make viewers aware of what’s available on SmartCast. Home screen banners started as a “time-relevant promotion platform” for content partners to advertise upcoming shows, and then they expanded to become a customer acquisition vehicle for signing up for a service, Townsend said. Vizio has done promos with YouTube TV and Apple TV for them to acquire customers, he said.

Now the home screen is evolving to be more personalized. Partners can license Vizio's underlying customer segmentation data "to promote the right kind of content to the right household.” If Vizio knows a household watches a lot of children’s content, “we may lean into that and sell that hero bannerin a different way to those particular content partners.” The ability to use data for more personalization creates a higher return on investment opportunity for partners, more revenue for Vizio and a better viewing experience for customers “because they’re being shown content that’s relevant for them,” he said.

The SmartCast home screen will continue to evolve, said Townsend. The company sponsors content hubs to bring in “nonendemic advertisers,” Townsend said, citing partnerships with Turbo Tax, Grey Goose and Microsoft, which have sponsored content around a particular event. Events around the Super Bowl could include food show content about tailgating, he said; one with the NFL Network could have great Super Bowl moments. It’s “a way for us to expand our advertising base beyond just the media entertainment companies and allow us to reach a broader audience” with a curated content approach, he said.

A year ago, Vizio decided to sell its data in “more of a walled garden” approach, Townsend said. “We are not necessarily going to try to be the measurement company of the CTV marketplace, but we can be the backbone, through our data, to help facilitate those who want to compete for measurement,” Townsend said, citing its relationship with Nielsen. “We are the largest available data set that is at a currency grade that’s being used specifically to facilitate measurement and transactions within CTV,” he said. Roku and Samsung don’t license that data, and LG’s data set is “a little smaller,” he said.

The data business will hit a “steeper growth trajectory” as it becomes a “cornerstone” to other measurement business models, Townsend said. Vizio's "first-party, opted-in, high-quality”data is “glass-level” across whichever input the consumer is using, Townsend said. So whether it’s from a set-top box, input from a game console, an external media player “or within SmartCast itself, all of that is part of that data set,” he said: “We have the most comprehensive view of tastes, preferences and how people are spending their time.”

Vizio has its eyes on “better use cases, new interactivity, new things the smart TV’s going to do to bring value to the consumer’s home beyond just simply connecting to the internet and streaming content,” Townsend said. Consumers are migrating to connected TVs and away from dongles, he said, because they want a single remote control, an integrated TV and a seamless TV experience: “We feel like we’re where the puck is going.” Though dongles played an important role in getting people into the streaming ecosystem, smart TVs in the future will have uses cases and interactivity that exceed the capabilities of a dongle, he said.

For its part, Vizio plans to launch a payments platform mid- summer, an infrastructure layer that will “create more monetization.” The initial implementation will enable customers to manage their subscription VOD services through Vizio’s platform. “All we’re getting today is a referral fee; we want to start to get a piece of that monthly subscription,” Townsend said, and that “could be sizable.” Services with high churn levels offer more opportunities for consumers to resubscribe through SmartCast and contribute to Vizio’s ARPU, he said.

On the company’s TV business, Townsend said supply chain issues are largely history: “We have a lot of available supply,” and Wi-Fi components and chipsets are “readily available.” Challenges remain on the transportation side with vessels, port unloading and trucking, he said, but a healthy supply of product on shelves is allowing the company to “deploy some of our pricing and merchandising strategies to help move those products in home.”

The company plans to take the same low-ball pricing strategy it took with the 50-inch V Series to make that model the top-selling TV in the U.S. in Q1 (see 2205130032) and apply it to other models, Townsend said. He expects the company to be "pretty aggressive on pricing" with several more SKUs in the coming months "to facilitate that exact same strategy,” he said: “Move strong units into the home, feed our Platform+ business, drive engagement and generate growth in ARPU.”

TV trends are normalizing after a disproportionate number of smaller screen sizes sold during the COVID-19 pandemic for use as monitors for work- and school-at home, Townsend said. Those customers had low engagement rates on the SmartCast platform because “there’s not a lot of people hovering around a 24-inch TV streaming Netflix or Paramount+,” he noted, saying there’s now a shift to larger TVs and a corresponding rise in user engagement on SmartCast.

On whether licensing the SmartCast platform to other TV makers was on the Vizio road map, Townsend didn't see it happening. "When you rely on other manufacturers to make the hardware for you, you are somewhat exposed to their willingness to put the right amount of memory in it, the right processors, the right chip sets to help facilitate your software." To Vizio, "that’s a disjointed approach," he said.