Streaming Players Are Pulling Out The Big Guns And Roku Keeps On Growing

When it comes to streaming wars, everyone is pulling out the big guns. In May, AT&T's T HBO Max delivered the Friends reunion special, Walt Disney Company's DIS Disney+ has gathered over 100 million subscribers and Netflix NFLX had so much new content it literally had a little something for everybody.

But, there is one player who only keeps benefiting as competition keeps getting more and more intense. In the past three years, shares of Roku ROKU were up 800%, respectively, both crushing the 63% total return of the S&P 500. This figure shows just how much Roku succeeded in benefiting from intensifying streaming wars that many mistakenly thought would hamper its skyrocketing growth. For its first quarter, it reported substantial increases in both revenue and income during the first quarter despite a slight slowdown in active account growth.

Q1 Figures

During the first quarter, Roku delivered $574 million in revenue. This figure consists of platform revenue that went up 101% YoY as it amounted to  $466.5 million and $107.7 in device revenue which is up 79% compared to the same quarter last year. Operational income of $75.8 million was enabled by growth in gross profits that helped offset higher operational costs, improving significantly from a $55.2 million loss from the same quarter last year.

Roku attributed its quarterly growth to advertising as its ad-supported streaming service Roku Channel now reaches an estimated 70 million people in the U.S. with its account reach and streaming hours more than doubling with a growth rate being twice as fast as of the overall Roku platform.

As for its continued active account expansion, Roku attributed it to sales of players and Roku TV models in both the U.S. and international markets. The company claimed that Roku OS remains the top operating system for smart TVs sold in the U.S, while also becoming number one in Canada and number two among smart TVs sold in Mexico.

The Power Of The Roku Channel

This demonstrates the power of The Roku Channel: it offers easy access to content with broad appeal and that viewer engagement is attractive to advertisers. As advertisers spend their budgets on the platform, Roku is able to invest in more content, be more creative, and expansive in sourcing content suited to an AVOD (advertising video on demand) business model.

During the first quarter, Roku grew its active accounts by 35% YoY to a total of 53.6 million, although the 2.4 million new additions slightly lower compared to the same quarter last year.

A New Growth Driver

Although Roku gained popularity as a manufacturer of connected TV devices, its platform services became its new growth driver with 81% of Roku's revenue coming from its platform business last year. This includes its cut of transaction fees as users can pay for subscription services through the platform as well as digital ad sales.

Key Moves

Acquiring Dataxu in 2019 was a key milestone as its ad tech platform that was rebranded as Roku OneView allows marketers to programmatically purchase ad space and launch data-driven campaigns across digital channels, including streaming TV, mobile, desktop, and linear TV. It is what enabled Roku to believe its platform can reach four out of five homes in the U.S.

More recently, Roku acquired Nielsen's Advanced Video Advertising business, along with its dynamic ad insertion technologies. This allowed marketers that use the OneView platform to replace traditional ads on linear TV channels with targeted ads in real-time.

That's only one piece of the puzzle as there is also Roku's user base. eMarketer reported Roku is the most popular CTV platform in the U.S., with over 100 million users, being ahead of Amazon.com Inc's AMZN Fire TV with its 73 million users. More users means more marketing dollars and Roku translated that advantage into rapidly growing both top and bottom lines.

Outlook

As more and more consumers decide to cut the cord in the coming years, more marketing dollars are headed towards CTV, benefiting both Roku's OneView platform and expansive user base. Roku has a market cap of $46 billion, it is growing its share of the digital ad market and growing fast as it expands internationally.

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