Revisiting ROKU

Roku just reported earnings with the stock up 20%+. While reading the TTD conference call transcript seeing Jeff Green talk about all the connected TV opportunity made me think a lot about ROKU and the pure play CTV opportunity there. Many people have expressed concern over lack of moat, and confusion/concern over how they are able to monetize their platform currently and going forward. After investigating further, these concerns seem overblown.

I think it is quite interesting that Beth Kindig, the gal who reported the news about Amazon effectively endorsing MDB, is a huge Roku bull. She is much more concerned with competition for TTD than ROKU and likes their “walled garden.”

An article she wrote regarding TTD:…

In this article she shares many of the same concerns Saul and others have expressed about TTD. Lots of competition and a terrible track record for previous ad tech companies as investments. That being said, she isn’t bearish on TTD from what I can tell, just advises to watch competition and industry trends closely.

Article she wrote on Roku:

From this article:

The first thing Wall Street got wrong with Roku is that investors thought Roku was a hardware player. Although it is clear now that the ad platform is what will drive the profits, this wasn’t evident in the financials for a few earnings reports. My three pieces of analysis in 2018 were the opposite; I made my readers aware the ad platform was where the growth potential was.

The second thing Wall Street gets wrong is assuming Google or Amazon can dominate over-the-top television because they are Big Tech and smaller companies don’t have a chance. Google struggles here and recently raised the prices on YouTube television to $49, which for the most part, negates the purpose of cord-cutting when you add a few subscriptions like Netflix or HBO Go, and end up at the monthly cost of cable. Amazon is pushing into ads for OTT, however, there will be privacy regulations to face as the data powering those ads is being brokered without consent from e-commerce and Prime purchases. You can ask Facebook how that is going for them.

Roku has all of the pieces to the stack. The hardware is a razor-razor blade model that locks in their ad-supported platform. They’re OTT-only, and this prevents privacy issues for the data they collect from the device (this is why Apple is always in the clear with privacy issues – data stay s on the device.)

The way I see it their moat is their easy to use platform that people like, and the leading market share they have. You can make the same argument with almost any of the stocks discussed here (Twilio, AYX, TTD) that someone could easily come in and create a competing platform and steal their lunch. As long as they maintain their leading position in the category they should continue to grow revenue rapidly as the CTV and cable cutting trend continues. Certainly need to closely watch their market position, but again that’s true of any company we follow.

Some highlights from Q2 2019:
Total net revenue of $250.1million, up 59% YoY
•Platform revenue of $167.7million, up 86% YoY - This is the good stuff, 60% plus gross margin, larger than the entire current TTD quarterly revenue, and grew at twice the rate. Platform gross margin was 65.4%
•Active Accounts of 30.5 million,a netaddition of 1.4 millionfromlast quarter
•Streaming Hours increased 0.5 billion hours vs. Q1 to9.4 billion, up 72%YoY
•Average Revenue Per User (ARPU)of $21.06 (TTM), up $2.00 vs. Q12019
•Gross Profit of $114.2million,up 47% YoY(and up 66% YoY excluding an $8.9M benefit to Player COGS in Q2 2018, from releasing accruals related to potential IP licensing liabilities that did not materialize)

Revenue growth is a bit lumpy like TTD, but has been accelerating nicely:
2017 - 40 28
2018 - 36 57 39 45
2019 - 51 59

Platform revenue growth looks like this:
2017 - 137 129
2018 - 106 96 74 85
2019 - 79 86

They guided for 46% at the midpoint next quarter. Platform revenue is really starting to pull up net revenue growth and continues to be very strong.

Some ways they monetize the platform:

Roku Channel viewers can start free trials of premium channels, and all billing and subscriptions will be managed through their Roku accounts. Roku then takes a cut of the subscription fee every month. Roku had nearly 24 million active accounts at the end of the third quarter, making it an attractive distribution channel for content owners. In comparison, Comcast, which is the largest cable provider in the U.S., had approximately 22 million total video customers at the end of the third quarter.

They also monetize by selling ads in the Roku channel free offerings as well as on the home screen.

