ROKU Key Metrics

For anybody who is interested, I collected some key operational performance metrics on ROKU for QOQ comparison.

What these metrics indicate is slowing active account growth and streaming hours. Not good. But ARPU growth is accelerating, meaning the company is monetizing exceptionally well. In the US, 38% of smart TVs include ROKU. ROKU and AMZN appear to be losing international market share particularly to the Korean smart TV manufacturers. This makes sense since the Koreans want to ship their own smart TVOS and monetize it like the ROKU model. The margins on TVs suck. ROKU has been aggressive entering markets in UK, Brazil, Mexico, Canada, Germany, Korea, and Taiwan amongst others. I don’t see ROKU breaking out international numbers so it is hard to find a metrics on this. But clearly competition is coming on strong.


Metrics        	Q1-20	Q2-20	Q3-20	Q4-20	Q1-21	Q2-21
Active Accts	40	43	46	51	53.5	55
ARPU $        	24	25	27	28.76	32.14	36.46
Stream Hrs (B)	12.3	14.6	14.8	17	16.4	17.4
						
Percent Growth QOQ						
Active Accts	 	7%	7%	10%	5%	3%
ARPU $        	 	4%	7%	6%	11%	12%
Stream Hrs (B)	 	16%	1%	13%	-4%	6%

Market share (posted on nexttv.com):According to the latest data released by Conviva, Roku saw a 3% drop in global connected TV “big screen” usage in the first quarter of 2021 vs. Q1 2020, and now stands at 30% of the worldwide market. Amazon Fire TV has slipped from 22% to 19% over that same span.

Conversely, Korean smart TV markers Samsung and LG have seen increased usage in fast-emerging streaming markets—Samsung’s OS market share is up 3 points to 12% in the latest Conviva study, while LG’s usage grew from 4% to 6%.

Also notable: Google’s Android TV usage grew from 2% share to 5%.

My notes from March 2020: Market share: ROKU 59%, AMZN 19, Chromecast 4, LG 4, Samsung 4

Reviews of the ROKU TVOS are still the best for streaming. Samsung’s Tizen is a Linux-based open source that has been long poopoo’ed for a bad user interface. It has been improved and Samsung claims it was shipped on 190M smart TVs. Further, it supports a large suite of apps. So this makes me wonder if ROKU will bring on additional apps more than just streaming apps (think gaming)
https://news.samsung.com/us/six-advantages-of-tizen-os-on-sa…

The bottom line here is that this smart TV marketplace is changing very quickly and the 800 pound gorillas are moving. And ROKU is feeling the pressure. ROKU has first mover advantage, but can it stay ahead of the pack of wolves.

-zane

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Good write up. Here’re my two cents.

First, we should not read two much about the ARPU growth. It’s great, but ARPU does not absolutely equal to monetization efficiency. The huge growth of ARPU in the past few quarters were also contributed by the high advertising demand caused by economy recovery, which is a short term tailwind to the entire advertising market. The revenue in ad industry comes from a complicated formula, calculated from ads demand, ads supply (or impression) and other metrics like conversion rate and total number of monetized products. So IMHO, we can not ignore the slow down of the top-funnel growth just because of the ARPU number is great.

Second, a lot of our companies are leaders in their field, but I’d argue that Roku is not a leader. If we google “Smart TV global market share”, based on 2020 data, Roku TV OS only has 6.4% market share. Samsung Tizen OS has 12.7% market share. Even in the US, Samsung smart TV is the most popular brand and all my friends bought Samsung TV, so did I. So in terms of your comment: ROKU has first mover advantage, but can it stay ahead of the pack of wolves. I’d like to argue that Roku is actually not ahead of others.

Smart TV market has very fierce competition, since, as you can see, the market shares are very scattered. In such a market, considering Roku is not the leader, I think the slow down of top funnel growth is really worth investors’ attention.

I used to have 11% position in Roku and even added a little more in the AH of the earning call. But after I thought more, I reduced my Roku position to 5% and moved the money to $UPST and $CFLT.

