
Twitch could be a $20B company within Amazon - steven
https://backchannel.com/twitch-could-be-a-20-billion-dollar-company-inside-amazon-2507b7f9aa6d#.1hn2nry6d
======
dexwiz
Amazon bought two things with Twitch: 1) A social community 2) a monetization
model. The video service itself is secondary.

The past several years has shown the social communities grow organically. But
its hard to make users adopt one. If you build it, they probably won't come.
It's easier for a big company to buy one up than start one from scratch.
(Think Instagram versus Google Plus).

Second, Twitch is one of the few monetization models on the internet that is
not pure ad based. Twitch does have ads, but streamers see more money through
direct donations and monthly subscriptions. Also I am willing to bet the rate
of ad blockers on Twitch is higher than the average site. Twitch has shied
away from dark patterns that lock out adblocking users. I don't see any big
modals or disabled video if I run an adblocker on Twitch. This is no doubt on
purpose. So Twitch has locked on an monetization model of direct payment for
digital content, which is rare on the internet. And best of all, it's
completely optional.

A video streaming service alone is nothing revolutionary. There are many
Twitch clones that haven't reach near the same popularity. Its the community,
and how its funded.

~~~
ChuckMcM
If this thesis holds true:

    
    
       > The past several years has shown the social 
       > communities grow organically. But its hard to
       > make users adopt one. If you build it, they probably
       > won't come. It's easier for a big company to buy one
       > up than start one from scratch. (Think Instagram
       > versus Google Plus).
    

Then the best use of someone's time might be to start as many social networks
as possible on the possibility that one of them develops enough community to
go "big." At which point you sell it to the highest bidder. Sort of "community
farming" on a meta level.

~~~
forrestthewoods
My rule of thumb is that if you can get 100M monthly users you can sell your
company for $1B. It doesn't matter what your product or platform or service
is. It doesn't even matter if you have any revenue. If you can get a hundred
million monthly users then you can sell for 1 billion dollars.

At least that's what I've observed over the past few years. Twitch was bought
$1B with a mere 50M users. But highly engaged users with successful
monetization. So it fits my model. WhatsApp was bought for almost $20B under
the assumption they could hit 1B users. A 2x premium for being so large.

So roughly $5 to $20 per user. That seems pretty reasonable.

~~~
TeMPOraL
Unless I see evidence to the contrary, I assume that all startups follow your
model - i.e. they don't give a damn about the product they're making[0]; they
need something that'll give them a good growth curve in order to get bought
for $alot[1].

I wonder if and when people get tired of that. I also wonder how user
engagement/retention numbers evolve globally over time; if almost everyone
treats their users like cattle, I won't be surprised if more and more people
started treating on-line services as throwaway.

[0] - corollary: all the "we're trying to change the world", or "our passion
is to help you do X" they say on their page is just lies.

[1] - that also applies to paid services; I've read that classic Maciej's
post[2] about paid vs. free services, but companies aren't stupid; if being
paid signals trustworthiness and leads to more users, they'll make the service
paid

[2] -
[https://blog.pinboard.in/2011/12/don_t_be_a_free_user/](https://blog.pinboard.in/2011/12/don_t_be_a_free_user/)

------
AndrewWarner
Maybe the most useful interview I've ever done on Mixergy is with Twitch's
cofounder about how he founded the company.

Do yourself a favor and get the transcript. He's super-methodical.

[https://docs.google.com/document/d/11Bcu32XwL4S0BHB2fybaqRRQ...](https://docs.google.com/document/d/11Bcu32XwL4S0BHB2fybaqRRQF8I2KUpnFbQLrCM7gZk/edit)

~~~
shostack
That's awesome. You should consider posting it as a .epub or .mobi file!

~~~
pavs
With Google doc you can do "File -> Download as -> epub / pdf" and other
formats.

------
strictnein
If you're interested in the backstory of Justin.tv (which became Twitch),
StartUp has a two part podcast on it:

[https://gimletmedia.com/episode/almost-famous-
season-3-episo...](https://gimletmedia.com/episode/almost-famous-
season-3-episode-1/)

[https://gimletmedia.com/episode/season-3-episode-2/](https://gimletmedia.com/episode/season-3-episode-2/)

~~~
bballer
Just wanted to say thanks for these links. One because the story was/is
awesome, and two, I had no idea about StartUp Podcast.

