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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, and thank you for standing by, and welcome to the Q1 2021 VIZIO Earnings Conference Call. [Operator Instructions]
I’d now like to hand the conference over to your speaker today, Mr. Michael Marks, Director of Investor Relations. Please go ahead, sir.
Good afternoon, everyone, and thank you for joining us for our first quarter 2021 earnings call. Joining me for today’s discussion are William Wang, our Founder and CEO; and Adam Townsend, our CFO. Also joining us for the Q&A portion of today’s call is Mike O’Donnell, our Chief Revenue Officer for Platform Plus.
Please note that in addition to our earnings release, we have a slide presentation for you to follow along with our remarks found on our Investor Relations website at investors.vizio.com.
Note that all quarterly comparisons in today’s remarks will be made on a year-over-year basis, unless otherwise specified.
I want to refer you to the second slide in the presentation and remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties that could cause actual results to differ materially from those forward-looking statements are discussed in more detail in our filings with the SEC, including our prospectus filed on March 25, 2021, and in our press release that was issued this afternoon. We undertake no obligation to revise any statements to reflect changes that occur after this call.
During the call, we’ll also refer to non-GAAP financial measures, including adjusted EBITDA. Reconciliations with the most comparable GAAP measures for non-GAAP financial information discussed on this call can be found in the earnings release or on the Investors section of our website.
Now I will turn the call over to William.
Thanks, Michael. Hello, everyone, and thank you for joining us for our first earnings call.
We know that many of you are new to the VIZIO story. And we are excited to share that with you today and going forward. I’m confident as you learn more about VIZIO, you will find that we have a long history of innovation and culture that seeks to challenge the status quo. We have created a great business model fueled by ownership of both the hardware and the software, all designed to work together seamlessly.
We see tremendous opportunity ahead of us as we continue to invest into the quality of our execution, the quality of our products, and most importantly, the quality of our team.
We will continue to make these investments to bring exceptional user experiences to consumers as well as tremendous value to our channel partners, advertisers, content partners and, of course, our shareholders.
Our first quarter results demonstrate the payoff of these investments as we are now seeing the contribution from an expanding base of revenue sources. Total net revenue grew 52% to $506 million, driven by strong results in our device and Platform Plus businesses, both operating segments built based on momentum we got in 2020, with continued strength in TV and soundbars as well as acceleration in our advertising revenue.
The success in our advertising business is particularly impressive, given that we are just lapping our first year in the market. Gross profit in the quarter came in at $87 million, up 82%. The dynamics of the path here accelerates the adoption of streaming, and we are aligned to balance it in a bigger way even sooner than previously thought.
This is an incredible, exciting time to be in our position within an industry undergoing such rapid transformation and massive shifts in consumer behaviors.
Adam will provide additional financial details in a bit, but first, I’d like to share more perspective on our businesses. We operate in two strategically integrated but separate business units: device and Platform Plus. I’ll start with device.
As we always have, we’ll remain focused on bringing to consumer a range of high-quality smart TVs and soundbars at affordable prices. We are proud that our products continue to be recognized with numerous awards and accolades for delivering a mix of premium technology and innovation to market at a price within reach for most American households. A deep focus on value, quality and efficiency is what has made VIZIO a top TV and soundbar brand in the U.S. for many years.
Now as we head into the spring-summer refresh in a few weeks, we are thrilled about the mix of our latest generation products hitting the shelf. Our TVs continue to win over critics for their processing speed, incredible picture quality and interactivity with the likes of Amazon Alexa, Google Home and Apple Homekit, all of which have further positioned our offering at the center of the connected home. Likewise, we’re expanding the features of our critically acclaimed soundbars to offer an even more immersive experience at an incredible value.
Our investment in strong and long-standing relationship with OEM suppliers and retail channel partners remain core to our success. In a highly competitive industry, relationships matter. Our team works closely with these partners to control costs, ensure consistent supply and secure prominent shelf space with merchandising support.
This year, we are excited to expand our number of shops with several of the largest retailers in the country to bring an even wider range of products into these stores. We’re also looking to expand with the online sales channels, which are expected to gain share going forward.
Building on the strong foundation of our device business is Platform Plus. Through the wide range of content available on our proprietary SmartCast operating system, we’re now tapping into the rapidly growing CTV ad marketplace. We drive recurrent revenue from free to consumer, ad-supported, watch free service as well as our inventory share across many AVOD apps.
