I think there are two aspects to ROKU that have been “under-discussed” here.
One is the perspective of a small to medium content provider that would like to get their content out there, but doesn’t want to lay out monthly fees for this privilege, nor has the technical and logistical capability to worry about their own ad-serving.
A number of people here seem to ask the “why would X give up their ad revenue to ROKU” question without really considering what it takes to be able to serve ads. SERVING ADS IS NOT A TRIVIAL UNDERTAKING. It actually takes a lot of infrastructure (people, hardware, software) and know how. Think about it for a second: you have to have a software platform that allows potential ad buyers to browse available ad inventory, select one of multiple possible ad formats, see ad targeting information (viewer and content statistics, etc.), manage the concept of ad campaigns, test/pilot potential ads, submit ads for placement, see statistics on ad performance, etc. etc. etc. And if you want to be a modern ad platform, you better have some machine learning and other advanced capabilities in your platform too, or the Google’s and Amazon’s and TTDs of the world are going to eat your lunch and no one is going to place any ads with you. And, btw, even if you have a software platform that does all this, you are STILL going to need a kick ass sales team to attract ad inventory away from the giants.
So, yeah, if you are YouTube, you’ve already got all this infrastructure, and you have no reason to give away any of your ad inventory. But if you are just about anybody else (including not small names like BBC, Discovery Channel, Fashion Network, etc., etc.) it’s a very different story. In fact, when ROKU comes along and says: “hey - as long as you have the content, we’ll put it on our 39m user network, help you create your app, stream your content for you, basically provide everything else - and you don’t have to pay us a single dollar in upfront fees, or worry about anything - we’ll do all the work and just take a cut of the ad revenues for ads shown to people who watch your content” - what are you going to say? I think you might say “OMG, this is AWESOME, where do I sign?!”
Remember, most apps on Roku are NOT YouTube. They are small to medium content providers who just want to get their content out there without a lot of work or upfront cost. The Roku value proposition is VERY appealing to these people.
Now the other aspect to ROKU that’s been under-discussed in the consumer aspect. There are a LOT of people out there who are looking for near-free content options. A LOT of people don’t want to pay any monthly content fees AT ALL. There are also a LOT of people out there who maybe pay for Netflix, but can’t afford to pay for anything else. Yet they still like to have choice in what they watch. Here, Roku’s marketing is key. People know that when they buy a Roku, they pay once for the device, and then they get tons of channels for free. Sure, they are not HBO or Showtime, but the sheer choice is nice, and that lack of a monthly fee goes a long way. They also know that YouTube will work. And they know that if they do have that one paid service like Netflix, that will work too. And they know that they will get a nice remote and best in class usability.
Now maybe those people might consider an Amazon FireStick as well. But the first thought in their head might be, well, it’s Amazon, so I’ve got to have Amazon Prime to get real value out of this thing. Maybe they have it, maybe they don’t (again, lots of people do NOT like to pay Prime annual fees). Even if they do have it, they probably think about YouTube next. Hmm, I heard YouTube is a pain in the butt to use on Fire devices. You have to jailbreak them and stuff. That consideration alone will kill it for 95% of people out there. Then they might think about AppleTV for 5 seconds. YouTube is no problem, but then they will see the price. Wait, I know - why not just get a cheap Roku device where everything works nicely?! Click - there is another user for Roku! When you think about it this way, it’s pretty apparent that Roku’s support for YouTube (even though they get minuscule revenue from it) is actually a brilliant move.
Now put these two factors together.
One one hand, Roku is a godsend for every second and third tier content provider out there, all the way from the BBC down to some pretty niche and specialized content providers. Sure, none of them are Netflix or Hulu individually, but combined, they are the rest of the content world, and there are still some pretty big names in that mix.
And on the other hand, every user who is watching their wallet, but still wants to have a broad choice of free content available to them, is also choosing Roku. Which, of course, gives Roku even more eyeballs, and more data for their machine learning algorithms that feed the ad targeting features of their ad platform. Which ultimately makes their advertisers happier. Which makes them pay more and place more ads with Roku rather than with someone else.
I don’t know about you all, but that strategy really clicks for me.