It was funny when one of the co-founders said something along the lines of
"who the hell wants to watch other people play video games on the internet,"
little did he know... I beat my head on my desk some days thinking "why didn't
I think of that!!!!" and then I beat my head on my desk again thinking, "what
other ridiculous sounding simple idea is lurking out there yet uncovered." If
anyone stumbles across that very thing and needs help brining it to fruition,
pm me :D

------
alexandre_m
This whole industry of game streaming is operating in a gray zone.

It's a matter of time before we see some big lawsuits against the streamer and
streaming platforms which make a lot of money by publishing the whole content,
without any royalties to game developers /publishers.

For certain games. it doesn't spoil or ruin the fun factor for viewers, but
some others it just removed the incentives to buy a copy of the game in the
first place.

~~~
duaneb
Why do you think content owners would see this as IP theft rather than free
advertising? Are people watching play throughs rather than playing it
themselves?

~~~
wongarsu
It heavily depends on the game. There are lots of single-player games where
the story is much better than the actual game mechanics. Or where watching
somebody figure out all the puzzles is more fun than doing it yourself. Here,
streamers and let's-players likely cause a decrease in game sales. In
simulation and competitive games on the other hand streamers should usually
cause more sales then they prevent.

As one less recent example, watching Half Life 2 with funny commentary is
great, but I have no desire to ever play the game myself.

~~~
zapt02
Relevant article on a game developer that did not approve of streaming their
game:
[http://www.thatdragoncancer.com/thatdragoncancer/2016/3/24/o...](http://www.thatdragoncancer.com/thatdragoncancer/2016/3/24/on-
lets-plays)

------
Noseshine
Funny enough, I'm watching a Starcraft II channel on Twitch just now, while
reading HN. I don't play _any_ games, not even the smallest, but I watch -
although only caster streams, not player streams. Tastosis FTW :)

I have a cable subscription as part of my apartment package - but I don't use
it. I don't even have a TV. Internet and streaming _only_. I find that if I
had TV I'd be much more passive and watch too much, now I watch SC2 but not as
much as if I had TV. I spend a lot more time with edX and Coursera and watch
lecture videos instead. If I had a TV it would be much harder to turn it off
than a game stream. I like the smaller communities, watching a TV production I
am much more of a passive anonymous consumer than even a (very big) 50,000
viewer stream on Twitch, and even though Twitch chat is notorious, at least it
exists. And a lot of streamers and casters react to what is going on in chat
at least sometimes, in traditional media I am much farther removed from the
makers.

Of various streaming services I tried watching Twitch in the end provided the
consistently best experience, these days up to 1080p60. That alone is not
sufficient to know how much data is flowing though, the data rate can be very
different even for streams with the same resolution and frame rate, so with
the same advertised resolution one channel can be much more crisp than another
one, but some people may experience occasional buffering issues.

I just checked, currently there are about 650,000 viewers total on Twitch,
rough estimate just to get an idea of order of magnitude. More stats:
[https://www.quantcast.com/twitch.tv#trafficCard](https://www.quantcast.com/twitch.tv#trafficCard)

You can change the period on the right, the earliest to set "From" to is 23
March, 2012, to get a view of how Twitch's viewers develop(ed) over time. When
I look at the last 365 days it looks pretty flat. I'm not sure about the data
though, for some reason the "Rest of the world" (other than USA) is pretty
much gone from one day to the next beginning of 2016. Does anyone have an
explanation? I doubt that the "rest of the world" stopped watching Twitch
overnight.

Looking at [https://stats.twitchapps.com/](https://stats.twitchapps.com/) it's
the same result though - no real growth any more for at least the last 12
months. Unless that's based on the same data, I don't know.