We also monetized our home screens with content and streaming service advertising as well as the sponsorships for brands and content hubs across big events, like the holidays and the Super Bowl. We’re also positioned to grow from SVODs, TVODs and PVOD engagements right on our platform. And our rich data inform all that we do and drive advertisers to our platform as they seek to reach millions of streaming viewers that cannot be reached elsewhere.
Our investment in this integrated experience is paying off and being recognized, not only through our growing base of active accounts, but also by industry critics. In fact, just a few weeks ago, we were honored to receive the prestigious Digiday Award for Best Connected TV platform. So through the combination of our award-winning devices and award-winning operating systems, we’re excited about our growth potential ahead.
But you may be wondering why the Plus in Platform Plus. We’ll call it Platform Plus because it represents not just a great streaming platform, but also a wide array of technologies, solutions and data-informed tools that help us bring so much more to viewers, advertisers and a growing range of content partners.
Just one example of this project was this is an industry-wide consortium we spearheaded 3 years ago with a number of major media networks and ad agencies to develop a technology standard for delivering linear addressable advertising. Now the architecture and the standards are in place to enable dynamic ad insertion, and we are working closely with networks to help them increase the value of their ad inventory and improve the viewing experience of VIZIO users, more relevant apps for users and higher monetization potential for networks. Now that’s a win-win powered by VIZIO.
The type of innovations made possible by continued investment in products such as Inscape, proprietary ACR technology. Inscape has grown to become a key data component in the TV measurement marketplace and fuels execution and addressable solutions across the media ecosystem.
Through the integrations with our Smart TVs, Inscape can use anonymous glass-level data, which means we are able to detect content that hits the screen regardless of the input source. This data improves transparency, informs our network, agency and content partners to help drive better targeting solutions.
We see tremendous opportunities ahead for our data-driven advertising business as we are just getting started. Last week, we participated in our first IAB NewFronts to help drive broader awareness of what we can bring to the advertisers. We presented a host of advertising capabilities and are very encouraged by the response so far.
We also dramatically expanded our cross-device advertising capability in a product we call Household Connect through a new partnership with Verizon Media. Now we can offer advertisers the ability to launch campaigns across our SmartCast inventory and deliver cross-screen advertising opportunities via desktop and mobile.
I also want to take a moment to highlight that our investments extend well beyond our product and software platform. For example, over the last 10 years, VIZIO has won 112 American business awards for customer service. We take consumer satisfaction very seriously, as we know it is the key component to the product experience and to build brand loyalty. I’m really proud of our team and their award-winning efforts.
So to wrap up, this is a very exciting time in our company’s progression. We know that with the big changes underway in entertainment and advertising, there are significant opportunities ahead. We will continue to invest in our TVs, soundbars, software and people needed to further redefine how consumers engage with the largest screen in the home.
The evolution of TV is calling for a revolution and VIZIO is here to answer. We’re happy you are here on the journey with us.
With that, I will now turn the call over to Adam to discuss the financial details of the quarter, and then we will take questions.
Thank you, William. Let me start by saying Q1 was an exceptional one for VIZIO. We successfully completed our IPO during a challenging market environment, launching a new chapter for the company, but perhaps more importantly, we delivered strong financial results during an atypical business environment due to the pandemic, demonstrating the focus and tenacity of our team.
For today’s presentation, I will walk through the financial results and the key drivers of our business, which are also detailed in the presentation slides provided on the Investor Relations page on our website, and then I’ll provide some comments on our outlook.
I’d like to start with our key performance metrics that drive growth in our Platform Plus business. We view these as the most important indicators of our future success as we expect that Platform Plus gross profit will surpass device gross profit this year and represent the majority of growth going forward. We will focus on 4 key metrics that we believe provide the most significant insights into the drivers of our business.
The first is SmartCast active accounts. This is a measure of those units where a user has engaged in Smartcast-enabled TV during the most recent 30-day period being reported. Second, total VIZIO Hours. This is a measure of overall device level engagement and includes time spent across all input sources. Third, SmartCast hours.
This represents time spent on our streaming platform itself. This is where we achieve the highest monetization. And finally, average revenue per user, or ARPU, which is defined as trailing 12-month SmartCast platform revenue divided by the average number of SmartCast active accounts over the annual period.
I want to be clear that when we talk about ARPU, we are only talking about smart cash-related revenue and accounts. Thus, we are excluding revenue and accounts associated with any units running our legacy operating system via Plus.
