Roku's (NASDAQ:ROKU) user base is finally bigger than Amazon's (NASDAQ:AMZN) again.

At the end of 2019, Roku counted 36.9 million active accounts versus 40 million active users on Amazon's Fire TV devices. Amazon said its user base grew another 10 million by mid-December to reach 50 million, but two weeks later Roku reported 51.2 million active users.

Roku's notably experienced an uptick in account growth over the last couple years while Amazon's growth has slowed. Here's what's leading to strong account growth at Roku compared to Amazon.

The Roku homescreen on a television.

Image source: Roku.

International expansion

Amazon's biggest advantage over Roku has always been in international markets. In fact, Roku has held its crown as the largest connected-TV platform in the United States despite the increased competition from Amazon and other tech giants. 

But Roku made several big investments in international markets in 2019 and early 2020, and they seem to have paid off. Roku's biggest expansion came in January, when TV manufacturers AOC and Globoplay started selling Roku TVs in Brazil. It launched the stand-alone Roku Express device in the country in September. Brazil is a strategic market for Roku, since it's sizable and growing and Amazon doesn't have a large presence in the region.

That's not to say Roku didn't also go after markets where Amazon's strong. It expanded its retail and manufacturer relationships in Western Europe, building on the momentum it started in 2019. It also launched The Roku Channel in the U.K. Roku made the ad-supported streaming service available on SkyQ set-top boxes and Roku devices, providing additional reach for the Roku brand.

The Roku Channel

Roku has greatly expanded The Roku Channel over the last year or so, and it's helping drive more consumers to its devices and keep them engaged. As mentioned above, Roku introduced the service in the U.K., and it also operates in the U.S. and Canada.

Roku has been extremely aggressive in acquiring content for The Roku Channel. It's reportedly asked for content rights in exchange for distribution of streaming services in negotiations with media companies.

The growing content library of both on-demand entertainment and live news programming has produced outsize growth in the reach of The Roku Channel. The company says the service reached households with an estimated 61.8 million viewers in the fourth quarter. That may include viewers on Roku devices, as well as other platforms, including Fire TV. In the long run, growing the audience on The Roku Channel could translate into more account activations when consumers are looking to upgrade their devices.

Price competitive

The final area where Amazon has historically bested Roku is in price competition. Amazon has historically sold its Fire TV devices at below cost with the intent of making up for it with ad revenue and Prime subscriptions. Roku has mostly avoided going that route, trying to eke out at least a small gross profit on its hardware.

Roku actually saw gross margin on its device sales expand last year, as a surge in demand during the pandemic meant it had no need to run promotions. That said, management's long-term strategy is to keep its device prices low in order to grow the user base. And the company offered very aggressive pricing on its devices during the holiday shopping season last year.

Roku's growing revenue per user on its platform gives it greater freedom to sell devices for less, which will allow it to maximize its user base. Investors should look for Roku to keep gross margin on its device sales low in 2021 as supply and demand move back into equilibrium. But that could mean Roku grows its user base even faster this year, expanding its lead over Amazon.