Roku (NASDAQ:ROKU) had an incredible 2019 with the TV streaming platform specialist posting a 52% YoY growth in revenue and profits also soared 49% over the period.
The incredible performance was attributed to the 9.8 million new active accounts, 29% growth in average revenue/user, and an increase in streaming ours by 68%. Roku doesn’t seem to halt this impressive momentum as there are tailwinds that will make its growth persist going forward.
Americans are shifting to connected TV
The first tailwind is the growing cord-cutting trend as consumers move from conventional TV to streaming. Most interestingly the COVID-19 pandemic seems to have accelerated the cord-cutting trend as Roku CEO Anthony Wood indicated in the Q1 earnings call.
The CEO indicated that the pandemic has accelerated the transition to streaming which was already beginning to pick momentum pre-COVID-19. With the acceleration of cord-cutting, Roku will benefit in terms of subscriptions as well as ad-related services like an increase in streaming hours.
Ad revenue shifting to connected TV
Another trend that is growing is the shift of ad budget of marketers to connected TV from traditional TV as they follow numbers of consumers shifting. The company indicated that the falling ratings of traditional TV, change in consumer behavior and the ability of Roku to help marketers target ads on the platform will increase budgetary allocation from advertisers. Roku added that advertisers are showing interest in the company’s measurable and targeted advertising forms and solutions like interactive overlays and sponsorship.
Roku channel growing faster
The other aspect that will boost growth is the Roku channel organizes ad-linked services and subscriptions into a single viewing experience. The app has been growing faster than the whole platform and in the first quarter, it saw a YoY increase of 100% in streaming hours. With users embracing the channel the company is growing its users base giving it control over the general experience.