In Q1, SmartCast active accounts grew 57% to $13.4 million for an addition of 1.2 million net new active accounts in the quarter. This marks the highest number of first quarter net additions we’ve seen since we started tracking this metric 3 years ago.
Total VIZIO Hours grew 42% to $7 billion. Of this total, 3.6 billion hours were spent engaged with SmartCap specifically, representing a 70% increase. Growth in active accounts and increased engagement is the flywheel that drives our monetization model. Given the strong growth of each, SmartCast ARPU for the quarter increased 76% to $14.52, a new record for us.
For further insight into the viewing behavior of our users, we also analyze time spent by input source on our SmartCast TVs. We are able to glean these insights due to our integrated hardware and software architecture. During the quarter, viewing on SmartCast represented 52% of total time spent on our TVs, up from 43% a year ago.
During that period, time spent on linear fell from 41% to 34%, highlighting the continued consumer shift towards streaming.
Also of note, just 7% of time was spent using an external streaming device plugged into our TVS, which we believe provides further evidence that our consumers are seeking an integrated solution and are increasingly choosing SmartCast as their primary way to search, discover and consume content. We expect these trends to continue and drive more monetization opportunities across our platform while delivering exceptional value to consumers.
Turning now to our financials for the quarter. As William mentioned, first quarter total net revenue grew 52% to $506 million. This was driven by 120% growth in Platform Plus revenue and 47% growth in device revenue. Our Platform Plus Q1 represents the first quarterly anniversary of the launch of our advertising business, which grew over fivefold and represented 67% or $35 million of our total $52 million in Platform Plus revenue during the quarter.
Our advertising revenue comes from a combination of video inventory across hundreds of ad-supported channels and apps on our platform as well as our ability to monetize off-platform inventory. It also includes ad placement on our SmartCast home screen, which represents a powerful promotion opportunity right in the center of the living room.
With the continued shift of viewers towards streaming and advertisers following, demand for both advertising revenue sources is accelerating. Through these dynamics and our growing presence in the market with agencies and brand advertisers, we expect to see rising CPMs against our expanding ad inventory base, particularly within our monetizable VIZIO channels environment.
Non-advertising revenue during the quarter was $17 million, slowing slightly from last year as we made a strategic decision in our data business to shift licensing growth in exchange for supporting more rapid growth in advertising revenue. Device revenue growth continued to benefit from strong demand for TVs and sound bars, where shipments grew 28% and 155%, respectively.
We delivered these strong numbers even as poor congestions around the country caused delays. We expect these continued delays to move some units out of the first half of the year and into the back half. Fortunately, demand continues to outpace supply, so we view this as a timing dynamic with no change to our expectations for the year.
Average unit price across TVs and sound bars also rose during the quarter, partly due to the overall strong demand, but also as a result of a higher mix of larger screen TV units and from the success we are seeing within our higher-end 5.1 and Atmos sound bar products. Total company gross profit grew 82% to $87 million. Total gross profit margin increased 270 basis points to 17%.
Breaking this out further, Platform Plus gross profit grew 152% to $38 million. Platform Plus gross profit margin was 74%, benefiting from a favorable mix of higher-margin ad revenue, particularly from expanded monetization of our home screen.
Device gross profit grew 48% to $48 million, representing an 11% margin. Our device profit margin continues to remain somewhat elevated from atypical market conditions due to the pandemic. The total company operating expenses were $73 million compared to $37 million in the year ago quarter. This increase was driven by a combination of higher share-based compensation, higher R&D expenses as well as continued investment in people to support the growth of our platform business and transition to a public company.
Adjusted EBITDA, which has only been adjusted to exclude share-based compensation, grew 218% to $40 million. And finally, net income totaled $3.3 million compared to $9.3 million a year ago, driven primarily by an increase in noncash share-based compensation expense.
With that, let me turn to what we see ahead for Q2 and provide a little insight into our approach to our outlook commentary. As you know, our business includes two segments that, while strategically integrated, contain very different operating histories. For this reason, we want to provide more specific details on the shorter-term trends for the Platform Plus business, and in longer term, directional commentary for the device businesses, which aligns well with the planning cycles and visibility more typical of that business.
