Operator: We’ll take our next question from Jason Kreyer with Craig-Hallum. You may proceed.
Jason Kreyer: Great, thank you. Adam, just a question on the device gross margins. I know with that turning negative this quarter and the focus on the bigger screen sizes, can you give any more color just on how aggressive you plan to get on those specific skews that you’re targeting kind of where margins could go there?
Adam Townsend: Look, we don’t guide the specific margins. Obviously, there’s really a lot of competitive detail information in that. We look at our pricing versus the market, where others are on a skew by skew basis and want to make sure that we are competitive, but again, avoid this sort of race to the bottom dynamic. I think we don’t think that some of those pricing strategies are sustainable in the market, and as a result, we don’t feel the need to chase them in the immediate term that can jeopardize further economics, and so we’re going to apply that kind of discipline around it. But clearly, if you’re supporting a 65-inch product with a higher average selling price versus they have 32, then there’s different dollars that you need to support, but my point is that the customer lifetime value of a 65-inch as an example is significantly higher than a 24 or a 32, and so for that reason, you’re willing to make that investment because at the ARPU level, we’re now generating, and the strong margins in our Platform+ business, it is a positive customer lifetime value in a significant way.
And so when there’s a race to gain households, as we’ve talked about, it’s competitive to be gaining and representing the operating system in a living room, we want to be really thoughtful about how we do that, and we like our strategy, we like this dual revenue structure that we’ve built. We’ve scaled up and grown our platform business to a level now that gives us that financial and strategic flexibility, and we’re going to be thoughtful about how we approach that in the overall market.
Jason Kreyer: That’s perfect. Thank you. Maybe one for Mike, just curious if you can talk about the trends you’ve seen in advertising recently, we’ve just heard a lot of commentary on a tougher star to Q4, it doesn’t seem like you’re really guiding to that, but if you’ve noticed any of that in the market?
Michael O’Donnell: Yes look speaking for VIZIO here, I mean we saw 27% growth in Q3, I think we’re projecting pretty strong growth again in Q4. In terms of trends, M&E, there’s still some uncertainty, but as you mentioned, wasn’t as bad as we were expecting, I think we’re well positioned there heading into Q4, and there could be more upside as things come to a close, and potentially new releases come out or more premiers come out into the market. But you look at those 66 new advertisers we had, I mean, we saw strong vertical growth, CPG, and QSR were all up over triple digits, pharma was up, insurance was up. I mean, we saw headwinds definitely in the automotive sector, but we were still up 60%, and we could have captured more dollars if there wasn’t for a separate strike of their own.
But by our ability to continue to add new advertisers, bring new partners into the fold, like automotive, we were able to get down into the tier two, tier three categories to help accelerate some of the advertising dollars. So we continue to feel strong about our position heading into Q4.
Jason Kreyer: Great, thank you.
Michael Marks: Thanks, Jason. Operator, we will take the next question.
Operator: We will take our next question from Cory Carpenter with JP Morgan. Please proceed.
Cory Carpenter: Thank you. Mike, I wanted to ask you about political and how big of an impact you think that could have in the work you’re doing to prepare for political advertising. And then maybe just a bigger picture question on SmartCast for Adam. $31 ARPU, you still have a gap that you’re closing with peers. Where do you feel like you’re still most undermined on SmartCast? Thank you.
Michael O’Donnell: Yes, thanks, Corey. We’re very optimistic about the 2024 political cycle. When you think about what political advertisers are looking for, they want targeted buys against local markets, and we’re positioned incredibly well. We have the ability to target audiences down to the most narrow geographic regions. We just added 35 more local channels to WatchFree+ recently to add more local content. We’ve got obviously unique data through in-scape viewing data as well as broad reach in key swing states. So we’re set up well to capture some of, I think, what people are projecting to be, I think $1.3 billion in CTV advertising this cycle. Last cycle, 2022, we learned a lot about how to improve sales. We did okay, not as good as we should have, but we learned from that.
We’ve added sales staff in DC to be closer to clients, and we’ve also kind of improved our programmatic partnerships and the capabilities we have there to capture additional demand. So overall, we’re very optimistic about our political revenue outlook for the back half of next year.
Adam Townsend: Yes, and on the ARPU question, I mean, obviously we’ve made tremendous progress, and we’re very proud of the team and the execution that’s got us to where we are, but we also believe there’s significant headroom from here. If you look at just the U.S. market, we think there’s a lot more room for growth versus this number that we’re putting up today. And so we got to continue to keep investing in a great overall experience for the consumer, more content, use our home screen to drive engagement, and ideally drive engagement into areas where, as we’ve said before, we have an opportunity to monetize. You want to deliver an exceptional user experience, but also have an opportunity to serve ads and monetize that time spent.
There’s no better place for us to achieve that than in WatchFree+. That’s why we continue to add more fast channels there. We’re adding more on-demand movie titles and television show titles. We’re expanding that capability to bring more to the consumer and a greater value proposition over all of them. As we can drive more time in monetizable content, more engagement means more ads serve, which means more revenue. Also, as we utilize our targeting tools and the data that we have, we can deliver exceptional campaigns for advertisers. We’re looking for specific ways to deploy campaigns and messages to consumers. So taking all of that together, again, we’re really excited about the upside that there remains to our ARPU number. VIZIO Account is an area where there’s an opportunity to your point about the gap.
We only rolled this out a year and a half ago, and we’re building out the partnerships that are available on VIZIO Account. That will help to drive subscriber revenue in that business. We’ve got about 40% of all the S.BOT and T.BOT apps that are now including that functionality. We’re going to be adding the NFL app later this quarter for subscriber revenue as well. So as we get the word out to our users that we’ve got this great way to manage their subscription services, to engage with VIZIO Account, and drive growth, we’re seeing great lift in premium apps like STARS [ph]. That’s a place where there’s still, to your question, a gap versus what you see in the existing marketplace today. So we’re going to continue to work to close that.
Cory Carpenter: Thank you.
Michael Marks: Thanks, Cory. Operator, we will take the next question.
Operator: We will take our next question from Tom Champion with Piper Sandler. Please proceed.
Tom Champion: Hi, good afternoon. William, I’m just curious, based on your experience and tenure in the industry, what inning of the price were on the device side you think we’re in, whether this cycle is following kind of a familiar template, what inning are we in? Could it extend well into next year? And would you expect the device segment to return to a positive gross profit contribution when all is said and done? I had a second question on VIZIO Account. Adam, you kind of just talked about it a little bit. Just wanted to see if there was any additional update there. Michael O’Donnell, I don’t know if you’d have anything to add. Thank you.
