Q3 2022 Vizio Holding Corp Earnings Call
We have invested in.
A whole range of operating improvement.
So the consumer experience.
We enhanced connectivity through Wi Fi six E compatibility.
We improved the speed and performance of our operating performance.
A standard <unk>.
Leasing certification for gamers.
Cost of fleet.
And now include R Brasil voice remote and Bluetooth headphone support to all of our products.
Unlike many of our competitors.
Most of these quality features all the way down to our entry level models.
That's a strong differentiator, especially for the price.
And the critics and reviewers.
We are receiving great accolades with many indicating that our new collection delivers a powerful pumps of great picture quality and high quality excellence.
At a great price.
With the explosion reviews with no surprise.
We maintained our position as the number two person on television in the U S for another quarter.
On the audio side.
M series to elevate and all in one complete the home entertainment experience.
Heather incredible value.
Critics here also region.
Particularly about Dolby Atmos products with many highlighting that one will be hard pressed to fund it.
This leaker and more powerful accounting system for the month.
We continue to benefit from the success of our new business model, which gives us the opportunity to invest in these award winning devices. While also delivering continued growth in platform monetization with.
With the enhanced viewing experiences to our users.
With instant access to over 135 streaming services, including fan favorites like stars.
TV plus.
BT plus.
<unk>, plus <unk>, plus HBO, Max Hulu, Netflix Peacock and Pan video. It is no surprise consumers spend the majority of their time on TV shipment.
We also know a growing wave of consumers are interested.
In consuming free AD supported content and commerce little surprise that our watch free plus offering remains the number two most watched.
Support of App.
Platform during.
During the quarter, we expanded <unk> plus with the recent addition of core television how PV ion and many more.
We also expanded our <unk> plus on demand service.
To improve access to over 6000 will be TV show titles.
Our partners like Disney Warner Brothers, Sony Pictures.
Great.
This quarter will continue to grow small cap.
Base and expand our relevance in the advertising marketplace.
Our advertising revenue grew substantially driven by expansion in both at client permission and broader pricing across multiple categories.
During the quarter, we expanded our direct client share by 65% versus a year ago, adding 158 net new advertisers the.
The continued growth is coming from big brands.
The largest ad categories versus automotive.
And the payment CPG quick service restaurants and retail.
We also recently announced.
That will conclude our 2023 upfront negotiations with more than $200 million in <unk>.
Advertising commitments, while agency holding companies.
Brent as studios one of them.
Doubled the commitments were achieved last year.
With better targeting measurement.
Advertising opportunities on Wall Street, plus as well as buyer demand for data informed advertising homescreen engagement.
The runway of opportunities for our Brazil business.
Although disciplined investment we continue to make in our product platform and our people are built around creating true long term value for our consumers.
<unk> only both hardware and software to allow us to continuously push new features and backwards integrated capabilities.
Due to our Tvs.
As a result, we would like to state that the longer a consumer has a brazil in their home the better it gets.
To further support the push of always making the television better we recently unveiled our dedicated developer program.
Created to optimize.
Salary.
Onboarding process for new features and content partners.
This program is available nationwide and helps connect certified developers and content distributors.
Small to build apps.
And experiences for physical smart Tvs.
We are excited to bring this opportunity to the developer market.
We have created discipline and measure roadmaps for new innovation.
By bringing together a great experience for our users and our partners alike.
The more time consumers spend within spot at a.
Lots of tremendous growth opportunities and our team is continuously working on our pipeline of new features and innovations that further to virtual ownership experience.
As an example, just a few weeks ago, we rolled out a new feature.
My Watchlist. This feature allows users to add their favorite TV shows and movies from different streaming services into one central location our platform.
I watch list makes us easier for viewers to find and access the content they intend to watch quickly.
Efficiently.
While at the same time, adding value for our content partners in the customer acquisition and retention efforts.
And due to the backward compatibility of integrated hardware and software structure, we are able to launch across the fleet.
With a simple software update.
Greenfield new features to our spot <unk> Tvs that are several years old.
We look forward to sharing even more with you in the quarters ahead as we continue investing in our users and our partners.
With that I will now turn the call over to Adam to review, our third quarter results in more detail.
Thanks, William before opening the call to questions I will take you through our quarterly financial highlights and discuss our outlook for Q4, starting with the third quarter total company revenue came in at $435 million.
Platform plus revenue grew 49% were quarterly record of $128 million and represented a new highest one 9% of total company revenue in the quarter.
