When most people hear the term “on-demand,” they probably think of streaming services. However, ProShares uses a much broader definition for its new ProShares On-Demand ETF (NYSEARCA:OND). It describes OND as the first exchange-traded fund (ETF) dedicated to companies that provide “seamless and convenient services at the touch of a button.” The fund debuted on Oct. 26 and features on-demand services ranging from digital media and gaming to food delivery and fitness.
According to ProShares, the on-demand market was worth $403 billion in 2020. That value is expected to increase by nearly 50% in the next two years. OND is set to benefit from growth across multiple industries that are tapping into this business model.
The FactSet On-Demand Index includes 34 companies that earn at least 75% of their revenue through on-demand services. Its selections are weighted by their market capitalizations, and the index is reconstituted and rebalanced twice per year.
OND ETF Is Betting on the Gig Economy
Coming in at a little more than 7.55% of the fund is DoorDash (NYSE:DASH), OND’s top holding. The company is a leader in the food delivery industry, taking a considerable share of sales in cities like San Jose, Houston and Philadelphia. That’s not insignificant, especially since the total value of the U.S. market more than doubled during the pandemic.
DoorDash isn’t the only food delivery service to make the top 10 list of the OND ETF’s holdings. Delivery Hero SE (OTCMKTS:DLVHF) makes up nearly 5% of the fund. Based in Germany, the company operates in more than 50 countries that span four continents. Delivery Hero SE has 13 brands, with the majority located in Europe, the Middle East and North Africa.
Uber Technologies (NYSE:UBER), the ridesharing company that has branched out into food delivery with Uber Eats, makes up about 4.7% of OND ETF’s holdings. The company acquired Postmates last year which undoubtedly contributed to its considerable profits in delivery services.
Uber can also benefit from the promising outlook in the ridesharing sector. A report by MarketsandMarketsResearch projects this market will grow by about 115% over the next five years–an increase from $86 billion in 2021 to $185 billion by 2026. At that point, car ownership will be more expensive and environmental worries could change transportation behaviors.
The OND ETF is tapping into this growth not just with Uber, but also its competitor, Lyft (NASDAQ:LYFT). The rideshare company makes up approximately 4.7% of the fund’s holdings.
The Streaming Industry Isn’t Slowing Down
Streaming services are a dominant force in the on-demand market. Viewers spent 75% more time streaming content in 2020, and viewers favored subscription based content at nearly double the rate. 62% of viewers watched subscription based content almost twice as often as ad-supported content, with only 32% of respondents saying they preferred ad-supported content.
Of course, one could argue this growth was likely driven by the pandemic and could decline as more businesses reopen their doors at pre-Covid capacity. But a Fortune Business Insights report released last year indicates the global streaming market could increase substantially. The report projects the market will reach nearly $160 billion by 2027, a 196% increase from its value of $54 billion in 2019.
What’s more, viewers are increasingly satisfied with their streaming options. According to a survey conducted by PricewaterhouseCoopers, more than four out of every five respondents reported they were happy with the streaming services they use. Consumers were found to use an average of eight streaming services in 2020.
This positive outlook for the sector should make it no surprise that Netflix (NASDAQ:NFLX) is the second-largest holding in OND, accounting for 6.5% of the holdings. The company is a streaming giant with 214 million paid subscribers as of the third quarter of 2021. In Q3, its revenue increased by 16% year-over-year (YOY), driven by a considerable increase in subscribers.
Outside of video-based services, Spotify Technology SA (NYSE:SPOT) also makes an appearance in OND ETF’s top 10 holdings. It’s the most popular subscription-based platform for streaming audio, with 381 million total users in 178 markets.
OND Is Capitalizing on Growth Across the Globe
The OND ETF dips into several other sectors as well, with the remainder of its top 10 covering social media, gaming and exercise stocks. Communication services dominate OND at nearly 62% of its holdings, followed by the consumer discretionary sector at almost 26%.
The fund includes companies across the globe, but about 58.5% are based in the U.S. China is the second largest market, accounting for 14.6% of OND’s holdings, while Luxembourg and Germany claim about 5% each. OND has an average market cap of nearly $36 billion and a price-to-book ratio of 4.65x. The top 10 holdings make up approximately half of the fund at about 53.9%.
Overall, the OND ETF offers exposure to a diverse array of industries set to see explosive growth in the next few years. If you believe on-demand services are the future for any industry, keep a close eye on ProShares’ On-Demand ETF.
On the date of publication, Sydney Sweeney did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Sydney Sweeney is an Assistant Editor at InvestorPlace.