~~~
cpeterso
I don't play computer games either, or watch Twitch streams, but I have
watched quite a few "Let's Play" walkthroughs on YouTube (mostly old adventure
games). You get to experience the game's story and puzzles without the
frustration. ;)

------
Analemma_
With all that growth opportunity, you'd think they could invest a little more
in the engineering side. I mean, I like Twitch, but their platform is still a
mess. Chat delay can be a minute or more, and the VOD situation still sucks
(60 days? Seriously?). I mean, they're owned by the people who run AWS for
crying out loud. They should be able to knock this out of the park.

I thought YouTube Gaming was going to muscle in to this space quickly just by
virtue of technical superiority. It looks like that hasn't happened yet, but
Twitch can't afford to get complacent.

~~~
wesleytodd
Fully acknowledging that some of the things they have issues with, my startup
also has issues with, BUT:

My startup is under 2 years old, in the same space, and with a much smaller
team. We have solved almost all of the technical problems twitch faces, and
even released many other features that Twitch is only now also working on.

We have regularly looked at this market and what keeps fueling twitch's
success, and strictly speaking people go where the content is. It has NOTHING
to do with the user experience of the product, nothing to do with the quality
of the tech. If there are 500 people streaming the game you want to watch on
twitch and 10 on another platform, the viewers stay on twitch.

Anyway, it is an interesting problem, and one that all competitors in this
space are facing. And has clearly not pushed twitch out in any way.

Finally the self promotion if anyone is interested in our product:
[https://www.stream.me](https://www.stream.me)

~~~
jedberg
> We have solved almost all of the technical problems twitch faces

A lot of those problems are a lot easier to solve with a smaller audience.

My point is, you haven't solved Twitch's problems _at Twitch 's scale_.

~~~
wesleytodd
Very true, that is a continual problem that even twitch hopefully has to
address often. There are no simple answers as you scale an application. I was
more addressing the feature set.

All a team can really do is setup an architecture that can theoretically
scale, and then adjust as you reach higher and higher levels.

FWIW, our site is actually a pivot after a product that reached a higher
unique per day than twitch currently has (99th globally vs 63rd globally
according to alexa.com). And I can say from experience that scaling a real-
time experience is MUCH harder than a more traditional web app experience. But
the techniques are much the same, reach the scale, see what breaks, fix.

------
Multiplayer
My 9 year old son would rather watch people play minecraft than actually play
it. I'm not talking about competitive or pro play (if that even exists for
minecraft) - just people goofing around.

Potentially just an enormous new business for games.

I still can't get my head around it. It's like his version of cartoons.

~~~
lonelycoder2
It's not really a new phenomena. Look back in the 70s or 80s with arcades,
people would stand around watching their friends play. Then later young people
went to each others houses and played video games (mostly multiplayer but some
single player and watched).

It's entertaining watching how other people do things. They might play
differently than how you would play it.

~~~
duderific
Ha, I remember those days all too well...there would be a big crowd around the
best players of PacMan, Defender or what have you...you would have to work
your way in there, or be tall enough to look over peoples shoulders, to see
what was going on.

------
rjvir
It's worth noting that in the 2 year period since Amazon bought Twitch, their
search interest via Google has been stagnant.

[https://www.google.com/trends/explore?date=2014-08-25%202016...](https://www.google.com/trends/explore?date=2014-08-25%202016-08-26&q=twitch)

~~~
sergiotapia
twitch is twitch. Who really searches for Twitch, instead of just visiting the
site and searching for content there?

~~~
rjvir
That proportion is not too relevant for this graph. The graph is relative.

Even if a only a small percentage of Twitch users use Google search to access
Twitch, the graph would be somewhat indicative of it's growth.

~~~
wongarsu
The question is: does the probability that a given user accesses Twitch over
Google search go down as the user uses Twitch more often? Does it so more than
on other sites, maybe because regular twitch use promotes other ways of
engagement (phone app, console app, email notifications, twitter links from
the streamers, etc)?