This strong growth was driven by advertising revenue, which was 47% to $97 million and a step up in data licensing revenue over the year ago period.
During the quarter as William mentioned, we expanded our direct advertising client relationships by 65% versus a year ago, adding more than 158 net new advertisers to our platform. We continue to show growth in our advertiser relationships with strong repeat customer base those relationships continue to broaden and driven by our combination of unique ad experiences.
And powerful first party data are best in class ACR data drives the complete campaign cycle, helping advertisers to plan target and measure their advertising spend more effectively.
Pair that with the expanding reach of our AD supported service Wall Street, plus and we continue to see rapid growth of monetize video AD inventory on top of this our homescreen continues to represent a highly compelling destination for content partners to reach viewers right at the moment. They are deciding what to watch we believe that CTV advertising continues to grow faster than the <unk>.
They're all AD market and our advertising business continues to outpace the growth within CTV.
Platform first non advertising revenue grew 55% to $31 million versus a year ago period again led by growth in data licensing as.
As new entrants shift and audiences fragment across different services are first party ACR data has been at the forefront of powering products that deliver a better consumer experience and bring greater transparency and scale to CTV measurement today, we work with some of the leading measurement companies such as ISR Comscore video App.
And Nielsen to utilize our data to fuel their ad currency products.
Turning to our device segment total revenue was $307 million a year over year decline in device revenue is the combination of lower smart Tvs shipments and lower average selling prices due to more promotion pricing. While these pricing strategies have impacted our average selling price versus the year ago period. We have also had an intended consequence of increasing our competitiveness in the market.
To improve sell through volumes, which in turn helped drive growth in our base of smart cast active accounts for platform plus monetization opportunities to that end, we continue to see healthy market share trends, where we remain the number two best selling TV brand in the U S. During the quarter and on a year to date basis.
Turning now to gross profit total company gross profit was $80 million for the quarter platform plus gross profit was a record $79 million up 38% year over year, representing about 99% of the total company's gross profit dollars.
Plus gross profit margin was a strong 62%.
Total company adjusted EBITDA for the quarter was $17 million. This better than expected result was attributable to more managed growth in SG&A expenses and strong platform plus gross profit contribution.
We are closely managing operating costs, including prioritizing hiring two specific areas that helped drive top line growth and overall operating efficiency. We are also looking at offshore and nearshore opportunities in order to provide incremental engineering support for various growth initiatives in a cost efficient manner.
We remain focused on maintaining our strong balance sheet, which remains highly liquid with no debt.
With more attractive interest rates available in the market, we have increased our investments specifically through short term treasuries in order to improve return on our cash.
At quarter end total cash and equivalents along with short term investments totaled $325 million.
Now turning to our key performance metrics. Our Q3 results continued to highlight the growing success of our efforts to drive overall monetization across our platform smart cast our food grew to a record $27 69.
Up 39% over the year ago period.
Our platform monetization continues to benefit from strong demand for home screen advertising inventory and growth in video advertising revenues, particularly within our wall Street, plus app where growth in viewing hours again outpaced overall streaming growth across the platform.
Total time spent screening also outpaced all other time spent by our users as measured by a 17% increase in smart test hours against an 11% increase in total visitor hours.
User adoption of streaming on our platform continued its upward trajectory demonstrated by further growth in screen time spent on a per active account basis.
Active accounts grew 500000 sequentially and $2 $2 million year over year to a new record $16 6 million.
So let me now turn to what we expect for the fourth quarter.
The fourth quarter represents our seasonally largest quarter in terms of both device sales and advertising at constant consumption rises during this time.
We're working closely with our retail partners to ensure we have competitive and compelling campaigns in the market to move as many units as possible throughout the holidays.
We expect platforms, plus net revenue to be between $138 million to $142 million with.
With continued growth in home screen and video advertising as well as growth in data licensing at the midpoint of the range platform plus net revenue of $140 million for the quarter implies growth of 33% year over year and a seven fold increase since we launched our internal sales grew just under three years ago.
We expect Q4 platform plus gross profit to be between 84 and $87 million, implying continued margins of around 60% at the midpoint of the ranges.
And lastly for total company adjusted EBITDA, we expect to be in the range of $15 million to $19 million.
So overall, our Q3 results demonstrate our ongoing focus on steadily growing the business, while maintaining our long time commitment to efficiency productivity and discipline.
