Amazon's Fire TV expansion to attack Roku

Amazon (NASDAQ: AMZN) already holds a small but growing advance on Roku (NASDAQ: ROKU) in the race of the connected TV platform. Amazon has more than 37 million active accounts on Fire TV, compared with 30.5 million for Roku.

But Amazon is not resting on its laurels. Its lead is largely due to its greater global availability compared to Roku – Roku is still more popular than Fire TV in the United States. The titan e-commerce therefore presents several new Fire TV products, including smart TVs Fire TV Edition, and also plans an expansion into several new European markets. These changes should help Amazon stay one step ahead of its much smaller rival, which has the most popular smart TV platform in the US and has its own international expansion plans.

Close-up on smart TVs

Amazon launches 15 new smart TV models with its manufacturing partners. British, German and Austrian consumers will be given first place in many of the new models. Previously, Fire TV Edition smart TVs were only available in the United States.

The possession of the intelligent television operating system provides a considerable advantage to the owner of the platform. When viewers turn on their TV, the platform's welcome screen welcomes them, inviting them to integrate the ecosystem of applications and content. In addition, Amazon or Roku can obtain better data on users' viewing habits by capturing a more complete view of their consumption time.

As such, smart TVs offer better engagement and better data to monetize this commitment. Last fall, Amazon updated the terms of the Fire TV platform requiring advertising services to provide Amazon with 30% of the ad inventory. Roku takes the same cup. Amazon now has a lot more to gain from increased engagement and viewer data.

Amazon's ad sales continue to grow at a brisk pace after exploding over the past two years. Other revenue, of which advertising is the largest contributor, increased 37% from the second quarter, exceeding $ 3 billion. Although the advertising on Fire TV still represents a small fraction of that amount – Roku, for example, generated about $ 125 million in ad sales in the last quarter – it offers tremendous growth potential.

Stay ahead of Roku's international expansion

Amazon's plans to expand into more European markets and sell more devices could hurt Roku's results through its own international expansion. In its fourth-quarter letter to shareholders earlier this year, Roku's management has announced its intention to invest significantly in international markets, with the hope that these investments will generate profits in 2020. This year, it is just laying the groundwork with the manufacturer, content and distribution partnerships to get smart TVs and standalone devices in the stores.

But Amazon may have beaten the fist. Roku has greatly benefited from its first-mover advantage in the United States, but the management's rating indicating that the results of its investments will not appear until 2020 means that it could be up to a year in some markets. The e-commerce giant will have the benefit of first-mover and brand recognition in Europe and other international markets. Roku will need strong partnerships to overcome these benefits.

That said, Amazon still has to run in order to take advantage of its benefits on the international stage. That means investing in Prime Video and other Prime benefits to make Fire TV as attractive as possible. Fire TV devices place great importance on premium video content, which is great if you have a premium subscription, but not as great if you're not. The agnostic platform at Roku's content may be more appealing to consumers who are not part of the Amazon ecosystem.

Investors in these rival technology companies will want to pay special attention to Amazon's efforts in Europe, as well as to Roku's reaction. This could be a great opportunity for Amazon and its booming advertising business, but Roku has a lot more on the line as the battle warms.