From the Q2 2019 shareholder letter:

A range of studies confirms the strength of Roku’s position in the U.S. marketplace. According to Kantar Millward Brown, Roku is the #1 TV streaming platform in the U.S. by hours streamed. Last month, Strategy Analytics reported that the Roku operating system powers 41 million OTT devices and smart TVs in the U.S. This is 36 percent greater than the next closest competitor and expected to grow. Recently released Parks Associates consumer survey datareveals Roku had 39% of the US streaming media player installed base as of Q1 2019.

Roku monetized video ad impressions again more than doubled YoY.

Our direct consumer relationship and data are guiding the creation of new ad formats on our homescreen and across the user experience. Sponsorships, which enable brands to help streamers discover and try new content, grew significantly faster than the already fast growth of video advertising. These ad formats are unique to Roku, and the consumer reaction is overwhelmingly positive. A recent study by Dynata (formerly known as ResearchNow) found that Roku only users are twice as likely to consider ads on Roku more relevant and personalized than AmazonFire only or Apple TV only users do on those platforms.

As more and more TV ads are streamed, platforms that know their users well, like Roku,are thriving. This is evidenced by our growing client base. We have worked with three quarters of the Ad Age Top 200 national advertisers. Likewise, programmatic demand, as well as emerging verticals like direct-to-consumer, are among our fastest growing sales channels.

One very valuable lesson I’ve learned from Saul/this board is that often it’s better not to get so caught up in the details and just follow the numbers. The numbers make a pretty strong case for Roku to become a much larger company.

Yesterday, I purchased a starter position in Roku and would be interested in others feedback as to why most here are invested in TTD but so hesitant on Roku (I’m long TTD as well with a full position.)



Yesterday, I purchased a starter position in Roku and would be interested in others feedback as to why most here are invested in TTD but so hesitant on Roku (I’m long TTD as well with a full position.)

Probably because we learned about TTD before ROKU. I know that’s the case for me. I am seriously contemplating selling a little TTD (12% position) and adding proceeds to ROKU (3% position). My reasoning is ROKU’S numbers are accelerating and FB and GOOG both have preformed very well in a relatively short period of time due to advertising revenue. While I don’t see ROKU growing to their market cap I do think they will have the wind at their back for the next few years.

Kindest Regards,


Glad to have a more robust conversation around ROKU. I have been building up shares ---- now at 5.5% Anecdotal information from a random stop off visit at Best Buy today:

(1) Many brands and models of TVs ---- not surprising. The main brands had massive displays. Those were Visio, Sony, Samsung. Some w 8K colors ---- pretty darn beautiful. Also, lot of very large TV’s ---- 75" +.
(2) Roku OS had a smaller display of 43 inch to 65 inch TV’s ---- nothing bigger in size. Brands that they had were Sharp, Hitense, and TCL. Somewhat disappointing.
(3) The gentleman there indicated that the top seller was Samsung. Said that Roku was okay, but not a huge seller. In the latest earnings report, Roku suggests that one in three Smart TV’s sold are Roku TV’s. Didn’t feel like that at Best Buy!
(4) The sales guy said the big draw to Roku is their integration w Comcast. Sounds like you get to stream Comcast on your second/third/fourth TV’s at your house using Roku ---- no need for additional Comast repeaters.
(5) Thanks to jackstrawhat for posting the details re: the report. The numbers are jawdroppingly great. But what am I missing re: my anecdotal data from Best Buy?


(4) The sales guy said the big draw to Roku is their integration w Comcast. Sounds like you get to stream Comcast on your second/third/fourth TV’s at your house using Roku ---- no need for additional Comast repeaters.
(5) Thanks to jackstrawhat for posting the details re: the report. The numbers are jawdroppingly great. But what am I missing re: my anecdotal data from Best Buy?

#4 is exactly why i have (2) TCL Roku smart tvs and then 2 roku devices for 2 other older tvs.

My nicest tv is a sony which has their own android tv o/s, plus that is the tv with my comcast box and comcast has an app page now. So on my best tv, there is no point to having roku…netlfix amazon youtube and hulu are all available.

So all 5 tvs, whether via roku or sony/comcast o/s, can all load amazon video which also has ability to easily turn on premium subscriptions like hbo or showtime or cbs (for star trek).

I think over next year it will be interesting to see if sony and samsung tvs start being preloaded more often with either FireTv or Roku, or if samsung/sony keep rolling out something else.