The growth in our platform plus business continues to provide financial and strategic flexibility, which allows us to enhance our market competitiveness on television sales, particularly during macroeconomic environments that we're currently experiencing.
With that let's open the call to questions operator.
Thank you as a reminder, if you'd like to register an audio question. Please press star followed by one on your telephone keypad. If you change your mind. Please press star followed by two please ensure you are muted when speaking with ask all participants to limit themselves to one question with an additional follow up.
Operator, we will take our first question.
Our first question comes from Laura Martin of Needham Laura. Please go ahead.
Thank you so much I'll do both of mine at the same time. So William can you talk about the developer program very interesting.
Your business model, they're taking a share of our revenue earned through that is that how it affects the vizio profitability or revenue line or is it some other strategic benefit I'm not thinking about and then Adam for you Youre right. Your cost control in the quarter was outstanding and therefore, you over delivered our EBITDA by about $6 million.
60% in the third quarter, but the guidance for Q4 for EBITDA is quite a bit lower than we had hoped so I'm curious if your costs are under such good control what is it that's bringing the EBITDA guidance down in Q4 or are you just being conservative because of the uncertainty in the environment. Thanks guys.
Hey, Liam.
Good question.
For many years looking building the fundamental building block for the developers.
Certainly exciting time for us.
And we're good at Brazil account, Bluetooth wiser Mone interactivity overlay in Brazil mobile.
We believe we are really not along with our 60 million through today.
<unk>.
Our strong belief that.
It was a good time for us with the certified developers to make more money.
Uh huh.
We're being again, we'll be working so hard to make that happen.
Positive monetization there Mike do you want to.
Add to that.
Yes Luke.
Thanks, William I think as a distribution platform we.
Been investing in laying this foundation or these foundational components to get closer to the App developer community. So.
So that we can encourage them to build new apps for the future of television and engage with our $16 6 million active users I think we've touched on those foundational components before but that's better communication to the television through voice rolled out on every size.
Size and model of TV moving forward.
Continued improvements to our mobile app.
Notifications and interactivity tools payment and subscriptions through Vizio account, which was truly important in.
An additional AD monetization tools for them, but we had a great turnout at the developer conference.
We expect to keep engaging with them as we invest in the future and we expect the business model to run similar to how the business model works today.
Or a share of the dollars generated on our platform.
Yes, more on the EBITDA question Youre right.
In the quarter was really a function of both general expense.
Ration as well as <unk>.
<unk> at more measured hiring pace and we would expect those dynamics to continue into the fourth quarter that said fourth quarter contains some dynamics and characteristics are a little bit different than the third quarter is for example, if the holiday period and we've got a number of promotion activity going on out in the market to drive sell through of televisions during the holiday period, which.
We think will be a benefit to help feed the platform plus business. So we've got to be thinking about that on top of that.
The growth mix in the revenue on the platform side is skewing more towards video in the fourth quarter, given consumption trends and demand for our video AD inventory and that has a little bit of a difference in terms of margin profile. So we wanted to factor those into the into the guidance considerations.
The overlay to that is a general conservatism there are certainly areas of our business, where we have great visibility and we want to factor that into the guidance, but there is also pockets of uncertainty out there and we don't want to ignore those so I think we've tried to find a balance of all those factors as we thought about the fourth quarter.
Thank you very much very helpful guys. Thanks.
Great great. Thank you. Thanks, Laura operator, we will take the next question.
Our next question comes from Nick Shangla of Stephens, Nick The line is yours.
Yes, congrats on the quarter guys.
Recently, we came across a report that was suggesting.
You are not a significant seller at Costco, just hoping you can address the claim of that report.
Yeah. So.
We have a great history with Costco.
Matter of fact, I think 17.
17, 18 years ago, we took the industry by storm.
With the profile also where we launched our first two.
Brenda flat screen TV.
Costco gave us opportunities to become a household brand and I'm Super Grateful Super Grateful for that partnership.
We are.
Over time, the number two a passive and TV bring the brand.
The TV brand in the USA.
We'll have many strong retail partners and <unk>.
Also we will earn.
Iron our way through some of the shelf.
Self placement in the industry and our teams are working very hard with support.
Frank also to gain additional momentum in a castle.
We're also work closely with other retail partners to maintain a strong position in those.
Soft demand environment.
A good example, with a $499 and lead by offering.
Offering a little bit of summary.
A fantastic value for Costco shoppers.
<unk> TV for $499.