Luffy

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Samsung Tizen does not have higher market share than Roku OS in US. Roku, at 38% market share, is number 1 in US. TV manufacturers that have adapted the Roku platform as their OS have seen their market share grow. Roku has two key TV manufacturers, Hisense and TCL. So whether these makers have seen their market share grow because of Roku is debatable.

I keep reading people complain about Roku OS market share worldwide being so low. They literally entered international markets December of last year in UK and then went into S America. They still have little to no Asian presence.

Thus the disconnect between US and international market share. And I’d Roku is not in the regions rhat are fastest growing and largest, it looks bad on their global market share.

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Correction, they went into UK in December 2019, not 2020. This was their first international push. They have already communicated that international will not be a 2020 story. And it wasn’t. It may take a few years.

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Plus, I think The ROKU Channel can become a game changer… it already has tons of great, FREE, content, and it’s only gonna get better. Much better than what people will get with Samsung or LG… I think once people realize this, they could start shopping for only ROKU smart TV’s… and more manufacturers will want ROKU on their TV’s.

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Samsung Tizen does not have higher market share than Roku OS in US. Roku, at 38% market share, is number 1 in US. TV manufacturers that have adapted the Roku platform as their OS have seen their market share grow. Roku has two key TV manufacturers, Hisense and TCL. So whether these makers have seen their market share grow because of Roku is debatable.

While Tizen OS may not have larger market share than Roku OS in the US, Samsung is the top single brand of smart TV in the US, with 32% market share in the US - https://www.statista.com/statistics/782217/smart-tv-share-by…. Some smaller manufactures like TCL and Hisense may keep the partnership with Roku, but none of Samsung, LG or Sony will use Roku OS in the future. With 32% market share of smart TV, Samsung is just most likely to be the go-to name for new smart TVs in the US, at least for the people, to whom budget is not a concern. This is different from the situation of our other companies, say Crowdstrike, when you are choosing a security product.

So here’s a little bit more about my concerns with Roku:

  1. It’d be very hard for Roku to keep growing market share in the US, because the Samsung and LG already take a significant market share. None of my known friends use TCL or Hisense TVs, all of them bought Samsung TVs as I mentioned (though this is not a lot of data points.)
  2. Roku acquired a lot of customers by the very cheap Roku players. These devices work well for people who use non-smart TVs. But eventually, everyone will purchase smart TV. Roku Player will be unnecessary after we buy a smart TV, which will eventually happen.
  3. Since Roku does not have giant manufacture as close partner, there’s a lot of uncertainty, since the smaller manufactures may switch their partners in future models. In addition, Roku’s competitors are very powerful, especially Android TV OS. There’re tens of thousands of Android developers in the world. It’d be very efficient to develop TV apps in the famous Android framework as well when the app developers already develop for their Android mobile APPs. The large community of Android could positively impact the adoption of Android TVs.

That being said, I’m not concluding that Roku will lose the competition. I’d just keep a very close eye on Roku’s top funnel growth, because data / metrics tell everything. And I think this is very important for investors to think of, in order to reduce potential risks of their investment.

Luffy

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I also imagine that ROKU is about in a place where they could give their sticks away for free… just to gain the customers. I could easily see people buying a Samsung TV and still using a ROKU stick…

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While Tizen OS may not have larger market share than Roku OS in the US, Samsung is the top single brand of smart TV in the US, with 32% market share in the US

A lot of these are reported by sales revenue, rather than unit volume. It would be nice to see this data updated from 2019, which showed TCL overtaking Samsung, when you measure by unit volume.
https://hdguru.com/ihs-tcl-holds-no-1-tv-market-share-for-no…

I haven’t seen anything that would suggest this has changed.

1. It’d be very hard for Roku to keep growing market share in the US, because the Samsung and LG already take a significant market share.
Agreed. Anthony Wood himself suggested that Roku is unlikely to ever be the OS for LG or Samsung.

