Twitch Is In Danger!
Summary
TLDRAmazon's acquisition of Twitch in 2014 for nearly $1 billion has yet to yield a financial return, with the live streaming platform continuing to operate at a loss. Despite an increase in users, Twitch faces challenges with user engagement and profitability. The platform's business model, which involves high costs for simultaneous live streams and content moderation, is under strain. Twitch's CEO, Dan Clancy, acknowledges the lack of profitability and has been focusing on improving the mobile experience to drive shorter, more frequent user sessions. There's potential for growth in sponsored content and creator-brand partnerships, but the platform must innovate to turn the tide.
Takeaways
- 💵 Amazon acquired Twitch for nearly $1 billion in 2014, but it continues to operate at a loss.
- 📉 Twitch's biggest paying users are spending less, and new user growth and engagement have slowed.
- 😟 There are concerns about a potential third round of layoffs at Twitch following two previous rounds.
- 👨💼 Amazon CEO Andy Jassy has shown little tolerance for unprofitable businesses, which could impact Twitch's future.
- 🧟♂️ Twitch risks becoming a 'zombie brand' at Amazon, similar to other underperforming internal projects.
- 📈 Despite the challenges, Twitch's user base is still growing, with millions of daily visitors.
- 💻 The business model of Twitch is costly due to the need to support tens of thousands of simultaneous live streams.
- 📺 The long-form live video format on Twitch doesn't align well with traditional ad sales strategies.
- 🎮 Twitch still has little competition for live streaming of video gameplay and has seen success in categories beyond gaming.
- 📱 Twitch is focusing on improving its mobile experience to drive shorter and more frequent user sessions.
- 💼 Twitch CEO Dan Clancy's frequent work trips to meet creators have been criticized amidst layoffs and financial struggles.
Q & A
How much did Amazon pay for Twitch in 2014?
-Amazon paid almost $1 billion for Twitch in 2014.
Is Twitch profitable according to the Wall Street Journal article?
-No, Twitch is still losing money according to the Wall Street Journal article.
What has been the trend with Twitch's biggest paying users?
-Twitch's biggest paying users are opening their wallets less, which is affecting the platform's revenue.
How has Twitch's user engagement and growth been affected in recent times?
-Growth in new users and engagement has slowed, as reflected by third-party data.
What concerns do staffers have regarding potential layoffs at Twitch?
-Staffers are concerned that a third round of layoffs could come in the fall following an annual operational review.
What is Amazon's stance on Twitch's profitability?
-Amazon has always taken a long-term view of Twitch and remains confident in its potential, despite current profitability issues.
What challenges does Twitch face with its business model?
-Twitch's business model is challenging due to the high cost of enabling tens of thousands of simultaneous live streams and the need to invest in content moderation tools.
How has Twitch's user base grown from 2024 to 2025?
-The number of Twitch users is forecast to continue growing, remaining a significant part of Amazon's traffic.
What are some of the internal Amazon projects that have been sidelined like Twitch?
-Projects like book review app Goodreads, online task finder Mechanical Turk, and discount website rooot have been sidelined due to unmet expectations.
What is the current state of Twitch's competition in the live streaming market?
-Twitch still has little competition for live streaming video gameplay and has seen success beyond video games in categories like just chatting, sports, travel, and music.
What steps has Twitch taken to improve its platform's mobile experience?
-Twitch introduced a different look to its mobile app, including a Discovery feed filled with short snippets from live streams to drive shorter and more frequent user sessions.
What are some of the criticisms against Twitch CEO Dan Clancy's actions?
-Dan Clancy has been criticized for his work trips to meet creators and host live streams while the company is laying off employees and remains unprofitable.
What is Twitch's current position as a source of US web traffic?
-Twitch is the 18th largest source of US web traffic, down from 4th in 2014 when Amazon bought it.
What are some of the strategies Twitch could employ to increase revenue?
-Twitch needs to create more sponsored content, connect creators with brands for promotions, and find ways for advertisers to engage with the platform's authentic creator and viewer relationships.