And we see that as a great opportunity for us even closer with cargo to get more momentum for years.
Years to come.
And Nick.
I just wanted to add one other comment there.
So William obviously very deeply value the relationship with Costco and expect to do more with them down the road, but we got to do it in the context of our financial model that works well for both companies and so our team is working on ways to achieve that and so as we sit here today, we're optimistic that as we look into next year.
We'd hope to do more business with Costco as we look forward. So it's really an opportunity to grow off this base.
Got it very helpful. I did want to ask about.
The upfront so last year.
<unk> generated $100 million at the Upfronts and if you do the math, obviously it ended up representing about 30% of your advertising revenue over those next 12 months. This year, you've doubled that upfront to $200 million I'm curious, how we should think about the upfront dollars as a proportion of your total adverse.
<unk> revenues over this next year is there any reason to believe that we should see a material shift in that mix over the next 12 months.
No no hey, Nick it's Mike.
Look I'll start with just the upfront some comments around the upfront I think we're pretty happy with where we landed this year.
As you know our our growth trajectory. This is really our third year in the business right. So the first year was really a test and learn phase of advertisers last year, we were very.
Very happy with US closing nine figures and an upfront commitments and this year, we were able to double that again.
So not only that but we were able to add new brands across multiple categories and not only increased spending but increased cpm's across those deals which is great for us but.
Much like this year I think.
The upfront was a good foundational component to building the advertising business, but it's not the only source of advertising dollars.
Past year, we showed that we're able to leverage our first party viewing data to tap into a lot of digital budgets as more and more dollars become available and flowing our digital dollars become available and are flowing into CTV. So I assume heading into next year, we assume a similar mix.
We're happy with the foundation, we have and still think theres, even more opportunities to grow on the digital side.
Honestly I'm going to squeeze one more quick one in here if you don't mind, but just curious if theres been any more incremental wins with the jumped view product I know you launched it with box earlier this year, but just any update on that front. Thanks. So much.
Yes.
Yes, <unk> has been a good product for us.
I think for those just as a reminder to those on the call.
Jumping to you is we believe a great benefit of the hardware software model or the integrated model.
Allows us to recognize one of viewers watching a program and then target and serve them and overlay.
To that viewer in real time. This allows our viewers to seamlessly jump between HDMI inputs or for example, as you said.
Youre watching NBC on linear TV, we continue a notification to catch up on past episodes or watch trailers within Peacock.
And then one click so.
<unk> tool for consumers and also a huge benefit to our content partners. So we've seen material growth in terms of the the <unk>.
Content partners utilizing it.
It's another tool in the bag for us on the media and entertainment side to continue to grow.
Spends and relationships with with those advertisers.
And we've seen seen great success in terms of engagement with the product.
Awesome. Thanks, a lot guys. Good luck going forward.
Thanks, Mike Operator, we will take the next question.
Our next question comes from Jason <unk> of Craig Hallum, Jason. Please go ahead.
Hey, Kyle on here for Jason first just wanted to ask can you just talk a little bit about kind of touched on this earlier, but how you are balancing growth and profitability here in the more choppy environment.
Seen some other than implement some cost reduction plan. So just curious if there are any more details about what you're doing here to preserve profitability.
Yes, Hey, Thanks this is Adam.
Look I think you used the right word which is balance.
We see tremendous growth opportunity ahead for where we are and the opportunities that are going to be presenting themselves. We want to make sure. We're continuing to invest and create new functions and capabilities that will help us monetize down the road, but at the same time, particularly in this environment, we're going to be very mindful of preserving profitability growing profitability and being able to exit.
Cute on the overall plan I think if you look at the quarter results. Your Opex, excluding stock based comp was up about 7% year on year and the bulk of that increase is really in R&D and marketing, which are two areas that I would view as in that investment camp, which implies that we kept other cost really in check to that point SG&A.
<unk>.
It was only up about 1% pretty flat in an environment, where youre seeing high single digit inflation I think that reflects the discipline and the focus that we've described for you. So we're going to continue to remain focused on that we think we can find the right balance lots a lot of excitement to come down. The road. We think we've got a great team in place based on the investments we've made in the last.
Year, and a half or two years to build up teams across the enterprise and engineering advertising sales AD Tech corporate support as a public company in particular, so theres a lot we've done to put us in this position and now it's a matter of just executing in and seeing how we can progress.
Yes.
