On Thursday, over-the-top (OTT) TV set-top-box maker Roku witnessed nearly a 70% gain from its $14 opening price. In early Friday trading, the day after its IPO, it gained another 24% to land at a mid-day price of $29.13.
Roku makes most of its revenues — 74% — from selling the set-top device. The remainder comes from its platform services. Two-thirds of its platform-services revenues are from advertising. In 2016, Roku said it had $400 million in revenue.
On CNBC on Thursday, Anthony Wood, CEO/founder of Roku, said that 80% of its gross profit — $121 million in the first part of the year — came from platform (services) revenue, which includes advertising and content distribution.
Roku has 15.1 million users — growing 42% year-over-year, per Wood, who says the company spends little on marketing. “There is a huge opportunity to become the next-generation advanced-TV advertising platform,” he added.
Among all OTT makers, Roku has the biggest share of U.S. broadband households — at 37%, according to a Parks Associates study in August. That compares with 24% for Amazon Fire TV, 18% for Google Chromecast and 15% for Apple TV.
In April, Roku began offering audience guarantees for advertisers buying commercial inventory based on Nielsen's Digital Ad Ratings.
As for smart TVs, many of which have their own in-house app operating systems, Wood says that one in five smart TVs sold in the U.S. in the first half of 2017 used the Roku operation platform.