If 90% of new Twitch users reach Twitch over Google, 30% of one week old users
and only 5% of one month old users, then a flat graph could actually indicate
growth.

------
dfrey
More and more people are dumping cable TV. The main reasons that I hear for
people keeping it are sports and news. If live streaming sites like twitch can
sign deals with sports leagues, then I think we will see even more people
cancelling their cable.

The nice thing about streaming is that you aren't channel limited, so there is
no reason why you can't follow some obscure minor league team on the other
side of the planet.

~~~
paulcole
NFL rights alone will (my guess) cost around 5 billion USD per year when the
next contracts are negotiated, maybe more.

There is no way an online service puts up that kind of money considering
something like 1/3 of Americans simply don't have high-speed internet access.

~~~
jedberg
The last time the rights were negotiated in 2013, they were $40B, with ESPN
paying about double what NBC, CBS and Fox payed.

There is one company with the kind of money that might make sense -- Apple.

It would be a heck of a way for them to jumpstart a streaming service and make
it only available on AppleTV.

Probably the biggest holdup would be the NFL itself, who makes sure those
broadcast contracts reach the biggest number of people to keep their brand
popular.

~~~
paulcole
Apple really is the only option that makes sense, but mostly because it just
doesn't make sense for anyone else. Would love to see it happen. I pay
$50/month during the season for Sunday Ticket and the service is just OK.
Would love to see a better take on it.

------
thecolorblue
What is a good example of a twitch stream to show how great live streaming can
be?

~~~
arcticfox
My favorite is
[https://www.twitch.tv/fopt_membrillo](https://www.twitch.tv/fopt_membrillo).
He streams pro Age of Empires 2 tournaments in the crazy Spanish soccer style,
and his community (including me) support him enough that it's his full-time
job. Full-time AoE2 streamer in 2016??? I think that's amazing.

An example of a crazy moment:
[https://www.youtube.com/watch?v=JrxXKK8oIyE](https://www.youtube.com/watch?v=JrxXKK8oIyE)

~~~
gurkendoktor
Speaking of AoE2, I think Resonance22 has a really good voice and is great at
explaining the game while playing/spectating. Random example:
[https://www.youtube.com/watch?v=Lo-
qAVGb5vQ](https://www.youtube.com/watch?v=Lo-qAVGb5vQ)

(He's not doing it full-time.)

AoE2 HD really got me back into PC gaming after a decade of only touching
Wii/Wii U/mobile games. I'm not yet sure if it can drag me into watching
Twitch, though.

~~~
arcticfox
Resonance22 is indeed fantastic, and very professional. I know he wants to
make a career of casting/gaming at some point and I hope he manages to pull it
off. T90Official is another great AoE2 caster in a similar style to
Resonance22.

Same with me about AoE2 HD, I hadn't played a PC game for years until I tried
it. Now I'm hooked on both playing and spectating. The $30k Clan Masters
tournament going on right now is insane.

------
wehadfun
Watching people play video games is something I still don't understand.

~~~
chippy
Give it a try, see if you like it. I'd suggest a variety streamer first. The
main thing for me, is that it's entertainment, not really the game itself.

Visualise this: Imagine your favourite comedian cracking jokes, now imagine
him cracking jokes while playing a video game. Now imagine a chat of thousands
joining in and interacting with your favourite comedian. Now imagine yourself
talking to and cracking jokes with them. This is, in essence what many popular
streams are.

~~~
serge2k
Now imagine he's not funny and he's trying to appeal to kids.

This is why I don't bother. I do like speedruns, and I watch some of the
cinemassacre stuff on youtube since I do actually like watching those guys.

