Month: November 2021

Talking to the principals of the firm last month inside their sprawling, still-under-construction space, a converted, 100-year-old grocery warehouse, one gets the idea that they like living on the fringes. Mother’s previous HQ, on Manhattan’s far West Side, was also — before it, too, was transformed by projects like Hudson Yards — somewhat of a no man’s land when the agency put down stakes there.

“We definitely like a blank slate — we like being able to have plenty of room in order to play around with new things,” Charlie McKittrick, Mother’s chief strategy officer and partner, interjected amidst the dueling arias of jackhammers and table saws.

McKittrick and his partners were serious about not being mere interlopers here, organizing a coterie of consultants to educate themselves about the neighborhood and its history back when the project was first being imagined nearly two years ago, prior to the pandemic. “We didn’t want to be assholes about it and just sort of roll in a bunch of advertising hipsters and just, like, wait for the neighborhood to mold around us,” he said.

In opening its new Brooklyn digs this month, the firm — which has done work for a diverse range of clients, including Target, Stella Artois, Wrangler, Dave & Buster’s, and The New York Public Library — sought to create a space for, as the agency likes to put it, “the future of not working.” Meaning, one takes it, that it wanted an office where people could not only produce but also connect with, inspire and create with others both inside and outside the company. 

Touring the funky, 60,000-square-foot space spanning two wide-open floors, one finds a place designed for ample collaboration: lots of midcentury sofas and areas set off by tropical plants and beaded curtains, a striking absence of any private offices, assigned workspaces that are changed up every few weeks, and nary a cubicle as far as the eye can see. It is also a space that aggressively encourages creativity. Certainly no two areas of the massive warehouse look the same — and yet, together they come together in a sort of choreography. 

The ethos of Mother has always emphasized connections over cubicles. In 1996, the agency was famously founded around a kitchen table in London, to equalize every person’s stake in the creative process and to maximize problem-solving. Today, it employs more than 500 staff across outposts in London, New York, Los Angeles, Shanghai and Latin America. As for Gowanus, it isn’t intended to be a building for just employees, but rather, a place that connects all the different parts of a broader creative community, creative and cultural partners that include music strategists, food experts, fabricators, and media and production people.

The space was designed to be adaptable for the different stages of the creative process. The “energies” that guided the design, according to the agency, include group ideation, independent thinking time, 1:1 huddles and presentations but also took into account activities like meditation, the needs of nursing mothers, and simply the need we all have for some alone time. (As food equals life, there is also a very large open kitchen and coffee bar that anchors the entry point of the office, along with an awe-inspiring spiral staircase of forged steel worthy of a steampunk Scarlett O’Hara.)

No story about new workspaces can ignore the impact of COVID, and even though the agency started working on its new HQ prior to the pandemic, the wide-open expanse cannot help but bring to mind social distancing. A fresh start in a new office is also a signal the partners wanted to send their people. “What was clear was, nobody wanted to go back to the old place,” McKittrick said. “As much as everybody loved it, it was like the entire world changed. It’s a new era for Mother, a new way of going forward.”

This is a space that’s meant to reflect real life and all its opportunities and demands — not for the 9-to-5. “When you design a new space, and you start talking to architects and designers and so on, you can quickly go down the route where it becomes a design that’s very self-aware and kind of a statement from the architect of, this is the thing — nobody can touch it, it’s perfect, like you’re going into a cathedral where you’re not meant to touch or change anything,” said Paul Malstrom, the agency’s creative chairman and partner. But the new space is the opposite, where things are deliberately incomplete, imperfect, in motion. “I think this is an invitation to do the exact same thing that’s happened throughout our history,” Malstrom said. “People are just doing shit here. This is meant to be a living space.”

Mother worked with the New York firm Shadow Architect on the project, whose principal Larry Cohn recounted the pandemic’s impact. Just as the design process was starting up in early 2020, COVID hit and everything came to a halt for him and his associate, senior project manager Rachel Newton. By June, Mother was ready to get back to work on its vision. “They were saying people need to work together, that collaboration happens in person. And so they were really courageous because they were saying, we’re going to make a space for people who want to come back to the office,” Cohn said. The HQ can accommodate the agency’s full staff of 150 people.

Working on the project during COVID was interesting, he said, in that it forced the designers to work under conditions that would also become commonplace for those for whom it was creating a new workspace. The building, as one would imagine, features accommodations for in-person collaboration as well as tech-enabled spaces for remote connections.

As with most companies, Mother, even as it flings open the doors on its dramatic new space, is still figuring out the logistics of the return to the office, with some employees eager to return, others not so much. McKittrick sees the new office as the ultimate motivator for employees who, for so long now, have been physically cut off from their peers. 