2. Roku acquired a lot of customers by the very cheap Roku players. These devices work well for people who use non-smart TVs. But eventually, everyone will purchase smart TV.
That’s why ROKU is already installed directly in the Smart TV before it leaves the factory. Over 1/3 of every Smart TV being made right now has Roku installed. So that risk is minimized.

3. Since Roku does not have giant manufacture as close partner, there’s a lot of uncertainty, since the smaller manufactures may switch their partners in future models. In addition, Roku’s competitors are very powerful, especially Android TV OS. There’re tens of thousands of Android developers in the world. It’d be very efficient to develop TV apps in the famous Android framework as well when the app developers already develop for their Android mobile APPs. The large community of Android could positively impact the adoption of Android TVs.
This is absolutely the biggest threat to ROKU. However every time it is brought up, it is a false alarm, FUD, buying opportunity. Because ROKU continues to execute. Point number 3 is the reason I don’t let ROKU get carried away as too much of a position in my portfolio.

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I am also concerned about Roku’s growth given the moves that the TV manufacturers are making. No matter how well they execute, Roku needs new users. The only way that is going to happen going forward is through their manufacturing partners. Increasing ARPU is nice, but it doesn’t generate new users.

Roku called out the slowing user growth and their guidance does not call for it to pick up. It’s not clear how to interoperate this. Is it a warning? Or is it just CYA?

I already sold any lots that I had which were slightly underwater but I still haven’t made up my mind on Roku overall. Obviously, they have demonstrated they can compete against the odds. But it’s not clear exactly how they are going to find a way to continue to grow their user base. I am sure this is being feverishly discussed by management.

As I see it, they can’t acquire a TV manufacturer or get acquired because then the other competirors won’t want to work with them. They need as many hardware partners as possible. But they still need to find a way to outflank Google. Which isn’t impossible. Google has way too many fish to fry and can’t give this space the attention that it deserves.

Roku stock recovered a bit today, I think I am just going to let the market decide for me. If it starts to decline again I will take that as a sell sign and move on. If it stays flat, I am going to hold on.

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I remember seeing a post about a new set of career positions at ROKU and thought it was on this board, but I can’t find it.

So apologies to whomever I can’t credit, but someone went into their jobs board and found a series of open positions for T-Commerce. There are five positions currently listed.

Three are “Sr. Software Engineer, T-Comm” (San Jose, NY, and Boston). Here’s the San Jose listing: https://www.roku.com/jobs/position/3377284/sr-solutions-engi….

The last two are both based in San Jose.

One is “Sr. Product Manager, T-Commerce, Check-out”: https://www.roku.com/jobs/position/3359490/senior-product-ma…

And the final one is “Senior UX Product Designer, T-Commerce”: https://www.roku.com/jobs/position/3314875/senior-ux-product…

The first bullet point in the duties for that last position says it all: “Partner with product managers, engineers, and cross-functional stakeholders to design TV-based shopping experiences.”

In short, ROKU is building interactive T-Commerce into their platform.

Could GoogleTV or others add that? No doubt. But they’re already playing catch up and ROKU has the advantage of being laser-focused one just one thing, while Google has to keep its eye on many balls, including the threat of regulation.

ROKU is only minimally about hardware (both missionally and financially). If they have the most engaging platform, people who don’t have ROKU on their TV will either replace the TV or get the stick to use the TV they’ve got.

I’ve got just over a 5% position in ROKU and will likely add more.

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Comparing Samsung OS installed base on a global scale is not all that relevant. Many markets in international, like say Asia, do most of their streaming on mobile devices.

So Roku has about 31% of all global streaming hours on TVs. That is because North America, where Roku is far and away the dominate OS that people stream on, is far and away the dominate area where people stream on their TVs.

Being installed on a TV is not as relevant as delivering eye-ball/hours to advertisers or subscription services. On Asia 16% of viewing time is on TVs. In North America it’s 82%. The money will be flowing to that North America market. When and if those other markets develop is dependent on content deals in those localities and service development by the players. They will develop and will be monetized and it’s to be seen if Roku will be in that right place at the right time.

