Metric analysis

This ad metric alone should make Roku shareholders jump for joy

Although Roku (NASDAQ: ROKU) started its journey as a way to access streaming video services, the company has grown into so much more. Many investors still associate Roku with the boxes and dongles that bear its name, and rightly so. The company is the leading provider of streaming video access devices in the United States, reaching more homes than any other.

Roku isn’t just the leader in streaming access. It is also a significant and growing force in the digital advertising and connected television (CTV) space. Additionally, recent research suggests that its unparalleled market penetration plays a significant role in Roku’s dominance in the CTV advertising market.

Image source: Getty Images.

Crush the competition

Premium video ad views jumped 50% year-over-year in the first six months of 2021, according to the US Video Market Report provided by FreeWheel. Perhaps more importantly, approximately 60% of these views were provided by CTV viewers. For context, set-top video on demand accounted for 15% of ad views, while mobile and desktop accounted for 13% and 12%, respectively.

The best news by far for Roku shareholders is that the company led the connected TV market with 43% of ad views, while Amazonit’s (NASDAQ:AMZN) Fire TV came a long way behind with a 26% market share. The e-commerce kingpin has earned a reputation for crushing the competition, and the market is littered with companies it left in its wake. That makes it all the more impressive considering it’s not the first time Roku has beaten its well-heeled rival.

Who counts ?

The pioneer of streaming devices has developed a strategy to allow consumers to access its platform from almost anywhere, which came straight out of the netflix (NASDAQ:NFLX) playbook. Roku has created a state-of-the-art operating system (OS) that it licenses directly to CTV makers, greatly expanding its reach beyond its own devices. Investors might recall how Netflix made access to its video streaming service a snap with the red “Netflix” button that was ubiquitous on TV, DVD and Blu player remotes. -ray.

Roku built its OS from the ground up, rather than just using a repurposed mobile OS. The extra work paid off. Roku’s platform is the best-selling smart TV operating system in North America, powering 38% of TVs sold in the United States and 31% in Canada, as of December 31, 2020.

Sick person lying on sofa holding tv remote control with scattered tissues.

Image source: Getty Images.

As a result, Roku overtook Amazon’s Fire TV in terms of viewership, and its growth was accelerating just as Amazon’s was slowing. Roku closed 2020 with 51.2 million active accounts after a 39% year-over-year acceleration. Meanwhile, Amazon reported monthly active users of 50 million, up 25%. We don’t know exactly how many Fire TV users currently have, because Amazon only updates the number at the end of each year. That said, Roku added millions of new users, with its active accounts climbing to 55.1 million to close the second quarter of 2021.

There aren’t many rivals that have gone head-to-head with Amazon and come out on top. Roku’s recent triumph in ad views gives the company another victory over Amazon.

Advantage: Roku

Being service-agnostic is one of the biggest differentiators for Roku. The company has one of the largest collections of streaming services available in one place, with over 10,000 paid and ad-supported apps available for viewers to choose from.

Whether users access the platform using one of Roku’s namesake set-top boxes or dongles, or one of the many CTVs powered by its operating system, viewers are sure to find the service of streaming they are looking for.

This killer combination of a large and growing viewership base, deeper CTV market penetration, and a clear dominance in ad views is a trifecta that should make Roku investors jump for joy.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.