Outlines
💰 Twitch's Financial Struggles
Amazon's acquisition of Twitch in 2014 for nearly $1 billion has yet to yield a financial return. Despite the platform's continued user growth, Twitch remains unprofitable with its biggest spenders reducing their financial support. The Wall Street Journal reports a slowdown in new user growth and engagement. Concerns over potential further layoffs are rising, especially following two previous rounds. Amazon CEO Andy Jassy's focus on profitability has put Twitch at risk of becoming a 'zombie brand' within Amazon. The platform's business model faces challenges due to the high costs of maintaining live streams and content moderation. Twitch CEO Dan Clancy acknowledged the platform's lack of profitability in January, following job cuts. Twitch has also closed operations in South Korea and raised subscription prices for the first time.
📉 Declining User Engagement and Revenue
Twitch's user numbers continue to rise, but there's a decline in the hours users spend on the platform, which directly impacts revenue. The trend suggests a preference for shorter content forms over Twitch's traditional long-form live streaming. This shift has led to a decrease in subscription value for viewers, prompting some to cancel subscriptions. Twitch's ad sales team was integrated into Amazon's in 2021 to improve results, but the platform's ad revenue and commerce revenue, which accounted for less than 0.5% of Amazon's total 2023 revenue, have not been sufficient to offset the costs. Investments in exclusive contracts and esports events have also contributed to the financial strain.
🚀 Attempts to Boost Twitch's Revenue
Twitch has introduced new features like a mobile app with a Discovery feed to encourage shorter and more frequent user sessions. Despite this, internal documents and employee feedback suggest that Twitch's revenue from commerce is growing while advertising sales have plateaued. The platform's rank in terms of US web traffic has also fallen from 4th to 18th since its acquisition by Amazon. Twitch's former CEO Emmett Shear was succeeded by Dan Clancy, who has been criticized for his frequent work trips and live streams during a period of layoffs and financial struggles. Clancy has defended these efforts as necessary for building relationships with creators and improving the platform's mobile experience.
🔄 The Need for Revenue Diversification
The script highlights the need for Twitch to diversify its revenue streams beyond viewer spending. It suggests that sponsored content and partnerships with creators could be a successful model, as viewers have a high level of trust in the creators they follow. The platform needs to create more opportunities for advertisers that align with the authentic nature of the creator-viewer relationship. The summary also points out the lack of progress on previously announced initiatives like channel skins and additional revenue opportunities for creators, suggesting a need for more focus on these areas to improve Twitch's financial position.
Mindmap
Keywords
💡Twitch
💡Amazon Acquisition
💡Profitability
💡Live Streaming
💡Audience Engagement
💡Subscription Model
💡Esports and Gaming
💡Short-Form Content
💡Advertising Revenue
💡Zombie Brand
Highlights
Amazon acquired Twitch in 2014 for almost $1 billion, but a decade later, it has not received a significant financial return.
Twitch has faced declining user engagement, with its biggest paying users spending less and growth in user engagement slowing.
Concerns about Twitch's profitability have led to speculation about potential layoffs, following two previous rounds of cuts.
Amazon CEO Andy Jassy has initiated a profitability review across the company, with a focus on cutting unprofitable businesses.
Twitch remains unprofitable despite its large user base, according to CEO Dan Clancy, who stated in early 2023 that the platform is still losing money.
Despite its challenges, Twitch continues to attract millions of daily visitors, although maintaining tens of thousands of simultaneous live streams is expensive.
Long-form live video, Twitch's core offering, is difficult to monetize with ads, making the platform's business model particularly challenging.
Twitch's user base continues to grow, but the time spent on the platform has been declining since the peak in 2020 during the pandemic.
Subscriptions, which are a key revenue source for Twitch, are becoming harder to justify for users as subscription prices increase.
Twitch's reliance on viewer-generated revenue is problematic, as viewers are canceling subscriptions due to time constraints and subscription fatigue.
Amazon does not break out Twitch's financials, but the platform generated approximately $667 million in ad revenue and $1.3 billion in commerce revenue in 2023.
Twitch's advertising revenue has plateaued, with internal projections forecasting a potential loss of nearly a quarter of a billion dollars in revenue by 2025.
Twitch's rank as a source of US web traffic has fallen from 4th place in 2014 to 18th place in 2023, reflecting its challenges in retaining engagement.
CEO Dan Clancy has focused on improving Twitch's mobile experience to encourage shorter, more frequent viewing sessions through clip discovery and swipe-based navigation.
Twitch needs to improve revenue opportunities through sponsored content and partnerships with creators, as relying solely on viewer payments is insufficient for profitability.
