Although Roku (ROKU +6.04%) began its journey as a way to access streaming video services, the company has evolved into so much more. Many investors still associate Roku with the boxes and dongles that bear its name, and rightfully so. The company is the leading provider of streaming-video access devices in the U.S., reaching into more homes than any other.
Roku isn't just the leader in streaming access. It is also a large and growing force in digital advertising and the connected-TV (CTV) space. Furthermore, recent research suggests that its unrivaled market penetration plays a significant factor in Roku's dominance of the CTV ad market.
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Crushing the competition
Premium video ad views surged 50% year over year during the first six months of 2021, according to the U.S. Video Marketplace Report provided by FreeWheel. Perhaps more importantly, roughly 60% of those views were courtesy of CTV viewers. For context, set-top box video-on-demand accounted for 15% of the ad views, while mobile and desktop accounted for 13% and 12%, respectively.
By far the best news for Roku shareholders is that the company dominated the CTV market with a commanding 43% of ad views, while Amazon's (AMZN +1.25%) Fire TV came in a distant second 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 has left in its wake. That makes this all the more impressive, then, that this isn't the first time Roku has bested its well-heeled rival.
Who's counting?
The pioneer of streaming devices developed a strategy to let consumers access its platform from almost anywhere, which came straight out of the Netflix (NFLX 1.74%) playbook. Roku created a state-of-the-art operating system (OS) that it licenses directly to CTV manufacturers, significantly expanding its reach beyond its own devices. Investors may recall how Netflix made access to its streaming video service a snap with the red "Netflix" button that was ubiquitous on television, DVD, and Blu-ray player remotes.
Roku built its OS from scratch, rather than simply using a repurposed mobile OS. The extra work paid off. Roku's platform is the No. 1 selling smart-TV OS in North America, powering 38% of televisions sold in the U.S. and 31% in Canada, as of Dec. 31, 2020.
Image source: Getty Images.
As a result, Roku dethroned Amazon's Fire TV in terms of viewer numbers, and its growth was accelerating just as Amazon's was slowing. Roku closed out 2020 with 51.2 million active accounts after accelerating 39% year over year. At the same time, Amazon reported monthly active users of 50 million, up 25%. We don't know exactly how many users Fire TV has now, as Amazon only updates the number at the end of each year. That said, Roku has added millions of new users, with its active accounts climbing to 55.1 million to close out the second quarter of 2021.
There aren't many rivals that have gone head-to-head with Amazon and came away the winner. Roku's recent triumph in terms of ad views gives the company another win over Amazon.
Advantage: Roku
Being service-agnostic is one of the key differentiators for Roku. The company boasts one of the largest collections of streaming services available in one place, with more than 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 growing number of CTVs powered by its operating system, viewers are sure to find the streaming service they're searching for.
This killer combination of a large and growing viewer base, deeper penetration in the CTV market, and a clear dominance in ad views is a trifecta that should have Roku investors jumping for joy.