It is that daily interaction, he reckons, that will be the ultimate enticement.

“Maybe part of it comes from the shell — this thing called an office — but most of it is coming from the human beings,” he said. “It’s going to take a while to get back to it, but that is the ultimate magnet.”

• $680 million in total revenue, up 51% year over year
• $582.5 million in platform revenue, up 82% year over year
• $97.4 million in player revenue, down 26% year over year
• 56.4 million active accounts, up 23% year over year
• 18 billion hours worth of video streamed through Roku, up 21% year over year
• Average revenue per user of $40.10, up 49% year over year

An expanding platform business

More than a year after the pandemic-induced streaming surge sent Roku’s CTV platform business skyrocketing, the company was able to (somewhat) maintain that trajectory in Q3 2021, according to the company’s latest quarterly earnings report released on Nov. 3.

During the third quarter, Roku’s platform revenue — which includes the money it receives from selling ads across its CTV platform as well as from its cut of streamers’ subscription sales — increased by 82% year over year. That increase appears to be driven not only by a 23% year-over-year increase in its account base to 56.4 million active accounts — with the addition of 1.3 million accounts during Q3 2021 — but a rise in the amount of time people spent streaming shows, movies and videos on its platform.

From July through September, people spent 18 billion hours streaming video on Roku’s platform, a 21% increase year over year and, notably, a 3% increase from Q2 2021. That sequential increase may seem relatively minor, but it’s significant because Roku had seen streaming watch time slip in Q2 2021 versus Q1 2021.

In Roku’s letter to shareholders, the company said that the average daily streaming watch time per account in Q3 was 3.5 hours, which it described as “consistent with Q2 2021 and slightly higher than Q3 2019.”

Additionally, how people are spending that time on Roku’s platform seems to be diversifying. In the U.S. during Q3 2021, the share of time people spent streaming services outside of the top 10 most-watched streamers on Roku’s platform increased by 5%, though the company did not state what share of total streaming watch time those services represented.

Roku’s streaming watch time may take a hit next month if its current standoff with YouTube leads to Google pulling its popular streaming video service from Roku’s platform when its current deal expires on Dec. 9. Additionally, Roku is reportedly on the verge of a distribution standoff with Amazon, which centers around the latter’s free, ad-supported IMDb TV streamer but could pull in its popular Prime Video service, according to The Information. 

During a call with reporters on Nov. 3 after Roku released its latest earnings report, the company’s svp and gm of its platform business Scott Rosenberg declined to provide any update on its talks with YouTube and said that its agreement with Amazon is “not up for renewal or being renegotiated at this time.”

Hardware hardships

A few years ago, Roku’s platform business overtook its legacy hardware business to become the primary moneymaker. However, sales from devices like smart TVs and streaming sticks powered by Roku still accounts for a chunk of the company’s quarterly revenue — 14% in Q3 2021 — so it’s worth acknowledging that that business is dealing with some setbacks at a time when it’s receiving increased competition.

In Q3 2021, Roku’s hardware business — which the company labels “player” — saw its revenue decline by 26% year over year to $97.4 million. To be fair, Roku would have seen an acute uptick in hardware-related sales in 2020 because of people picking up smart TVs and CTV devices during the pandemic, making it difficult for the company to match the mark in Q3 2021. In the shareholder letter, Roku said that, while hardware unit sales fell below the Q3 2020 mark, they were above the Q3 2019 amount.

Nonetheless, the hardware sales decline corresponds to a slowdown in account growth, which the company acknowledged in its shareholder letter. And it doesn’t look likely that selling Roku-powered TVs and devices will get any easier any time soon, as competition increases. Within the past month, both Amazon and Comcast have rolled out their own smart TVs, respectively. Meanwhile, smart TV makers like Samsung and Vizio continue to push their competing CTV platforms to rival Roku.

Supply chain challenges

The global supply chain issues are having an impact on both Roku’s hardware and advertising businesses. 

On the hardware side, Roku’s own costs have increased because of the supply chain challenges, and the company ate those costs rather than passing them on to customers, cutting its hardware profit margins by 15%. In the shareholder letter, the company said it expects the margin impact to be temporary and that it is seeking out hardware alternatives, including tweaking its software to work on hardware using available processing chips and components.

On the advertising side, Roku has seen some advertisers pull back budgets because of the supply chain issues those advertisers are experiencing. During the call with reporters, Rosenberg cited automotive and consumer packaged-goods advertisers as two category examples where advertisers have been affected. As with the hardware impacts, he described the advertising impacts as temporary but acknowledged they may continue into 2022.