With mounted tvs, having to have physical devices is a pain and the usb sticks tend to be lower quality/specs. A good tv preloaded o/s is ideal, imo.



Dreamer. You are failing to realize that Roku has there owned app. The Roku app, which is basically free add based Netflix!! This app can be downloaded on ANY smart TV!!
I’m up 200% on my Roku investment and don’t see anything slowing it’s growth! It’s my largest holding and will continue to be.


The Roku channel it’s called.

Thanks for assuming you know what I dont.

I said i have 4 roku devices…pretty good chance i am aware of roku channel.

It has no original content…just older tv and movies. Cant be compared to hulu netflix or amazon video.

I dont every watch the channel…every time i look, they have nothing i am intereated in, as i tend to prefer new series and new shows.

Congrats on your Roku investment.



My nicest tv is a sony which has their own android tv o/s, plus that is the tv with my comcast box and comcast has an app page now. So on my best tv, there is no point to having roku…netlfix amazon youtube and hulu are all available.

So all 5 tvs, whether via roku or sony/comcast o/s, can all load amazon video which also has ability to easily turn on premium subscriptions like hbo or showtime or cbs (for star trek).

A good tv preloaded o/s is ideal, imo.

This is exactly what Roku provides, a good preloaded o/s. I think by focusing on why you personally don’t need Roku, you are missing the forest for the trees. The market opportunity in CTV is huge, they don’t need to capture the whole market. They are the market leader, so clearly many people like the Roku O/S. I personally have only one TV, and it has Roku built in. I picked it specifically when I bought it due to all the positive reviews and prior bad experiences using the Samsung O/S, etc.

One concern I did see was with management. Going through the conference call I noticed we seemed to get more input from the CFO than the CEO. I also looked at Glass Door reviews which had a 65% approval rating of the CEO. Not great. And lots of reviews saying the company culture is terrible, bad management, etc. Not uncommon to see on Glass Door, former employees complaining. Something to keep an eye on, though.

Jeff Green said CTV is the biggest opportunity they’ve ever seen and probably ever will see. With Roku you have the opportunity to invest in the market leading platform, which provides many opportunities for monetization. In a huge TAM. This is clearly evidenced in their outstanding platform revenue growth. 86% off a sizable base.

There is plenty of pie for Amazon, Sony, Samsung, and Roku. And Roku is winning. Unlike mammoth Amazon et al, Roku is a more modest ~$14 Billion company, and doesn’t need to take over the world to be a great investment. I can certainly see it becoming a $50 plus Billion company in a few years as CTV really takes over. That’s the way I see it anyway.



Samsung has their own operating system called Tizen which is Linux based and open source.

You can see it’s the second fastest growing operating system and soon to be second popular. According to page 2 of Rokus income statement.…

I know Samsung has a few TVs with Roku on them but I just don’t see a mass adaption. If they did it would be huge. Samsung just has the history of remaining vertically integrated.

As for Amazon video I have Amazon Prime but no Roku. I can’t see the free content on Prime being any worse than Roku. The good stuff costs money.


From ROKU’s 10-K /Annual report, here are the ROKU’s products, advertising, ways ROKU monetizes and their business strategy. (Warning, Long Post)

Item 1: Business Overview
Roku pioneered streaming to the TV. Roku connects users to the streaming content they love, enables content publishers to build and monetize large audiences, and provides advertisers with unique capabilities to engage consumers. We do this at scale. As of December 31, 2017, we had 19.3 million active accounts1 and during 2017 our users streamed 14.8 billion hours 2on the Roku platform. TV streaming’s disruptive content distribution model is shifting billions of dollars of economic value. Roku is capitalizing on this large economic opportunity as a leading TV streaming platform for users, content publishers and advertisers.

Consumers win with TV streaming—they get a better user experience, more entertainment options and more control over what they spend on content. When users want to enjoy streaming entertainment, they start at the Roku home screen where we put users first by helping them find the content they want to watch. From our home screen, users can easily search, discover and access over 500,000 movies and TV episodes in the United States, as well as live sports, music, news and more. Users can also compare the price of content from various channels available on our platform and choose from ad-supported, subscription, and transactional video on-demand content. The Roku platform delivers a significant expansion in consumer choice. Consumers can personalize their content selection with cable TV replacement offerings and other streaming services that suit their budget and needs. Ad-supported channels available on the Roku platform include YouTube, CBS News, Crackle, The CW and Vice; subscription channels include HBO Now, Hulu and Netflix as well as traditional pay TV replacement services like DirecTV Now, Sling TV, Spectrum TV and Sony PlayStation Vue; and transactional channels include Amazon Video, Google Play and Vudu. Consumers are increasingly streaming ad-supported content.