So starting with Platform Plus, we see continued momentum and monetization throughout the platform. We are seeing accelerating viewership and ad-supported streaming content, particularly in our free channels where we typically have the highest inventory share. Based on what we know right now, we expect to generate Q2 Platform Plus revenue in the range of $55 million to $59 million, representing over 100% growth year-over-year. We expect Platform Plus gross profit in the $36 million to $40 million range, also doubling year-over-year. We plan to continue to invest in engineering and add sales resources to capitalize on the rapid growing opportunities we see ahead.
In terms of our active account growth, Q1 typically sees much higher net account growth versus shipment volume. This is due to holiday purchases that often become registered and an active account early in the first quarter. As a result, we would not extrapolate the Q1 ratio to the full year.
Turning to devices. We tend to experience similar seasonality trends as overall retail with typically higher shipment volumes in the second half of the year. The holiday-driven fourth quarter is usually our largest quarter, and the second quarter is typically our lowest. Of course, we expect that some of these trends this year will be altered due to the pandemic disruption. This will cause atypical year-over-year comparisons over the next several quarters as we lap the stay-at-home orders and the impact of the initial stimulus checks last year, which drove a spike in TV and soundbar sales.
We expect device gross profit margin to trend towards single-digit range over the coming quarters, which is more consistent with historical norms. How quickly margins normalize will be a function of several factors, including consumer demand, industry-wide product supply and competitive pricing strategies, all of which remain more difficult to predict than usual given the current global dynamics.
Finally, we expect to generate Q2 total company adjusted EBITDA of between $12 million and $18 million.
Overall, we are very pleased with the results we generated in our first quarter as a public company. We continue to benefit from the rapid adoption of streaming and our expanding presence in the advertising marketplace. We are increasing our offering of ad-supported content on SmartCast, driving higher CPM rates and generating more data from our growing active account base that helps us deliver higher value proposition to consumers. Demand for our smart TVs and audio products remain strong, moving us closer to our mission of becoming the center of the connected home.
And with that, operator, let’s open the call up to questions.
[Operator Instructions] Your first question is from the line of Douglas Anmuth with JPMorgan.
It’s Cory on for Doug. Hoping you could expand some on the strategic partnership you recently announced with Verizon, how meaningful that could potentially be for you this year.
And then for SmartCast, could you talk some about the product road map and see investment priorities for the year?
Yes, I’ll take that one. So look, we believe the relationship between customers, smart TV and the smartphone creates real opportunity for innovation for us, for both the consumer experience and advertising. Our household-connected product, which is an example of this investment, we’re making and building new and creative solutions for advertisers that we think will connect our glass-level data and the consumers’ personal device, which will ultimately give our sales team a lot of opportunities to now sell off-platform.
The Verizon partnership is significant for us in helping to create scale around this product. It marries the largest footprint of opted-in ACR Smart TV data with the largest identity graph in the marketplace. So this gives us the opportunity to tap into over 200 billion daily cross-screen signals. And it’s going to enable a lot of cross-device solutions for advertisers in the marketplace.
It’s a great opportunity for us to, as I mentioned, expand off-platform and sell outside of the SmartCast platform.
And then -- Cory, it’s Adam. I’ll take the second -- or the first part of that.
So when you think about the road map, I mean, we’ve laid out a plan that we think is going to bring more interactivity, more capabilities for us to monetize the platform and more engagement for our viewers over time. These can range from additional interactivity on advertising solutions. This can range into capabilities for increased monetization and economics around subscription services.
So this year is really going to be a year where we take what we learned from last year, where we validated the strategy, we validated the ad team, we validated what Michael Donnell has brought to us and built out, and now, we’re going to be able to invest and lean into that to drive additional growth.
You’ve already seen really strong growth on a year-over-year basis in terms of our ARPU, up over 70% year-over-year, and we’re going to continue to lean into that with more resources on the engineering side, more resources on the ad sales side, all to drive increased ARPU.
And your next question is from the line of Laura Martin with Needham.
So William, one of the things that you’ve been consistent about is -- the goal of wanting to be the center of the connected home. And if we hypothesized that you’re successful in that, that in 5 years you are the center of the connected home.
Tell me how you think that drives value? What are you -- what opportunities does that give you in your mind to drive value upsides for shareholders if, in fact, you are successful becoming the center of the connected home space?
Yes, Laura, great question. The -- currently, we’re monetizing our platform, mostly because the users shift away from linear, from cable to streaming. But I do believe TV is a status symbol in the living room. In the similar living room, we can do more things than just streaming entertainment content. And you can look at who’s at the front door, you can -- perhaps it’s streaming music to you when you’re not watching TV, when you’re in the kitchen cooking.
