When it comes to live streaming video games, whether you are the streamer or the viewer, Twitch is the premier destination. According to their advertising website, twitchadvertising.tv, Twitch has 15 million daily active users who spend 106 minutes on the site each day and over 2.2 million streamers monthly. However, just like many other successful startups, Twitch had to pivot a couple of times to cement their reputation
The founders of Twitch, Justin Kan and Emmett Shear, launched a website called Justin.tv in 2007. Named after Kan, Justin.tv served as a 24/7 live stream of Justin’s life. Although the website was attracting attention, it was met with mixed reviews.
The users really wanted to learn how to stream themselves, so Justin.tv expanded to become a platform for streamers. Every day, the website added more and more channels until it reached a point where the channels had to be split up into categories.
The gaming category was, by far, the most popular and fastest growing category. As a result, the gaming category spun off into its own website in 2011, known today as Twitch.tv. Justin.tv officially shut down in 2014 and the company rebranded itself as Twitch Interactive, showing that all of their efforts will be put into Twitch.
In combination with Justin.tv, Twitch raised over 40 million dollars in venture funds to grow their company. Twitch became the gold standard for watching live gaming content on the Internet, accounting for 1.8% of peak Internet traffic in 2014 (4th highest).
Those statistics were published in February 2014. In August of 2014, Amazon had acquired Twitch for 970 million dollars, giving Twitch the biggest boost in its growth trajectory. With access to Amazon’s capital, connections, and AWS (cloud computing service), Twitch began its rise to become the definitive number one live streaming platform.
As an Amazon subsidiary, Twitch has made some key acquisitions.
Curse used to be a popular online community where gamers could converse on forums and share various unofficial modifications for video games that enhance their gaming experience. However, Curse also developed various software, most notably their VoIP (voice over IP) client, Curse Voice.
In March of 2017, Curse Voice transformed into the Twitch Desktop App, where viewers could watch streams, have access to various chats, and then screen share and video call with their friends on the app.
Just like the goal of many technology services out there, Twitch wants its users to maximize their time on the service. As a result, Twitch acquired ClipMine, which was a company that used machine learning and computer vision to gather data from the actual stream itself.
Twitch users could now discover streams through filters such as the character they are using in a video game, making it very convenient to find specific content and use Twitch’s services.
Twitch’s revenue mainly comes from advertisements rolled out mid-stream or the traditional rectangular advertisements found around the content. In addition, Twitch offers a subscription service that gives a user the benefits of Amazon Prime plus ad-free viewing and exclusive in-game items.
A large portion of their revenue also comes from their collaboration with their partnership and affiliate programs. Broadcasters with a consistent streaming schedule and an adequate amount of viewers are able to monetize their content through advertisements and get their own subscription service, which Twitch takes a cut of. Streamers also become ambassadors for Amazon’s services by promoting products, such as video games, on their personal channels.
In 2017, there were 666 million video game content viewers and this number is expected to grow to 740 million in 2019. Twitch will need to continue to find ways to effectively monetize their ever-growing audience.
The most obvious problem for Twitch at the moment is the fast growth of YouTube Gaming. At the moment, YouTube Gaming is Twitch’s only legitimate competition. YouTube Gaming has access to YouTube’s user base and data and has the advantage of having a familiar platform. Twitch will have to find ways to retain their best broadcasters/influencers and attract new broadcasters in order to stay at the top.
In addition, over fifty percent of Twitch’s user base is in North America. Twitch may have some problems with copyright laws and Internet restrictions abroad, but global expansion would be a huge boost to their user base.
Any service that offers live streaming suffers from a problem known as “swatting”. Swatting is the act of finding a broadcaster’s location through an IP address or through watching his or her stream and then accusing the broadcaster of a crime that instigates a response from a SWAT team. This dangerous act recently resulted in a death. I hope to potentially learn, if appropriate, how much involvement Twitch has with swatting.
BOSTON COLLEGE ALUMNI
John Sutton – CFO
Sutton graduated from Boston College with a degree in Accounting and Information Technology. Sutton started his career in an accounting firm and then worked for multiple publishing firms as director and CFO before joining Twitch in 2012. It will be interesting to hear how his experience in publishing traditional content, such as magazines, translated into his work with video game content!