Roku operates the number one TV streaming platform in the United States as measured by total hours streamed, according to a survey that we commissioned, conducted in the fourth quarter of 2017, by Kantar Millward Brown. Content publishers and advertisers win with Roku because our large and growing user base simplifies their access to the fragmented and complex over the top, or OTT, market and we provide them with direct to consumer engagement and monetization opportunities. We provide our content publishers with access to the most engaged OTT audience, as measured by average hours streamed, and the ability to monetize their content with advertising, subscription or transactional business models. Furthermore, as a pure play, neutral TV streaming platform, we are better able to serve content publishers compared to other platforms that have diversified business operations and competitive content offerings. Advertisers on our platform can reach our desirable OTT audience with ads that are more relevant, interactive and measurable than advertising delivered on traditional linear TV. As traditional TV audiences shrink, OTT audiences have become increasingly important to advertisers who must continue to reach large audiences. Our growth in active accounts and hours streamed has attracted more content publishers and advertisers to our TV streaming platform creating a better user experience.

While we currently generate a majority of our revenue from sales of our streaming players, we generate a majority of our gross profit from our platform revenue. Our business model is to grow gross profit by increasing the number of active accounts and growing average revenue per user, or ARPU which we believe represents the inherent value of our business. We define ARPU as our platform revenue during the preceding four quarters divided by the average of the number of active accounts at the end of that period and the end of the prior four quarters. We grow new accounts through three primary channels: we sell streaming players, we partner with TV brands through our Roku TV licensing program, and we have licensing relationships with service operators. The fastest growing source of new accounts comes from our licensing partner relationships which accounted for 48% of new accounts in 2017, up from 42% in 2016. We believe we have a significant opportunity to grow platform revenue and as we further monetize TV streaming hours we will increase ARPU, which was $13.78 per active user during the year ended December 31, 2017 up by 48% as compared to $9.28 per active user for the year ended December 31, 2016. Our success in growing ARPU will depend on our ability to increasingly generate platform revenue from content publishers and advertisers as we increase the number of active accounts.

1 Active accounts represent distinct user accounts that have streamed content on our platform in the last 30 days of the period.
2 Streaming hours streamed as the aggregate amount of time users streamed content on our platform in a given period.

Our Products
Our advertising products enable advertisers to serve relevant ads to our users and measure return on investment. We collect a variety of information on the Roku streaming platform, including user registration data, as well as anonymized information like audience engagement with channels on our platform, use of features like search and interactions with advertisements. With Roku TVs, we have the ability to use automatic content recognition (ACR) and other technology to collect information about what users watch via antennae and devices connected to Roku TVs, and we collect data about the use of the Roku TV’s on-screen programming guide.
We gather this information and then create user segments, develop look-a-like audience and predictive models, and activate segments for use in a variety of business operations including recommendations for users and analytics for content publishers and advertisers. Our platform also provides a mechanism to match and ingest third party data sets from our advertisers and data vendors who may have demographic or other attributes that would enhance our analytics, products or advertising efforts.

We continue to refine measurement capabilities on our advertising platform. Through our own measurement tools and third parties including Nielsen, Acxiom, Oracle Data Cloud, Nielsen Catalina Solutions, Experian, Placed and Kantar Millward Brown, we provide advertisers the capability to measure audience demographics, validate ad effectiveness, and quantify sales lift from advertising on Roku. We offer engagement analytics such as impressions, click-through rates and video completion rates. We also work with a wide variety of third-party measurement companies to measure the branding impact of the ads we serve. We have also recently established relationships with third party providers that focus on transactional or point of sale data, which enables our advertisers to compare the effectiveness of Roku ads.
Our primary advertising products include:

•Video ads. Our ad-supported content publishers use video ads to monetize our audiences and we also use video ads to monetize our platform. Video ads are sold as 15-second or 30-second spots inserted before a program starts or during a program break, within channels on the Roku platform where we have video inventory access. One of the ways we secure video ad insertion rights from content publishers is via our distribution deals with those publishers. In addition, many publishers also authorize us to fill their own unsold inventory. Except for a minority of video ads that are passed unmodified in a traditional linear broadcast, all video ads are selected and delivered to a user in real-time, as the user is engaging on our platform. Digital advertisers have raised concerns about brand safety, viewability and fraud after certain issues arose between various video ad networks and major online video distributors. OTT is an attractive alternative. On the Roku platform, our video ads play full screen, are not skippable in most channels and are delivered into a curated channel list.

•Interactive video ads. We offer advertisers the ability to make their TV advertising interactive with customized clickable overlays that invite viewers to engage more intimately with brands, by watching additional videos, obtaining offer details, getting a coupon code via text or finding the nearest retailer to buy a product.

•Audience development promotions. We utilize a variety of ad placements, particularly native display ads, on the Roku home screen and screen saver, to promote content publishers and their services to our users. We help them to drive channel downloads and traffic to their channels, and to drive subscriptions or movie and TV show consumption. Given our strategic role as a user’s TV streaming home screen, we are increasingly able to predict a user’s likelihood of taking action in response to an ad we serve. We also sell branded channel buttons on player and TV remote controls. The branded buttons are reserved for content publishers who want to reduce friction and drive incremental usage by allowing users to launch straight into the channel.

•Brand sponsorships. We support a variety of promotional opportunities for advertisers, such as sponsored themes to take over our home screen and content sponsorships to give users the opportunity to experience a free movie or show (e.g. “Family movie night brought to you by…”). We also sell branded content rows in The Roku Channel.

Roku TVs
Roku TVs are manufactured and sold by our TV brand licensees, integrate our Roku Operating System, or Roku OS, and leverage our smart TV hardware reference design. Current licensee brands consist of Element, Hisense, Hitachi, Insignia, RCA, Philips, Sharp and TCL, with a ninth brand, Magnavox, joining in spring 2018. Roku TVs are available in sizes ranging from 24” to 75” at leading retailers in the United States and Canada. In 2017 we had over 150 models available to consumers in North America, up from 100 in 2016, featuring a wide range of prices as well as picture and display capabilities. Consumers are able to choose from very affordable HD and 4K UHD models to TVs with picture quality boosted by 4K, Dolby Vision HDR and local dimming. Approximately one in five smart TVs sold in the United States in 2017 were Roku TVs.

Streaming Players
We offer a line of streaming players for sale under the Roku brand in the United States, Canada, the United Kingdom, France, the Republic of Ireland and several Latin American countries, that allow users to access our TV streaming platform. All players run on the Roku OS, and stream content via built-in Ethernet or Wi-Fi capability, depending on the model. Our current product line for the U.S. market includes several models at a range of manufacturers’ suggested retail prices to meet the needs of different users starting at $29.99.

Our Strategy
We are capitalizing on the large economic opportunity for a leading TV streaming platform for users, content publishers and advertisers. Our key growth strategies include:

•Grow active accounts. We intend to increase user adoption of the Roku platform by continuing to improve our user experience, to increase the depth and breadth of our content offering, and to enhance our TV streaming platform. We plan to continue to attract more users with a highly compelling TV streaming value proposition that allows users to access the largest collection of channels, pay only for the channels that they want, utilize the best search and discovery tools, and navigate a simple and easy to use user interface. We also plan to increase active accounts by continuing to expand our retail presence and grow our Roku OS licensing program for TV brands and service operators. Further, we believe international expansion represents a large opportunity to grow our active accounts. We plan to continue to invest in our international strategy over time and become a global business in the long term.

•Grow hours streamed. We intend to increase user engagement and hours streamed by offering more content that is easier to find and discover on our platform. By increasing the available content on our platform and making it easily accessible, we have diversified the type of content streamed. When we launched the first Netflix player in 2008, Netflix accounted for 100% of our streaming hours, but now with thousands of channels available in the U.S and internationally, our reliance on any particular channel partner has continued to decline.