So there are so many more applications, we believe, that the device in the middle of the living room can provide you, more convenience and better experience. So we believe we can bring that to the consumer. We can definitely monetize based on that. So my theory always has been that if we can provide consumers a better experience, we’ll also be able to monetize based on that. So that’s what we’re looking forward to.
Okay. And then I’m not sure who this one’s for. I know you guys said you just participated in the NewFront for the first time. Could you sort of give us what your goals were of going to the upfront and during the presentation or what your learnings are to date from what your conversations with advertisers have been after your NewFront presentation.
Yes. I think, Mike?
Yes, I’ll take that. Yes, we’re really excited about being able to participate in the first new fronts for us, very well received by the marketplace. And if you think about our sales efforts, we really only launched VIZIO ads about a year ago. So this was a great opportunity for us to continue to tell our story to the marketplace.
Not only our direct-to-device offering, so the ability to talk about our owned and operated inventory, what we can do with our first-party inscape ACR data, but as well as talk about new products that we have in the marketplace, like our Household Connect, which I just mentioned as well as VIZIO features, which is a data-driven -- or data-informed, sponsor-driven content programming opportunity that we rolled out.
So it’s been very well received.
And if you look at the growth we had just over this past year and the growth we’re thinking about for the future, this is a great opportunity for us to continue to evolve our relationships with brands and agencies that are moving out of that old test-and-learn scenarios into really more of this upfront -- more enterprise-type relationship.
Great numbers, you guys. Congratulations.
Thanks.
Thank you, Laura.
Thank you.
The next question is from the line of Wamsi Mohan with Bank of America.
I had two questions. One on the device side, the magnitude of shipments that are pushed out, what do you think that will not result in either lost sales or lost share? And can you quantify what is the magnitude of the pushout from the first to the second half? And I have a follow-up.
Yes. Look, it’s really a result of some of the delays that we’re seeing in the biggest ports in the country, particularly in California, where a lot of our product comes through. There’s been a slowdown in being able to unload vessels and get products processed and out into the distribution hubs.
We don’t think it’s that material over the course of a number of months or even into a quarter. So we wanted to give you some indication that while we had a great number, an increase of 29% growth in shipments in Q1, it doesn’t really reflect even what could have been possible if not for those delays, right?
And so our view is the year is intact. We think demand continues to be very strong. We’re now seeing, as you all know, another round of stimulus checks going out to consumers. There’s actions being proposed even in California for additional stimulus. So we think there’s demand in the marketplace, and it’s just a matter of getting our products into those stores and on to the shelves.
So we think overall, over the course of a year, doesn’t change our view of total shipment volumes that we can see. Maybe a little bit of a shift out of Q1 and into either Q2 or into Q3 if it pushes out that far. There’s only so much we can do to control the dynamics of the ports.
Okay. And as a follow-up, on the Platform Plus side, you saw some deceleration in your hour stream per-SmartCast account. Given that there is -- the trajectory of the economy looks like it’s heading towards the reopening and a lot of companies are sort of alluding to a slowdown in consumption of on-demand content, can you help us think through how you’re thinking about the second half trajectory here? I know you mentioned some seasonality in comps because of COVID.
Yes. I’ll start, and then I think Adam can talk about where the trends are moving. But I think we saw a slight dip, but still pretty consistent. You’re seeing about 70% year-over-year growth in terms of our SmartCast platform. We’ve continued to add a ton of new content to the platform, a ton of new ways in which we can engage consumers on the SmartCast platform.
So I think we added 32 free ad-supported channels, including a bunch from AMC, QVC, HSN. We added some new apps during this quarter in terms of CW, FOX Now, Fox Nation. And we’re pretty excited about some of the upcoming or additional partnerships we’ll be announcing in the next few months.
So we continue to see opportunities and see growth on our SmartCast platform. There was a slight dip. But at the same time, we’re also thinking about how we can continue as things open up, how we can continue to drive engagement on the device as well as mentioning again our Household Connect product, but how we can leverage that TV viewership data as people start to get out more -- out and about more, and how we can leverage new products outside of the household, so how do we continue to grow our advertising base, both on platform and off.
Yes. But I would -- let me just add that fundamentally, we believe that the consumers can continue to shift towards streaming more and more. There’s no doubt that as people are able to get back to normal life, they’re going to spend their time a little bit differently. But over the long term, we think there’s absolute secular shift going on that’s going to continue to favor more and more activity on streaming.
