It's no secret the television landscape it shifting. Streaming video consumption is soaring according to data gathered by measurement and intelligence platform Conviva: Streaming video plays increased 52% year over year, and global viewing hours jumped by 63%. Live streaming is also catching on, with live TV content plays up 49% and viewing time up 54%, both year over year.
One of the biggest beneficiaries has been connected TVs. As the move from linear TV to streaming gains steam, consumers are increasingly relying on dedicated devices to deliver the best experiences. The number of households with streaming players is up 400% since 2014 according to Parks Associates.
This movement has created a number of opportunities for investors, with three stocks uniquely positioned to capture gains. Let's see why The Trade Desk (TTD 0.47%), Roku (ROKU 1.74%), and Amazon (AMZN -1.11%) have the best chances to capture the bulk of this opportunity.
Connected TV's are seeing rapid adoption. Image source: Getty Images.
The outlier
Check out the latest The Trade Desk earnings call transcript.
The Trade Desk is winning in the connected TV market, but not with a streaming device. The company specializes in programmatic advertising, which automates the process of high-speed ad buying in real time. This is one of the fastest growing areas of the advertising market, and is expected to top $700 billion to close out 2018.
In the company's most recent conference call, The Trade Desk CEO Jeff Green called out connected TVs (CTV) as one of the company's biggest opportunities. Ads on CTV grew 1,000% year over year in the third quarter, and more than doubled sequentially. That's impressive growth considering the channel grew 21-fold in the second quarter from year-earlier levels.
Green cited rapid adoption by advertisers as fueling that growth, and identified it as possibly "the most important channel for our company's growth in 2019 and beyond." The CEO also added, "We've never seen an opportunity like CTV before and I don't think we'll ever see one like it again. It is the biggest opportunity we've ever seen and probably ever will."
Connected TVs comprise only one area fueling The Trade Desks growth. Revenue grew 54% year over year during the first nine months of 2018, which is even more impressive considering the tough comps the company faced from the prior year. Revenue increased by 52% in 2017, and 78% in 2016, both year over year. This illustrates why The Trade Desk is in a unique position to take advantage of this generational shift.
The pure play
Check out the latest Roku earnings call transcript.
If there's anything close to a pure play in connected TVs, it would have to be Roku. The company is tapping both segments of the market -- devices and advertising. Roku pioneered the streaming internet player in collaboration with Netflix more than a decade ago, and has been a leading provider of streaming devices ever since. It added connected TVs to the mix in early 2014.
Roku's platform revenue, which comes from advertising, hit $100 million for the first time in the third quarter, up 74% year over year, and now eclipses revenue from the sale of its devices, which grew 9% to $73 million.
Premium subscriptions are coming to The Roku Channel. Image source: Roku.
The addition of The Roku Channel in late 2017 catapulted the company forward, and Roku recently announced the addition of premium channels to its platform. The company also released the preliminary results of its holiday quarter, providing two key metrics for investors. Active accounts grew to an estimated 27 million, up 40% year over year, while streaming hours climbed to 7.3 billion, an increase of 68%. This shows that Roku's strategy is still bearing fruit.
The elephant in the room
Check out the latest Amazon earnings call transcript.
Amazon has established itself as a significant force in a number of industries, and that growing list includes not only streaming video but also the products that make it happen. Amazon's line of Fire TV devices are well known, but new data shows the platform may be much more pervasive than previously believed.
At the Consumer Electronics Show in Las Vegas last week, Amazon revealed that it had "well over" 30 million active users for its video streaming devices. That's up 20% from the 25 million the company cited back in October -- and Amazon expects that growth to accelerate in the coming months. "We're still in the middle of the 'buy' to 'turn on' period" from the holiday shopping season according to Marc Whitten, Amazon's head of Fire TV.
This gives Amazon a market ripe for its advertising, an area where growth has soared, producing triple-digit gains in each of the past three quarters. Advertising is among Amazon's fastest growing segments, and is expected to top $10 billion to close out 2018.
Investors can rest easy knowing that there's more to Amazon than just e-commerce.
It will only get bigger from here
Streaming video is only a decade old, and already becoming more the rule rather than the exception. This is leading to a boom in connected devices and the advertising that comes with them. Investors can still tap into this growing megatrend while it's still in its early stages.
