Roku (ROKU -0.95%) and Nielsen Holdings (NLSN) announced a groundbreaking deal on Monday that will take the streaming platform's digital advertising business to the next level. Roku will acquire Nielsen's Advanced Video Advertising business, which uses automatic content recognition (ACR) and a dynamic ad insertion (DAI) system. This will allow Roku to digitally replace ads on linear (broadcast) television feeds with targeted, household-level spots on its over-the-top (OTT) streaming platform. 

The companies also announced a multiyear pact that will integrate Nielsen's rating measurement tools across Roku's platform. The collaboration will significantly expand the ability to measure advertising performance on nearly 100 million smart TVs and other devices, helping marketers better monetize their addressable advertising.

Man' hand pointing a remote at a blurred TV in the foreground.

Image source: Getty Images.

"Combining Nielsen's [Advanced Video Advertising] technology with Roku's innovative ad-tech and scale will enable us to deliver the benefits of TV streaming advertising to traditional TV," said Louqman Parampath, Roku's vice president for product management. "Roku will bring the promise of DAI to the market for the first time ever at scale -- providing better targeting and measurement for advertisers, creating easy integration and additional revenue opportunities for programmers' ad sales teams, and improving the TV experience for viewers."

This is a further expansion of Roku's digital advertising ambitions. In late 2019, the company acquired ad-tech company DataXu (pronounced "Data Zoo"), which allows marketers to plan and buy video ad campaigns. The platform offers automated bidding and self-serve software to manage programmatic ad campaigns across digital platforms. 

Marketers spend more than $70 billion on traditional television advertising, according to Roku. It cited data from Magna Global showing that while OTT accounts for roughly 29% of all TV viewing, it represents just 3% of television advertising budgets.

This represents a massive opportunity for Roku, and these latest acquisitions better position the company to capture a much larger percentage of broadcast television ad dollars.