It’s one of the reasons we measure and even disclose and talk about our metric around total VIZIO Hours and then SmartCast as a subset. We want to be able to highlight that the growth is happening in the streaming piece, even if people watch less TV overall, perhaps, but they’re moving into a place where we monetize them the most effectively.
And so to Mike’s point, he’s going to focus on how do we drive consumers into a monetizable viewing experience into our Watch Free channels, of our VIZIO Free channels, where we have the best economics. Can we drive CPM growth off of where we are today? We think we have a lot of room to grow in terms of both consumption on our highly monetized content offerings as well as the CPM against that. And so the combination of those 2 things are really what’s going to help us drive ARPU, and that remains our continued focus.
And your next question is from the line of Steven Cahall with Wells Fargo.
Maybe just picking up on those ARPU question -- comments, Adam. So I think ARPU grew faster than hours and accounts. I guess that would imply that you did get some nice pricing increase, CPM increase. Maybe you could just delve a little bit into what happened in the quarter.
Are these advertising trends? Is this what’s going on in the home screen? So a little color, I think, would be great there. We saw some acceleration in ARPU, and I think CPMs at Roku as well, and maybe kind of wondering about how that bakes into your Q2 guidance.
And then you had a number of streaming app launches in the quarter. Maybe just if you could put some color on how those negotiations are going with content providers, especially on the AVOD side. Are you finding that your terms are improving as you gain scale in the industry? Are things getting more combative or is it still sort of like a rising tide mentality?
Yes. Let me -- I’ll take the first one, Steven. Absolutely. I mean, the growth in ARPU is really demonstrating sort of the flywheel effect of the model that we talked about. So as we grow active accounts, we grow engagement, we grow engagement in the right content on the platform, that helps drive growth at a compounding rate on the ARPU side.
In addition, we’ve said we are kind of new to the game. We’re early in it. We’re only lapping on our first year being in the ad marketplace, and the awareness and the opportunity for advertisers to come to our platform and send their messages to consumers and use our tools to help them generate a better ROI is really in the early innings. And so we think there’s a lot of headroom to continue to grow that, and that will continue to drive ARPU overall.
Mike, do you want to take the second part of that?
Yes. In terms of negotiations, look, I think touching on the fact that we’re relatively new to the ad marketplace, from an investment perspective, we’re also continuing or -- we’re somewhat earlier on in our investment in building out our business development efforts on content.
And we’ve seen over the past year, massive growth in terms of the number of partners we’ve onboarded as we’ve been able to get out and work with them around the story we have, right. The #2 smart TV in the marketplace, continued accelerated growth across our SmartCast platform. And as we move into negotiations, it is a rising tide, as you mentioned, a rising tide scenario.
Negotiations have been going well. And as I mentioned before, I mean, we’re pretty excited about the future announcements we’ll be making around the content side as well.
And your next question is from the line of Michael Morris with Guggenheim.
A couple of follow-up questions that some of -- the prior questions and things you just said. My first is about the mix of revenue on the Platform Plus side and the strength you saw this quarter.
Can you help us with any more details on sort of the mix between display advertising, particularly given a number of new streaming service launches and then your core video advertising? And maybe any thoughts on how you think those 2 sort of sources progress from here.
And then my second is a question about on-platform content and unique content. I think Mike referenced some sponsored content or some branded content earlier. And so I guess my question is, how important is it for you to have programming that’s unique to VIZIO? Is original content something you would invest in? And maybe a little more detail on that particular content Mike referenced, so we understand what you’re doing there.
Sure, yes. Thanks, Mike. I can give a little more breakdown on the Platform Plus revenue. We’re not disclosing all the different components of it, but just to give you a general sense, when you look at the advertising business in the quarter, AVOD, advertising and home screen were roughly 50-50, albeit a little bit larger on the AVOD side. It really shows we’ve had tremendous growth on the home screen monetization as we’ve learned how to bring that value to various partners on that front.
And there’s a lot of ways that we can monetize. It’s not just them advertising a show on our hero banner. There’s the sponsored hubs we talked about. So what it does for us is it broadens the advertiser category base outside of just entertainment. We’ve done deals with T-Mobile. We’ve done deals with Microsoft.
And so as we are able to bring that solution, which is a really powerful message right in the home, it’s the screen that someone sees when they’re deciding where to go watch content, what to do, right? And so for the advertiser to put themselves in that spot, it’s really, really powerful. And so that’s driving great monetization on that piece.