Transcripts
Amazon paid almost $1 billion for Twitch
in 2014 it's still losing money this was
posted by The Wall Street Journal now
this is not news this headline is not
news to anyone that follows my content
Dan Clancy at the beginning of this year
actually said that twitch is not
profitable now he didn't say by how much
um and I don't know if this article will
but yes it is still losing money we do
know this this is not new news but I
like reading this stuff and you know
we'll see if there's anything that is
new in here Amazon paid nearly $1
billion to acquire the live video
startup twitch interactive in 2014 a
decade later the retail giant has
received little Financial return from
one of its bigger Acquisitions documents
reviewed by The Wall Street Journal show
twitch's biggest paying users are
opening their wallets less and
thirdparty data reflect that growth in
New Year and engagement has slowed
following two rounds of layoffs in the
past year staffers are concerned that a
third round could come this fall
following an annual operational review
according to people familiar with the
matter Amazon chief executive Andy jasse
who took over in 2021 has led a
profitability review at the company and
shown little tolerance for unprofitable
businesses insiders say that they worry
twitch is at risk of becoming what they
call a zombie brand at Amazon internal
projects or Acquisitions that have been
sidelined because they haven't lived up
to expectations these staffers pointed
to book review app Goodreads online task
finder Mechanical Turk and discount
website rooot oh my gosh Mechanical Turk
that's a throwback who who here was
making pennies on Mechanical Turk okay
anyone anyone the spokesperson for
Amazon said it has always taken a
long-term view of twitch and noted its
ability to attract harder to reach
audiences comedy said it remains
confident in twitch's potential Amazon's
Journey with twitch underscores the
challenge companies face as they seek to
grow through Acquisitions especially
when they bet on trendy startups that
aren't making money number of us twitch
users 2024 and 2025 are forecast so the
number of users has continued to go up
which remains a tiny part of Amazon
continues to get millions of visitors a
day however its business model is
challenging enabling tens of thousands
of simultaneous live streams is
expensive and the company has had to
invest in tools to moderate the content
insiders said the content itself poses
challenges as long form live video
doesn't align well with selling ads I'll
be blunt we aren't profitable at this
point twitch CEO Dan Clancy said on the
platform in January shortly after the
company laid off around 500 workers more
recently twitch closed its operations in
South Korea disbanded its safety
advisory Council and raised prices on
its subscription offerings for the first
time broader Trends are in twitch's
favor spending on video games has slowed
and consumer preferences have generally
shifted the short concise videoos
spanning a range of topics there's a
reason why I'm so focus on YouTube this
year I've been doing a lot of YouTube
content so if you're not sub to my
YouTube channel you're missing out on
the best things that we talk about in
the Stream because you know not everyone
can catch my my three-hour weekly stream
if you miss something there's likely to
be a video on YouTube still twitch has
little competition for live streaming a
video gameplay and the company said it's
seen success Beyond video games with its
just chatting category which creators
discuss a variety of topics with viewers
in that its Sports travel and music
sections are growing the company said in
a live stream in June featuring Creator
Kai Senna and comedians Kevin Hart and
druss ruski broke the company's North
American record for most viewers when it
reached
72,000 concurrent viewers it surpassed
the 2018 record set by musician Dr and
ninja video game creator which said its
creators connections with their audience
can be beneficial for advertisers the
company's users have also included
former president Donald Trump rapper
post Malone and pro race car drivers
Charles clerk I don't count restreaming
your tiny rallies as like using the tool
like it's not like he went live and was
like attention twitch viewers everything
they say about me is a lie thankfully
twitch you know the best best platform
out there lets me speak the truth let me
tell you the truth from my perspective
okay the media is out to get me
and if you really want the truth make
sure to subscribe it's $5 a month what
is
$5 I mean $5 is nothing you might as
well just give me $25 get give me that
tier three sub okay for my campaign I I
mean uh to to get me out of jail I I
mean um for you know free free speech
Free Speech give me give me $20 fore
your free speech thank you in 2011
twitch was spun out of live streaming
platforms Justin TV with a focus on
video games games about a year later
Amazon took up game publishing and saw
twitch as a vehicle for promoting titles
which makes a lot of sense I feel like
there's no better platform to Market
video games on on Twitch and if you're
going to make games and you have a
platform that promotes
games that's huge you would think the
company also sought to convert twitch's
mostly young male users into customers