But they are in the right place at the right time now. $530M+ platform growing at 117% is great. ARPU vastly exceeding expectations is amazing. Accounts growth in line but not amazing as can be expected with some pull forward from pandemic staying at home.

Roku has 7% (about) global market share of installed base and 31% of streaming hours to TVs. And Samasung has 26% (or something like that) of installed OS and 12% of hours.

Many people, myself included, don’t use the Samasung OS, but use a Roku. Or maybe even a FireTV. Both are far superiori. Even though I have 3 Samsung TVs.

But we’ll see these arguments always. And Roku will continue to grow crazy Ad and other platform revenue. And gross profit.

Here’s where these numbers come from.

https://pages.conviva.com/rs/138-XJA-134/images/RPT_Conviva_…

Darth

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I love it when I hear things like - anyone can make a OS, CPU, embedded OS ISA - what that means is that only the pure play survive in the long run. So many people made a CPU - remember Motorola, IBM made OS’s . this never works in the long run. Not because people are stupid - only because the incentives are not aligned in the long run. These side projects become a cost centers and the executive meetings are brutal for the VP running this division.

Maybe Samsung can make Tizen -but will any other TV manufacturer ever license it? Amazon will mage a Telehealth platform but how many companies will want to get stuck on AWS with absolutely no other option?

I believe that ROKU will just become the dominant TV OS, because that is their core business. And TV hardware is a commodity anyway where you compete on price and hardware features like resolution, FPS, LED, etc.

I recall that once Samsung TV was explaining to me how they had to build a Indian restaurant in their cafeteria since all the software talent was Indian sw engineers brought over to Korea.

I worry more about Google - since this is what they know and in the end this is an advertising play…

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I tend to think some of you are missing the forest for the trees here. COVID (2020) brought about a large boost in subscribers and viewing hours. We are now seeing poor YoY comparisons based on that. Looking at ROKU’s numbers in isolation is not capturing the whole picture.

From the Q2 Conviva report that Darthtaco linked above, North American viewing time (Roku’s main market) grew a meager 2% YoY in Q2 while Roku’s viewing time grew 19.2% YoY. Furthermore for comparison sake, from the Q1 Conviva report, North American viewing time grew 18% YoY in Q1 while Roku’s viewing time grew 48.8% YoY. I want to go back further but that was all I could get to easily. Bottom line, Roku is ahead of the macro trend at play.

I agree that there are other risks like international adoption and potential threats from Google, but the Q2 numbers are not one of them; I actually thought they had a great quarter.

-Junomean2
Long ROKU

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I tend to think some of you are missing the forest for the trees here. COVID (2020) brought about a large boost in subscribers and viewing hours. We are now seeing poor YoY comparisons based on that.

The streaming hours drop can blame COVID, but the poor 2.8% QoQ account growth can not. I’m talking about the sequential growth, not YoY, so there’s nothing about COVID here! Look at the historical QoQ growth trend of Roku’s total accounts:


       Q1.    Q2.     Q3      Q4   
2018.  7.8%   5.8%.   8.2%.   13.9%
2019.  7.4%.  4.8%.   5.9%.   14.24%
2020.  7.9%.  8.0%.   7.0%.   11.3%
2021.  4.7%.  2.8%

Did you see the trend of the account growth? It’s sequential growth so nothing about COVID YoY comparison! Sure, Q2 is historically the weakest season for this metric and Roku may be able to get back to the same level of account growth in the next few quarters, but this must be based on hope. The leadership of the company did not say that the growth would rebound. The numbers always or at least often tell the truth, no matter how much you love a company.

Luffy

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The streaming hours drop can blame COVID, but the poor 2.8% QoQ account growth can not.

This is true, but something like this was also expected. Roku’s quarter was a mixed bag for me. Great results with the softer guide raising a concern that wasn’t there previously. It was unfortunate the TCL/Google news from a few months ago was recycled right after the release. That’s already been a part of their long-term competition with Google.