Over the long term, we do think the AVOD is a larger addressable market. As you know very well, $70 billion linear TV ad market is going to be looking to find and chase those viewers that are moving more and more into the connected TV space. So we think that’s a very large addressable market, and we are getting increasingly setup to monetize that across our platform.
So I think the advertising piece at large definitely grows significantly from here. The non-advertising pieces have a different growth profile to them. As I mentioned before, data will be a little bit different. We have our sponsored button dynamics. And so those -- that’s a different growth profile versus advertising in total.
But the combination of the AVOD, viewers are growing rapidly and home screen is really, really a great driver for us.
Yes. And I think to answer your question on VIZIO features and what we discussed, we look at our home screen. Obviously, AVOD is a huge growth from partners we have, not only the entertainment category, but more categories in the space. But advertisers are always coming to us and continuing to look to ways in which they can expand their investment beyond just 15s and 30s, right?
So VIZIO Features is really a sponsor-driven content programming opportunity. The benefit to advertisers is it provides more ways for them to engage with our consumers inside the SmartCast experience, whether on the home screen or within the actual content. And for consumers, it gives them access to original or exclusive programming unique to VIZIO.
From an original strategy perspective, we see this as kind of a low-risk, low capital-intensive way of providing more value for our advertisers, content partners and, ultimately, more stickiness and loyalty for our consumers.
Can you share when that will come to market? Or any particular partnerships you’ve struck to date?
We’re not going to announce -- we’ll be rolling that out this year, and we go deep into it, and our NewFront Presentation has been well received by partners as well. So we’ll be rolling that out over the next few quarters. Not ready yet to announce the specific partnerships, but we will soon.
And your final question comes from the line of Tom Champion with Piper Sandler.
So maybe just looping back to the SmartCast attach rate, which seemed very high this quarter, it sounded like there was some delayed holiday impact there. Maybe you could just elaborate on that.
And I guess I’m curious, you added 30-plus free channels, you’re kind of working on the platform offering overall. Do you feel like that has a tangible benefit to your attach rate?
Sure, Tom. Why don’t I take the first one. Yes, what I tried to highlight in the prepared comments was that Q1 typically does have a higher attach rate or conversion ratio, whatever you’d like to call it, because of the dynamics that happen towards the end of the year. Oftentimes, it’s either we bought around holidays, and then it doesn’t get connected and become an active account maybe until early in Q1.
And so we tend to see very strong ratio of -- in the first quarter relative to shipments. That doesn’t continue necessarily throughout the year, right? So I want to be realistic about how that happens, and there’s some dynamics that will cause other quarters to fluctuate a bit.
Historically, we have seen somewhere around a 60% to 65% growth in active accounts relative to the volume of shipments, and we think we can continue to sort of drive that and look for ways to improve that over time. But that is sort of the historical context that I want you to keep in mind.
We always like seeing the strong numbers in Q1. We had really strong holiday sales of our devices, and that did translate into very strong Q1 numbers. Overall, for the year, we think we’re going to continue to track closer to the more historical averages on attach rates. Mike?
Yes. And in terms of, I would say, adding more and more free channel content to create stickiness for our consumers, yes, we’ll continue to do that moving forward. I mean, I think we’ve made a large investment in continuing to grow out our owned and operated services on the platform. And we mentioned 32 channels this past quarter.
We’re going to continue to build on and announce some newer relationships to add that.
We know our customers. While we have a large portion of our customers that come for subscription services that we make available, we know a lot of our consumers want to come for free, right? And they see free as a huge opportunity. So we’ll continue to invest in growing that platform and building out our Watch Free service, which is the #2 ad-supported service on our platform, to make more and more free content available to our consumers across multiple categories.
And just to add one more thing, Tom, I think it’s important to understand that we know how important free content is and their -- the engagement level of our viewers once they’re on the platform.
Going back to that statistic I mentioned during the call, when you look at how people are spending their time on our TVs, over 52% of the time is on SmartCast itself.
They’re looking for streaming solutions. But if you look at the total time they spend on streaming, they’re using SmartCast to do it almost 90% of the time.
And so it really tells us they are wanting that integrated solution. They want to find content there, and Mike and his team will continue to feed that appetite and bring more and more to the platform.
Thanks, Tom, and thanks, everyone, for joining. This concludes today’s call. Have a great evening.
Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.