While streaming pioneer Roku (NASDAQ:ROKU) is best known for its namesake set-top box and dongles that facilitate streaming, investors might be surprised to know that it's the company's advertising business that increasingly pays the bills. The devices -- which are sold at or near cost -- are the gateway drug used to introduce the masses to the thousands of ad-supported streaming apps available on its platform, and Roku gets a cut of each commercial shown via one of its devices or a connected TV that uses its operating system.
That model worked so well in the U.S., Roku is taking its show on the road. After launching its European expansion a couple of months back, the company is now pushing further into Latin America. On Tuesday, the company announced a streaming partnership and the release of Roku-enabled TVs in Brazil.
A hometown favorite
Roku announced that it would be partnering with AOC -- a Taiwan-based multinational electronics company -- to bring the AOC Roku TV to consumers in Brazil. The company said the device would offer consumers an easy-to-use smart TV, with great streaming entertainment at an affordable price.
The streaming pioneer also revealed that Globoplay would be among the first local Brazilian streaming services available on the Roku platform. "Globoplay is the largest Brazilian streaming platform that brings together internationally renowned movies and TV series, including exclusive productions that will only be available online, in addition to original Globo content," the company said in a press release. Users will enjoy direct access to Globoplay's service with a shortcut button added to the Roku TV remote control, which the company said would be available "in the coming months."
"I'm delighted to bring Roku to Brazil, one of the largest streaming markets in the world," said Anthony Wood, founder and CEO of Roku. "With the arrival of Roku, consumers in Brazil will now be able to enjoy their favorite TV programs and movies on the easy to use Roku platform. We want to bring streaming to everyone in Brazil."
A huge market opportunity
In mid-2019, reports emerged that Roku was planning to enter the Brazilian market, when several job listings were uncovered, as the company was looking to hire employees to create "the most exciting and widely appealing content for Roku consumers in Brazil -- a vibrant, growing OTT [over-the-top] market." Roku later confirmed the reports, saying, "As a global company we are constantly assessing different countries that could offer new opportunities to fuel our growth. We see great potential in the streaming market in Brazil." The potential hires would be charged with inking deals with broadcasters and other streaming services to bulk up Roku's content offerings for the local market.
Roku already has a smaller presence in a number of countries in Latin America, with streaming players available in Argentina, Chile, Colombia, Peru, and Central America, but this is the company's first foray into Brazil, which represents about 212 million consumers, or nearly a third of the population of Latin America.
It's been a little more than two years since Roku went public, but its business has really taken off since the company began to focus on advertising for its bread and butter. Over the past year, Roku's platform business -- led by advertising and the company's television operating system -- increased sales 79% year over year and grew to 69% of the company's total revenue, while the number of active accounts eclipsed 32 million.
That's not all. Late last year, William Blair analyst Ralph Schackart opined that Roku would experience "similar phased stages of international growth," comparing it to market-leader Netflix. He further surmised that Roku will top 80 million active accounts by 2025, generating revenue of $4.5 billion annually, more than 450% higher than Roku's trailing 12-month revenue today.
The further push into Latin America is the next step in Roku's goal of ad-supported streaming domination.