Perfect and then my last one here how are you kind of looking at the promotional environment ahead of the holiday season are you expecting to get more aggressive here than we saw last year in terms of pricing.
Yes, great question, yet, but we fully expect that it's going to be a very competitive environment. It has been for the last several months and quarters and probably even more so into this holiday season, one of the fundamental differences we have going into this holiday season versus last is that we have good supply in the channels. So we've got products out.
They're ready to go we've launched a number of promotion platform programs already with Sam's at target.
And Walmart, we're going to do more as we go through the holiday cycle.
And I think that feeds into the overall model that we've been describing for some time that we have this great benefit of a growing platform business that allows us that flexibility to be more aggressive and more competitive on pricing on the.
The hardware side.
Really an important element of our model today, we think it's working really well and delivering a good customer lifetime value and a good ROI on this investment so we're going to be out there in the market are going to have some great great great products out there at a great price and hopefully everyone can take advantage of those.
Yes.
Thank you very much.
Thanks, Operator, we will take the next question.
Our next question comes from Michael Morris Guggenheim Michael. Please go ahead.
Thank you. Good afternoon, guys two questions first I wanted to ask you about.
<unk>.
Partnership or expanded partnership that was announced with Fox earlier this month.
Specifically.
Part of the press release mentioned, having access to Fox as premium and premium inventory.
Which seems like a very good thing when we talked about having tier one.
Inventory, so I'd love to hear anything you can share about that agreement and what it means for your progress with with other tier one publishers.
That's my first question and then second just on Vizio account I'm not sure you referenced it but I know it launched kind of officially during the quarter love to hear anything you can share about early learnings there uptake.
How it's being received.
Okay.
Yeah, I'll start with from Fox perspective, Yes, we're pretty excited about the relationship we've had a great relationship with Fox for a few years now so we've continued to expand that across.
Not only Fox Fox News Fox nation, but also to be.
We're starting to add more channels across Fox sports and Fox weather.
And to watch free plus so we're excited about that growing relationship.
Michael.
All content deals that we enter into.
We tried to find a balance in terms of.
Making sure Theres value for both parties and.
Thank you.
Not just with Fox with all our deals we continue to look for ways in which we can help them grow and build on their their footprint within our platform grow their engagement, but also find monetization opportunities for both parties.
Yeah, Hey, Mike its Adam visitor account side, yes, we're thrilled to have that launched and out in the market. We had a successful launch and the success with keep some key launch partners in particular stars as premium cable coming onto the platform. As a result of the fact that we had that building capability and the ability for consumers to manage that subscription right on our platform.
So so far so good we're pleased with where it's going we're approaching about 30%.
<unk>.
After the platform that are now enabled within.
The deal counts and we'll expect more to be coming on over time fundamentally I think really do vizio accounted as sort of a foundational capability on the platform that will help us not only in <unk>, but other.
Potential use cases that come down the road in terms of other transactions or other elements, we're going to be looking at.
Ways that we can get people to engage more and ramp up the adoption of video counted as William talked a little bit about innovation coming that can include features that will that will be a catalyst for people to engage with.
Vizio accounts, so so far so good we think it really helps with the stickiness of the customer base.
Excited about what it can do for us down the road in and stay tuned.
Thank you for that can I, just ask one quick follow up to Mike on the Fox partnership.
Where you stand now with the announcement earlier with them would you consider this agreement with Fox sort of typical.
Of your agreements with with other.
Again, I kind of refer to them as tier one I think you guys do as well publishers or is this.
Kind of advancing.
Hi.
The sort of depth or breadth of your relationships with not just fox, but sort of peer publishers.
Hi.
Look I think there is variations and all the deals we have.
But I think for the most part this is pretty typical of the types of agreements we have fox like as mentioned before they've been a great partner for a while.
We've had we've got a good relationship in terms of helping both parties grow.
From a monetization perspective.
The same way, we look at most of our partnerships, including two tier one partners.
Great. Thank you appreciate it.
Thanks, Mike Operator, we will take the next question.
Our next question comes from Vasily <unk> of Cannonball Research as Lee. Please go ahead.
Thank you good afternoon I wanted to ask you to comment on how the culling of your conversations with advertisers.
In recent months.
Looking windows, where they've been good for them to you in terms of the conviction.
The holiday season.
Units are more properly.
In terms, so anything you're picking up on the change in the tone of the market would be appreciated. Thank you.
Yes.
I think there's no doubt, it's a tough market out there.