•Grow ARPU. We expect to continue to grow ARPU by growing hours streamed and our monetization capabilities. Advertising-based content is our fastest growing segment, and we are increasing the monetization of these hours by expanding our advertising capabilities both on and off the Roku platform. We intend to continue to leverage our data and analytics to deliver relevant advertising and improve the ability of our advertisers to optimize their campaigns and measure their results. We also plan to continue to expand our direct sales teams to increase the number of advertisers who use our services.

We believe that the core technology supporting the Roku OS is a critical competitive advantage and therefore we continue to make substantial investments in our research and development efforts to enhance our platform for users, content publishers and advertisers. We have invested in delivering broad search and discovery capabilities for our users in order to organize and manage the vast amounts of content and pricing information on our platform. Our cloud-based search and discovery features for users are powered by state-of-the-art servers and databases that are purpose-built and support large scale audiences. We have also introduced user experience technology such as private listening and voice search for certain streaming devices.

For content publishers, we offer our open Channel Developer Program to create streaming channels. The Channel Developer Program is based on our Software Development Kit, or SDK, and proprietary implementation of the Brightscript scripting language, which is optimized to provide robust performance and a consistent user experience on any device with the Roku platform. Channel Developers may also take advantage of our feed-based Roku Direct Publisher program, which does not require content publishers to write a single line of code to publish a channel on our platform.

For advertisers, the Roku Ad Framework, or RAF, technology is integrated into the Roku OS. RAF provides a variety of critical and advanced advertising capabilities, including IAB VAST ad processing, interactive rich media features, demographic measurement, device IDs, user privacy controls and compatibility with all major video ad servers, SSPs and DSPs.

Our proprietary systems leverage our feature extraction, information retrieval and matching systems to provide the most relevant ads. The Roku OS also includes our core data platform that manages and analyzes billions of technical and user events and terabytes of uncompressed data that is processed through our platform each day. We use leading big data analytic technologies to identify rich insights to improve user, content publisher and advertiser value from Roku.

In early 2018, we also announced plans to work with manufacturers of smart speakers and sound bars in a whole home entertainment licensing program. The new whole home entertainment licensing program will enable OEM brands to build sound bars and smart speakers, surround sound and multi-room audio systems that use Roku software to work together as a home entertainment network. Devices in this whole home entertainment network will be able to connect wirelessly and be controlled by voice commands and a single remote. In addition, OEM brands will be able to license smart sound bar and smart speaker hardware reference designs along with the Roku OS.

Sales and Marketing
We drive growth in our TV streaming platform by building relationships with content publishers, advertisers, TV brands and service operators. We have dedicated business development teams that develop and maintain relationships, to promote and build awareness of the features and advantages of Roku. Our data science team supports our sales and marketing efforts by analyzing data on our platform to increase effectiveness for our content publishers and advertisers as well as for our consumer marketing campaigns. We enter into distribution agreements with our content publishers and license their content through our dedicated content relationship management team. We sell advertising with two direct sales teams, one focused on content publishers, the other focused on traditional advertisers. Our relationship with content publishers is typically client-direct. We secure direct access to publishers’ video ad inventory as part of our distribution agreements and serve as an additional channel for content publishers to monetize their audience. These sales efforts are differentiated and complementary to that of our publishers. Whereas our publishers typically sell on a cross-platform basis and feature their brand and content in their sale, we focus on delivering a large OTT audience across many channels at once. We work with the major ad agencies and holding companies including Dentsu, Havas, Horizon, IPG, Publicis and WPP. We also offer smaller content publishers a self-serve platform to buy promotions, and are increasingly incorporating programmatic capabilities into our advertising sales. We work with TV brands to assist in all phases of the development of Roku TVs, including development, planning, manufacturing and marketing, and similarly work with service operators on the planning and development of their Roku Powered players.

