What was changed
Roku began as a maker of streaming players, a crowded market against Amazon, Apple and Google where the hardware had thin margins and was not the point.
The company deliberately reinvented itself as a neutral TV operating system and advertising platform. It licensed the Roku OS to TV brands, launched the free, ad-supported Roku Channel in 2017, and acquired ad-tech firm dataxu. By 2019 platform gross profit grew from $332.1 million to $495.2 million and average revenue per user rose from $17.95 to $23.14.
The decision was to accept low-margin hardware if it put Roku's software on the TV, because the real revenue would come from advertising, subscriptions and billing services.
What it achieved
grew platform gross profit from $332.1M to $495.2M in 2019 as average revenue per user rose from $17.95 to $23.14.
Why it worked
Selling hardware meant competing on price against far bigger tech firms.
Ad-supported streaming was the way to turn free viewers into revenue.
Licensing the OS to TV brands scaled Roku without making all the TVs.
First-party data and direct user relationships made Roku attractive to advertisers.
What can be applied
Sell the razor and monetize the ecosystem; the hardware is a way to reach a screen, not the business itself.
Aftermath
Roku's platform revenue kept climbing as it became the most-used TV streaming operating system in the U.S. The pivot from hardware to advertising is what made Roku a strategic channel for content publishers and brands, even as it kept posting small overall losses for years.
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