What happened
Roku (ROKU 2.62%) investors had a great week as shares of the streaming video specialist rose 22% through Thursday trading. That's as compared to a 2.5% rally in the S&P 500, according to data provided by S&P Global Market Intelligence. The spike added to an excellent year so far for Roku owners, with the stock up nearly 90% so far in 2023.
This week's rally was powered by positive news on the advertising front.
So what
Roku's sales have been pressured by a weak TV advertising market in recent quarters, but the company is taking big strides aimed at reducing its reliance on that volatile niche. To that end, the digital entertainment specialist announced on Tuesday that it has struck a deal with Shopify (SHOP 4.57%) that will potentially usher in a new kind of advertising approach.
NASDAQ: ROKU
Key Data Points
Roku will now be integrated with Shopify to such a degree that users can easily purchase products they see on advertisements from one of the e-commerce giant's millions of merchants. A few taps of the Roku remote, with payments processed through Roku, will be all that's required to go from viewing an ad to making an order. "This is a great example of Roku's unique platform position to make advertisers unmissable," an executive said in a press release.
Now what
It's not clear how big of a lift this move will bring to Roku's business, but it could be substantial. Shopify accounts for close to 10% of all e-commerce in the U.S., after all, and many of Roku's 72 million viewers will likely find opportunities to make impulse purchases.
Even more exciting is the potential for this advertising approach to unlock entirely new, and potentially very effective, marketing avenues. In any case, the move shows that Roku is reducing its reliance on traditional TV advertising by capitalizing on its digital-first platform. That's great news for shareholders, and for the long-term outlook for the growth stock.