------
partiallypro
I honestly think the game streaming model is sustainable, but it's also a bit
of a fad that will die down in 5-7 years. I also think Sony and Microsoft will
begin to make their own portals of game streaming that will challenge Twitch.
Microsoft just made an acquisition that points to this. That's not to say they
want to kill Twitch, just that they see its value. In doing so though, it will
squeeze the margin on advertising revenues, couple that with just demographic
shifts in the social fad and I believe it will not grow near as fast as people
forecast As for valuation, I don't know the numbers, it could be worth
billions; but $20 Billion seems like a stretch when CBS is only worth $22
Billion and Viacom $18 Billion at present. I wonder what their actual
financials look like, I feel like there is more monetary incentives and
opportunities for the content creators than for Twitch itself.

------
greendestiny_re
Twitch is a very interesting linguistical experiment, as the chat emotes can
be used to convey very subtle nuances in meaning, unlike anything we've seen
before, off- or online. For example, Kappa is a smug face denoting sarcasm,
superiority, condescension and arrogance, but can imply any of those meanings
_subverted_. Combining the emotes together, along with standard ASCII
characters, can produce very complex and astoundingly compact stories[0].

[0] [http://i.imgur.com/sVQr7wY.jpg](http://i.imgur.com/sVQr7wY.jpg)

------
hoodoof
Game developers don't have any option except to restrict public display of
their games in some way.

There are now plenty of people who enjoy watching but not playing games.

Game developers need revenue for this firstly because they deserve it, having
made the entertainment, but secondly because former players are now just
watchers and not paying money, reducing revenue.

My guess is that games developers will permit public display of a restricted
part of the game, like level one only, and will require royalties for display
of other sections of the game

~~~
hoodoof
I think it's funny that people downvote because they don't like what they read
even if its true.

Put yourself in the shoes of the game developer who puts everything on the
line to develop a game that thousands of people watch but the developer gets
no revenue for.

~~~
bobcostas55
>Put yourself in the shoes of the game developer who puts everything on the
line to develop a game that thousands of people watch but the developer gets
no revenue for.

Has this _ever_ happened?

~~~
nightski
Yea pretty sure if you get the point where you have thousands or tens of
thousands of viewers on Twitch, your game is already very successful.

------
pkamb
I wish Twitch had an Apple TV app.

I've found that the Apple TV is the only way I "get" YouTube in the same way
the kids these days do. No way am I watching videos on my
laptop/desktop/iPhone/iPad while multitasking, but video on the big TV is
great when sitting on the couch or on in the background.

Twitch on the Apple TV would be similar, but it appears Amazon (as with Prime
Video) is refusing to release an app.

~~~
tinbad
Welcome to todays walled entertainment gardens. Amazon thinks their Fire TV or
Stick is superior to Apple TV (or any other product) and why would you want an
Apple TV anyway? (sarcasm)

~~~
adrr
Amazon doesn't want to pay a tax to apple when they sell videos/service
through an AppleTV. Amazon Prime app is available on other media players.

Apple on the other hand doesn't support their video ITunes content on non
apple devices.

------
mandeepj
and amazon could be a $3T (that is trillion) company.

Nothing wrong with these speculations. At least they are positive and much
better than recession or bubble is coming like BS rumors.

source - [http://finance.yahoo.com/news/chamath-palihapitiya-says-
amaz...](http://finance.yahoo.com/news/chamath-palihapitiya-says-amazon-could-
be-a--3-trillion-company-174748494.html)

------
hoodoof
I wonder how the founders feel.

~~~
justin
Well we still got $970 million dollars, so mostly alright :)

~~~
hoodoof
What did your mom say when you told her that?

------
stkyle
These valuations are absurd.

------
ertigen
Not real

------
Happpy
Steam(Valve) could be next on Amazon's list.

Desktop application: Add \- amazon shopping \- streaming \- viewing \- social
...

~~~
shmerl
Why should they sell it to Amazon? Valve is very profitable as it is.

~~~
mastax
Also: Valve is privately owned and the owner (it may just be Gabe) is not
likely to sell.

[http://www.gamasutra.com/view/news/177395/Newell_Valve_would...](http://www.gamasutra.com/view/news/177395/Newell_Valve_would_disintegrate_before_selling_out.php)