But if you look at where our ramps coming from I keep going back to the fact that we're still relatively new in the marketplace. So we've been able to weather the storm pretty well and continue to grow.
Based on expanding our relationships I think last quarter, we added 246, new AD partners.
This quarter, we're adding.
We said, we announced another 158, new AD partners so for us, while it's definitely a tough AD market out there.
<unk> been able to continue to break new advertisers and we know and we've proven over the past three years once we get them in we've had great opportunities across all categories to continue to grow those partner so.
We're focused like I said, it's tough out there, but but we do have great opportunities, especially around our first party viewing data.
And that first party viewing data as I mentioned earlier, there is still a lot of digital dollars available and flowing into television and we've long been the leader in targeting and measurement. So the ability for our sales team to utilize our first party viewing data has continue to open up a lot of doors for us in the face of a tough ad market.
What about the booking window is it short now.
Representative of a tough macro.
Yeah.
In terms of the booking windows.
I don't know if it's necessarily shorter.
Like I said I think it depends on what budgets, you're you're tapping into.
Think from a digital perspective, it's typically a shorter window on that front. So as we continue to tap into those dollars I think we will continue to be successful.
Thank you.
Thanks, operator.
Operator, we will take the next question.
Our next question comes from <unk> Mohan of Bank of America. Please go ahead.
Yes. Thank you.
William will had two tough years for TV units declining quite significantly or 2021 and 2022.
Any early thoughts on how you expect TV units to progress here in 2023, and I will follow up.
Well the 'twenty to 'twenty, two as being top would see the soft demand since the beginning of this year.
I do believe <unk> III.
It's going to be a little bit better.
<unk>.
We don't believe it's going to be similar to the better like.
Last year the year before but we'll.
Let's see how they go this holiday season.
<unk>.
We hope the market will get better.
Sure.
We're now open.
We're not extremely optimistic.
At this particular time I don't want to add to that.
Yes, I can add a little bit I think.
Pointed off back.
Back to our brand has a strong value brand certainly in these kinds of environments, we do relative on a relative basis do quite well in these environments. We've gained share moved up from three two the number two selling brand in the country as the year has progressed and so from that standpoint, I think we can differentiate yourselves out there.
There would be a great product for the consumer and we've been encouraged actually by the response, we've seen to some of our promotions. This year. When we've got an aggressive on pricing consumers are really reacted and thats stimulated demand and thats increased sell through of our products in the marketplace. So those tactics are things are going to be looking at in a challenging environment.
And we would hope to be able to to see similar response and.
And hope to expand our market share capabilities as the year progresses next year.
Yeah.
Okay.
Adding back above this year's.
I don't I believe this is a good time for us to.
To capture additional market share and with our dual revenue business model I think.
Even people give us more of that advantage next year. So so we're pretty optimistic regarding <unk>.
Capturing additional market share, even though the economy is still soft.
Okay, Thanks, William and Adam if I could follow up.
Obviously, you had very strong ARPA trends in the quarter can you talk about the sustainability.
<unk> and maybe in the context of sort of some of the initiatives <unk> taken on the watch free plus side.
Yes look I think we believe with a significant continued headroom for <unk> growth.
ARPA growth for us comes across a variety of factors right. It starts with having a great user experience and we've invested in engineering capabilities to improve our home screen. The user experience the speed of the operating system and that obviously is a better user experience, which drives more engagement and more engagement means more opportunities to monetize on top of that we spent a lot of time, bringing in in <unk>.
And content that we think our viewers want to increase the probability that theyre going to stay engaged on the platform again driving opportunities for monetization, we use our data to help inform us around that has increased that probability and so when you bring all of these efforts together in areas that we've really been investing in and growing our capabilities are getting more sophisticated over the last couple of <unk>.
Years, that's coming together now and really sort of materializing into a good growth trajectory in <unk>. So it is a key focus of the company. It's a key it's a key.
Target goal that we have to grow <unk> and all the resources of the organization are really focused on that so we're optimistic there's plenty of room in the market for us.
Okay, great. Thank you.
Thanks, Romsey operator, we will take the next question.
Our next question comes from Steven Kull of Wells Fargo. Stephen. Please go ahead.
Thanks, maybe first could you just speak a little bit to what the opportunity looks like as Netflix and Disney plus introduce advertising Netflix has certainly been one that we've historically thought of as not sharing much with the connected TV World I think Disney and who have been a bit more sort of standard within your <unk>.
