Connected TV ad spending in the United States will more than double over the next four years from $6.9 billion to $14.1 billion, according to a recent forecast from eMarketer. There's still plenty of opportunity for growth to continue well into the next decade as well, as marketers currently spend about $70 billion on traditional television advertising, and more and more consumers are shifting their spending to streaming video subscriptions over pay TV.

So far, three platforms have stood out above the rest as winners of the connected TV advertising market: YouTube, Hulu, and Roku (ROKU 1.36%). The trio account for about 70% of connected TV ad spending, according to eMarketer's estimates. It's a strong bet that Alphabet (GOOG 1.44%) (GOOGL 1.89%), Disney (DIS 0.42%), and Roku will continue to dominate the market for the foreseeable future as well.

A man and a woman on a couch with a bowl of popcorn while watching television.

Image source: Getty Images.

250 million hours of "television" per day

Alphabet acquired YouTube in 2006 and has turned it into by far the biggest streaming video platform in the world, with over two billion monthly active users. And those users are increasingly watching user-generated videos on their television sets. This May, CEO Susan Wojcicki announced its users spend 250 million hours per day watching YouTube on their smart TVs and connected streaming devices. That's up from 180 million hours per day in July 2018.

That growth came despite Google's decision to pull the YouTube app from Amazon's (AMZN 1.60%) Fire TV platform at the end of 2017 as part of a feud with the online retail giant. The app is now available again as of July.

Due to YouTube's popularity, it carries considerable heft in negotiations with distribution platforms like Roku and Amazon. It likely keeps all of its ad inventory for itself instead of coughing up a share to the distributor as is common with ad-supported streaming services. Combined with Google's popular ad-buying platform, YouTube has climbed to the top of connected TV ad spending. Now that it's back on Fire TV and still growing viewership, it ought to see continued growth in ad spending for its television audience.

Premium connected-TV ad inventory

Hulu offers marketers the opportunity to place their advertisements next to premium content while reaching a well-targeted audience. The business has done well with its ad sales, generating a total of $1.5 billion in ad revenue in 2018 across television, mobile, and its desktop website.

Hulu reportedly generates an average of $9 per user per month in ad sales from its ad-supported service, which makes it more profitable than its commercial-free offering.

Now that the streaming video service is under Disney's operational control, it could get another boost in ad revenue. Disney will be able to leverage its ad sales team that manages ads across its television networks and digital properties, which could bring a lot of new marketers to Hulu.

The company is currently facing a challenge from Amazon as it negotiates a distribution deal for Disney+. Amazon wants a percentage of Disney's ad inventory for the latter's ad-supported properties. Disney argues its streaming services are popular enough to merit a free pass and believes consumers won't buy into a streaming platform that doesn't support Disney+ or Hulu. Amazon's roadblock may curb Hulu's ad revenue growth slightly, but it's strong enough to emerge from negotiations with the platform relatively unscathed.

The most popular streaming platform in the U.S.

Roku ended the second quarter with 30.5 million active accounts, most of which are in the U.S. That might trail Amazon's 37 million global users, but every indication is that U.S. consumers favor Roku's platform, which is used on 41 million devices in the United States, a 36% lead over its next closest competitor, according to Strategy Analytics.

Not only is Roku used on more devices, but it has extremely high engagement levels. The average user spent over 3.4 hours per day streaming content on Roku devices in the second quarter. That engagement is boosted by the company's dominance of the smart TV market, which makes Roku's home screen the first thing users see when they turn on their TV sets. Roku accounted for one-in-three smart TV sales in the second quarter.

Roku's large audience and strong engagement give it leverage in negotiating ad inventory shares with ad-supported streaming services. It also makes the company's ad products more appealing to marketers since it can reach a broad audience and has lots of data about their usage across streaming apps and even what they're watching on linear television for those using its smart TV platform.

Going forward, Roku has several opportunities to grow ad sales. It's just getting started taking advantage of its smart TV user base, and it recently released a new ad format to increase advertising opportunities. It's also investing in ad tech, an area where it still trails competitors like Alphabet, Disney, and Amazon. It recently acquired DataXu, a demand-side platform, to improve its programmatic ad sales.

Investors interested in the connected TV advertising space have a lot of options, but these three companies stand out as the front-runners. For those that want a pure play on connected TV, Roku is best. If investors want a piece of the consumer demand for premium streaming video, Disney may be the better option, diversifying away from the fully ad-supported model. Alphabet, meanwhile, is the leader in digital advertising, and that's not going to change anytime soon, especially with YouTube's foothold in connected TV ad spend.