The ad numbers crushed it and the flywheel is kicking in. Customers and hours were obviously down, but management said they’d do better than pre-COVID with viewer adds and to their credit they did (1.5M adds vs 1.4 in 2Q19). The problem was analyst consensus was higher (2.1 I read somewhere). Hours were down across every medium due to people being outside and Roku was one of the few actually up.

Viewer adds in 3Q19 was 1.8M. If they come in 1.9M or higher next Q along with decent stabilization in hours, everything should be fine. However, they need to prove they can feed enough new viewers into the front end of the ad funnel to maintain platform growth, particularly if they are selling players at a loss. I have enough hesitancy on customer growth and the player supply chain I won’t be adding to my position and might even trim a tick if we get a decent bounce from here. At this level, much of the new risk has already been priced in.

Any additional customer/player weakness next Q could present some troublesome Q4/Q1 comps. I still believe in the move to streaming along with Roku’s spot as a major player. I’m just keeping an eye out for any potential sideways drift in getting there. Sideways drift can be a silent returns killer in a concentrated portfolio.

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I started this thread and thanks all to a great discussion. It has been helpful to my own buy/sell decisions. I intend to hold ROKU, but have lightened my position that has seen incredible >300% growth YOY. Yes it would have been better to lighten last week when ROKU was $100 higher, but I needed to see the Q3 results. These were Good Q2 results but not enough to keep ROKU as my top holding. Next week my second equal top holding is SE so I will digest those results and reassess my investment conviction. This is how it goes.

I scoured the ROKU Q2 earnings call transcripts on international user growth and simply Anthony Woods and company redirects the conversation back to ARPU growth and that they are satisfied with the user growth coms. Below are their comments. I still would like to see a revenue/user account/ARPU breakout from US.

Ruplu Bhattacharya

Hi, thanks for taking my questions. I have two, the first one relates to active account growth and international expansion. So Roku had strong active account growth last year, I think you groove active accounts 14.3million. So that’s a tough compare sort of for this year, but at the same time, you’re expanding internationally. So do you have a sense for how much of the active account growth this year can come from international expansion? And what’s a reasonable level of penetration that we should expect over this year and next year in key markets like UK and Brazil that you’re targeting? And overall, how do you measure your success in international expansion?

Anthony Wood

This is Anthony, I’ll take that in terms of our international expansion. I mean, obviously, streaming as a global business. The US is ahead of most countries, there’s still room to grow in the US. And there’s even more room to grow internationally in terms of active accounts. And I’ll come back to that. I mean, the other way we grow, it’s not just active accounts, we also grow by increasing the monetization on existing accounts. You know, a big difference between a company like Roku and a subscription service, is that subscription services, active accounts correlate directly to revenue. Roku is growing and investing in building the monetization on a per customer basis, just as much as we are on growing our active accounts. And so and actually, I mean, in places like United States, there’s a tremendous amount of room to continue to grow ARPU, and that’ll be a big driver of growth as well as active accounts.

In terms of growing active accounts globally. You know, the strategy we’re using is the same. That worked for us well, in the US, which is focused on building active accounts. Well, in terms our business model internationally is to focus on building active accounts, engaging those users, and then monetizing those users. And the way we are building active accounts is through selling our streaming players and licensing our operating system to TV manufacturers and coming to market with Roku TVs. Both of those are working well for us, we’re starting to see, we’re definitely seeing success there. So for example, we are already the number one operating system in Canada. You know, things are going well in Brazil, in Mexico, in the UK, we just launched TV with TCL and new TCL, Roku TV bring increasing the number of OEMs that are selling Roku TVs in the UK and that TV is getting excellent reviews. It just got a five star review. So that’s going well. And then we just announced that we’ll be launching products in Germany scenes as well. So, you know, we’re going to continue to build out reasons that ran and go deeper in the reasons that we’re already in.

We are probably talked out till ROKU Q3 results.

-zane

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