We grow our users by providing consumers with low cost, widely available players and TVs and we promote them using a wide range of marketing techniques. In the fall of 2017, we refreshed our entire product line of five different streaming players, with prices ranging from our most popular Roku Express at $29.99 to our most powerful Roku Ultra at $99.99. Our players and TVs are available at over 16,000 retail locations in the United States, Canada, the United Kingdom, France, the Republic of Ireland and several Latin American countries. The majority of Roku players and TVs are sold in the United States through traditional brick and mortar retailers, such as Best Buy, Target and Walmart, including their online sales platforms, and online retailers such as We also sell players in the United States directly through our website. In addition, in some cases, we sell our streaming players to service operators or channel partners who bundle such players with services that they sell to their customers. We also sell products internationally through distributors and to retailers such as Currys in the United Kingdom and Amazon in France. In 2017 and 2016,, Best Buy and Walmart each accounted for more than 10% of our player revenue. These three retailers collectively accounted for 61% of our player revenue for the years ended December 31, 2017 and 2016. These retailers also sell products offered by our competitors. We support retailers with an experienced sales management team, and work closely with these retailers to assist with in-store marketing and product mix forecasting, leading us to be a category captain in many major retail locations.

Research and Development
Our research and development model relies upon a combination of in-house staff and offshore design and manufacturing partners to cost-effectively improve and enhance our platform, and to develop new players, TVs, partner licenses, features and functionality. We work closely with content publishers, advertisers, TV brands and service operators to understand their current and future needs. We have designed a product development process that captures and integrates their feedback. In addition, we solicit user feedback in the development of new features and enhancements to the Roku platform.

We intend to continue to significantly invest in research and development to bring new devices to market and expand our platform and capabilities.


This is my first MF post:

Believer in ROKU from its IPO and hold a 10% weighting. Thanks for this thorough discussion.

From the outset as i understood it, ROKU’s revenue strategy has been to use its low margin hardware device to build a critical mass to enable its move into the growing CTV streaming market to enable high margin revenue from its OS system and even more from adtech.

IIUC, one ROKU edge in adtech over fire stick is its privacy controls. So i now wonder if the AMZN deal with TTD will enable fire stick to better compete with ROKU in providing targeted consumer data while maintaining individual privacy.

beth kindig has been out in front on this for at least a year but all her articles linked herein were written before the AMZN/TTD was announced last week. beth has a new premium service wherein she addressed this deal and other investment issues related to TTD and ROKU. I am not a member and don’t know what she said but i have had an email exchange with her about the announcement wherein she told me that she thinks there is room for both ROKU and TTD and remains positive on ROKU. Up to that point, she has always spoken well of TTD but has stopped short of buying the stock.

FWIW, a sine qua non for me to make any investment is a highly capable, shareholder friendly CEO who not only has the ambition and vision to build a much larger company, but one who values/loves executive leadership. ROKU CEO Anthony Wood very much fits the bill, IMO.

Companies tend to grow or shrink to the size of their leadership, almost regardless of products and markets. My assumption is that highly capable inspired leadership will transform products to available markets when and where necessary. My favorite example is how Warren Buffett transformed a dead textile company into a giant conglomerate. Great leaders move where the TAM is. Perhaps this paragraph is off topic. Just saying, i am about 50% into hypergrowth, mostly SAAS/cloud, subscription stocks. But i first have to be comfortable with the CEO. And i’m not always right.

I have read Saul’s rules and hope that i am in compliance.

I have been lurking here for many months and this has been a very valuable discussion board for me. Thank you all.


Great insight from TMF this evening on how the “revenue well” was drilled before the company was thirsty.

The Blockbuster Announcement Hidden Away in Roku’s Earnings Release – and Why It’s a Big Deal

By Danny Vena
Danny Vena
Aug11, 2019

“…Roku made the decision several years ago to forgo much of the profit from the player segment to focus on account growth and advertising revenue. By getting its players and connected TVs in front of as many consumers as possible, it increases the number of active accounts and ultimately the number of people that see the advertising it serves up. This also increases the amount of data Roku derives from its viewing audience, which helps make its ads more effective.

This move has proven hugely successful. Roku’s platform revenue now comprises 67% of the company’s total revenue and grew 86% year over year in its most recent quarter. At the same time, active accounts grew to 30.5 million, up 39% from the prior-year quarter, while streaming hours of 9.4 billion grew by 72%.

Here’s why it matters

With Walmart’s scale and incredible reach within the low-cost segment of the market, this is truly a match made in heaven. Lower income consumers will be more likely to purchase an inexpensive connected TV – like Walmart’s Onn brand – and they’re also more likely to watch ad-supported services like The Roku Channel.

This partnership will help Roku’s growing penetration. With 30.5 million active accounts and a population of about 128 million households in the U.S., the company can now reach about one of every four U.S. consumers, and that number will only continue to grow with each passing quarter.”