Tier one providers so as we do start to see a lot more maybe add slow going into those.
Without getting into specific terms, what does that mean for vizio.
And then I have a quick follow up on the Upfronts.
Hey, Steve It's Mike.
Yes look we're not going to comment.
Specifically on Netflix or Disney, but we can say is.
I think we're pretty excited about.
About them coming into the market on the AD supported side.
Hi.
If you if you look at our platform we have.
We have a consumer base that has an appetite for AD supported content.
So from a from our perspective as a distribution platform anything that's going to accelerate or drive more engagement to the platform is ultimately going to lead to more monetization tools for monetization opportunities for us in the future.
I think also from a overall market perspective, I think it's going to help lift the overall connected TV AD market I mean today.
More than 50% of the time, we see on our own platform has spent streaming but what does it only.
Little over 20% of the AD dollars are flowing in.
We think this is going to be a huge benefit and ultimately help as more eyeballs come in ultimately helped more AD dollars drive into the fold and will be a huge beneficiary of that.
Great and then maybe just a bit more on on the upfront. So when Roku recently reported they talked about their upfront commitments as well, but when we kind of look at the numbers. It just seems like that those don't necessarily protect.
Their advertising revenue from downside when the market is weaker pricing is weaker.
And Thats, maybe in contrast to the linear TV network Upfronts, where the dollars tend to be very firm commitments are usually on a quarterly basis or even tighter. So when we think about your $200 million in commitments from agencies and marketers.
I guess can you comment at all about kind of how locked in that is.
And what those commitments really represent thank you.
Yes, I think for us at least we have seen in the past year, we've been able to hold pretty firm with the relationships. We have I think a lot of it ties into.
Our ability even with the upfront commitments at agencies and some of these brands.
We brought a lot of new brands and across multiple categories and I think when we look at the overall agencies Theres still a lot more brands for us to bring into the fold for them to deliver against the upfront commitments they have so.
There's always risk and upfront commitments.
Especially as the market tightens, but as I mentioned earlier.
I think we saw it this year and I think we're expecting it next year.
We had a lot of opportunities to expand our advertising business specifically on the video side.
Beyond just the Upfronts right and we're continuing to tap into more and more digital budgets.
Leveraging our first party viewing data right and our ability to continue to find audiences target audiences measure them and ultimately deliver incrementally.
For our advertising partners.
I think we're well positioned heading into next year.
Great. Thank you.
Thanks, Steve Operator, we will take the next question.
Our next question comes from Tom Champion of Piper Sandler Tom The line is yours.
Okay.
Great. Thanks, very much and good afternoon, Adam I'm wondering if you could just elaborate a little bit on the.
Comments around <unk>.
Offshore and near shore.
Opportunities to.
To expand engineering and then.
Mike.
O'donnell on maybe a question for you hopefully this isn't too duplicative, but.
As you think about that.
The total AD market heading into 'twenty, three and maybe looking beyond say the next <unk>.
90 days and what is kind of right in front of us.
I'm just kind of curious what your thought is on the market next year in totality based on what you see today and and more Relevantly I guess does does that market rate of growth matter for for Vizio historically, you've been at a scale, where you can just grow consistently and grow right through.
Any headwinds in the market or are you at a size now where the market rate of growth really matters any any thoughts on that would be really helpful. Thank you.
Sure Tom I'll take the first one.
If you look at the ramp up we've done over the last couple of years and our engineering team its almost its almost entirely been domestic hiring which is has served us well and we've executed on the way you've seen what we brought to market.
And so we're pleased with our domestic engineering team, but as we look forward, we want to make sure we're getting the right efficiencies.
Efficiencies in the right scale out of potential partners that could be offshore solution provider. So there's areas, where we're going to be expanding and developing particular capabilities with TV, where we might be able to just leverage partners efficiency much better than ourselves. So it's really a combination in finding that right mix and right balance between how large to the team.
Domestically and then and then how much do we put into our offshore and near shore solution for ourselves. So it all it all feeds back into speed time efficiency and quality, we're balancing those factors together.
Yes, Tom.
There have been I think.
Heading into next year, there's obviously a lot of uncertainty in the AD market in 2023, and I think it's going to be tough to predict but I'll give you a prediction from our standpoint on the overall market.
But in terms of <unk>.
Vizio itself I think we've still got a lot of room to grow and I think we've shown that.
<unk>.
That growth trajectory.