Yesterday, I purchased a starter position in Roku and would be interested in others feedback as to why most here are invested in TTD but so hesitant on Roku (I’m long TTD as well with a full position.)

I just don’t think they have going for them what a lot of our other companies do. The big thing for me is that they monetize based on users. They have over 30 million users…I’m not sure how many they can feasibly get, but the point is, there’s no multiplier effect. If AYX gets a new customer, they tend to spend 30% more each year. There’s nothing like this for ROKU that I see. Not sure how their ARPU is going up…but that patently can’t last forever unless they offer something more valuable…I don’t know what that would be in this model.

That said, I’ve seen worse. Good luck to the longs!



<They have over 30 million users…I’m not sure how many they can feasibly get, but the point is, there’s no multiplier effect.>

If you have a Roku account and you add a Netflix subscription through them (easy billing), they get a cut. And Disney+. And Prime.

If you are watching a Roku channel and see an ad, they get a cut.

And they are agnostic…the number of users is going to go way up, assuming they can expand internationally.

…and the vision is to be the OS for the TV…search for Shawshank and get the response from all your services plus pay per view to watch it…(assumes a very bright future but the ‘guide’ is a feature that is needed the more services you acquire. Someone has to solve for that)

Cord-cutting is just starting…not to mention when ‘cord-nevers’ start to buy TV’s for their tiny homes, apartments, or whatever… :slight_smile:


If you have a Roku account and you add a Netflix subscription through them (easy billing), they get a cut.

This almost 2-year old article says Roku actually gets almost nothing from Netflix:…

Roku does “not expect revenue from Netflix to be material to our operating results for the foreseeable future.” Meanwhile, Roku says that YouTube, its most popular ad-supported service, doesn’t give Roku a cut of its ads, or any other revenue. It’s a zero.

As a side note, that article’s tone was bearish about Roku’s prospects back then, but did summarize the bull case as:
Roku is going public as it moves from a low-margin business — selling video streaming devices — to a potentially high growth, high-margin business — taking a cut of advertising and subscription fees programmers generate using its devices…And Roku has been at this for several years. It now has 15.1 million monthly users, up from 4.8 million three years ago. And it is generating an average of $11.22 in service revenue for each one of them, up from $4.65 per user three years ago.

Roku went from a way for non-techies to get streaming on their home TV to a vehicle from which users can discover other sources of content, many of which either do pay Roku or for which Roku directly charges. The article talked about 5 major content providers back then. I think that number is now not only larger, but that more people are looking for more content outside of the big players.

Roku was really smart when they added their Search functionality. We use it all the time - instead of searching within Netflix for a movie, then Amazon Prime for that same movie, etc., it provides a one entry search that searches all providers, showing you the cost from each. We end up watching movies on “channels” we never would have sought out, except they had the content we wanted. We haven’t subscribed to anything new, but we have tolerated some with commercials, many of which do pay a portion to Roku.


“Cord-cutting is just starting…not to mention when ‘cord-nevers’ start to buy TV’s for their tiny homes, apartments, or whatever… :-)”

According to an article I read recently about ROKU from another subscription service I have; pay TV subscribers fell by 8,000 in 2012, 164,000 in 2014 and then three years later (2017) by 3 million subscribers. By 2023, it is believed that live-linear OTT video subscriptions will surpass traditional broadcast TV. [the article did not reference the source for the data].

Anecdotally; all three of my young adult and employed kids with homes or apartments of their own have been “cord-nevers” which will continue to be a growing portion of the market.


Anecdotal evidence: I’m a millennial who bought a TCL specifically because of the Roku interface which has been extremely easy to use, including my parents. We don’t have cable TV the traditional way as I’d have to pay for the cable box and for DVR services. I use Youtube TV (about $50/month) - get all my cable on the TV and any device along with unlimited DVR. Additionally, we can watch Netflix, Prime video, and free Roku channel on the TV. There are ton of channels on Roku.

Long Roku since $91, since I was a fool and sold it for a loss many months prior to that (sold out of emotion, and lack of discipline). I will be looking to buy more Roku on dips. I think this is the next Netflix - aka run up in stock price next several years and the de facto way to play cord cutting