It's still well positioned for next year, we continue to expand what Sri plus.
It's the number two free AD supported App on our platform, we continue to grow the viewership there.
Driven more monetization opportunities as we get deeper with brands and agencies on the owned and operated side.
I've already touched on more addressable and digital opportunities for US we think that will continue to expand heading into next year and again as I touched on I think there is still a lot of opportunities for us to continue to add to the advertiser base.
We have room to grow.
I believe there will be more dollars pushed into connected TV or the growth trajectory in connected TV will continue to be there heading into 2023.
Got it thanks, a lot guys.
Thanks, Tom Thanks, Tom Operator, we have time for one more question.
Okay.
Our final question comes from Jim Goss of Barrington Research Jim. Please go ahead.
Okay. Thank you very much.
Adam you started talking about some of the contributors to the <unk> gains that I was wondering if you could further unpack the latest quarter more specifically it was up 39% and I think one of the contributors was a 17% increase in the smart cast hours.
Perhaps there are other other things you may identify as the key contributors and then the other question I have.
As a <unk>.
Reminding me of the.
<unk>.
Yes.
Total vizio sets or your Tam.
Whether its share of sets are you currently monetizing.
And.
Are there any trends you can identify between there.
The various home screen elements between the couple of types of banners and the.
Third party apps and the.
The smart cast.
That there.
Trends in those relative to one another in terms of the key contributors.
Yes sure Jim.
For the first part of your question in terms of our pool I would highlight two.
Two particular areas that are key contributors to our continued success there and the first is wash REIT plus we're continuing to see great growth in engagement watch requests watch free plus usage is outpacing all other streaming.
Growth on our platform and that is the destination on our platform, where we monetize the most effectively that's where we have the biggest control of the AD inventory, that's where we can use all the resources, we have including our data to maximize and optimize our monetization of that time spent.
So the flywheel of getting more users on the platform having to spend more time streaming and not only more time to figure in Australia in the right places, particularly in Wall Street, plus as I. Just mentioned so that is really a key contributor to this and we're going to we're going to continue to source more content and bring more onto that platform use our homescreen as a promotional vehicle to drive user engagement.
<unk> and <unk>, plus all of that feeds into it and let's grow our through more the other piece that I high for this quarter.
Our growth in our data we did a great deal with Nielsen earlier in the year. We've got some other renewables that have come into the mix, we're growing our data business. Our data is becoming more valuable in the marketplace and that as I.
I pointed out as a non advertising source of additional <unk> that people shouldn't forget theres, a multiple contributors to our total <unk> and.
And so data is a really important part of that as well. So I think those two together are really helping.
<unk> in the quarter.
Into next year.
Mike do you want talk about the or did you have any other questions yes.
Jim I forgot you said.
I want to highlight that when we talk about our active accounts were only talking about those on units that qualify for that active definition, which is the connected to the internet and they are turned on in the month.
The user does that that's what it is when we talk about our monetization. It's it's really against that installed base there could be units out in the market that are being used for other use cases, they may not meet our definition and in a particular period as an active account and so therefore, obviously the monetization is very different for those units. So when you look at our economics and what we're putting up in the results we're showing.
It is tied to that base of active accounts, which we disclosed and accordingly in the $16 5 billion is where we are today growing up the space.
Yes, I can add just in terms of additional trends and growth sorry.
No no no just in servers.
Distinguished between them.
Yes.
Yes, just in terms of additional trends and growth.
I think from a category standpoint.
We're still see media and entertainment.
As the largest category in terms of growth opportunity for us.
In terms of today in terms of which we're generating revenue off of but we see significant growth opportunities in what we consider the general market side of the business.
We've continued to add more and more advertisers and this fold and we've done that through not only as I.
Mentioned before not only through additional video solutions video is our fastest growing.
Product on the advertising side, but not only through video through <unk>, plus but also through leveraging our first party data and driving more opportunities on our home screen I think this quarter again, we saw more of what we consider non endemic or non media and entertainment partners take advantage of our homes.
Screen.
In terms of sponsorships and promotional opportunities to two two.
To drive more advertising dollars, but also engage with our customers more by providing them with content.
They may want to view, so so as we expand kind of the product set in which we're engaging the general market side of the business with well can see continue to see growth not only in video, but also I believe on the home screen side.
Alright, thanks, so much.
Thanks, Jim and thanks, everyone for joining this concludes today's call have a great evening.
Okay.
Thank you for joining us.