of Amazon's other businesses and further
leverage the site's live video strength
for many early twitch employees working
on the live streaming service was a
passion project with little focus on
profitability or accountability built
into the company's culture
according to people familiar with the
matter which definitely makes a lot of
sense I mean it definitely seemed that
way some employees didn't take their job
seriously after the acquisition they
added an attitude Cally referred to in
Silicon Valley as rest and vest
producing profit was a problem from the
beginning twitch Executives presented a
three-year profitability plan during one
of Amazon's annual reviews only to
reintroduce the same plan in subsequent
reviews according to people familiar
with the matter the tech giant has taken
a mostly hands-off approach current and
former staff members said as a focus on
the company's bigger projects and
businesses in 2021 Amazon began
integrating twitch's ad sales team into
its own aiming to drive better results
this is number of hours spent on Twitch
globally so the number of users so
that's really interesting right number
of users has steadily increase since
2021 I mean since 2019 I mean it's
always been increasing but even post
2020 getting back to the real world
still going out but if we look at the
number number of hours spent on Twitch
you had the big surge again 2020 and
it's steadily gone down since 2021 and
that really aligns with the
interpretation that most people are
people love twitch and there's a lot of
value to get from twitch especially if
there's like a Creator you really like
but overall it's too like long form just
has limitations and people want the tldr
for a lot of things they want the clips
they want the highlights that's why they
want the short form short form is H huge
for this reason this this really shows
this this you know this trend of more
users are on Twitch but they're spending
less time on Twitch I mean I don't know
any other way to to Really interpret
this overall people just are spending
less time and when you spend less time
on on a platform that generates Revenue
by watch time and um also just like
community support if you as a viewer
spent less time watching a streamer
you're more likely to cancel a
subscription to that streamer because
not justifying the value of that sub and
Subs are expensive I mean you got you
got all your Hulu and your Netflix you
got your five twitch streamers that you
sub to you got your Amazon premium that
you sub like you know it really adds up
especially now that the price of
subscriptions has increased and this is
why even though it under it makes sense
for twitch to increase their sub prices
because they've never done that before
it's also a problem because it does
create a you know value reflection for
every every single consumer of like okay
it costs this much a month this is
adding up is it worth me to continue
subbing and and the caveat is you don't
have to sub to watch a streamer you have
to sub to watch Netflix or you have to
you know get it from your parents but
you do not have to subscribe or pay a
streamer to watch their
content for the most part
right it makes it harder to justify that
value and when you're spending less time
on the platform because you're busy you
have time to watch hours of content
you're headed back to work so you can't
like actually watch while you're at work
you know a lot of reasons for for this
to to be going back
down comes less um less Justified Amazon
doesn't break out twitch Revenue figures
in 2023 the live streaming service
generated about $667 million in ad
revenue and $1.3 billion in Commerce
Revenue according to internal documents
reviewed by the Journal that amount
accounted for less than 0.5% of Amazon's
total 2023 Revenue Amazon is expected to
Post Its second quarter uh results on
Thursday which this is a few days old so
I guess they've already done that
fortnite and the pandemic twitch grew
rapidly when its popularity soared from
the success of the game fortnite in 2018
and again during the pandemic's
lockdowns but its expenses Rose too the
company spent more than $100 million on
exclusive contracts for Top Broadcast
talent and for the rights hisam major
Esports events people familiar with the
matter said invested in new products
that it ended up abandoning or
prioritizing such as communications
platform a karaoke offering rip twitch
sings and watch
parties like I feel like man twitch
sings was something
special twitch sings was something
special could you imagine offering
twitch
sings like integrated into stream
together right like stream together just
becomes this like tech for interactivity
basically right like stream
interactivity stream together twitch
sings streaming together twitch
sings the
content I don't know I know it's not
maybe not like you know maybe there's
not money to be had unless like you had
to like buy the
songs or you could unlock the songs by
like your viewers could buy the songs
for you or you reach like a certain
amount of Subs you unlock new songs I
there's so much way to like gamify it
and I just like ah especially now that
they're doing the DJ thing right the the
DJ program so they're clearly working
with music industry I mean I mean come
on like karaoke's a blast anyways this
is mostly like me just wanting karaoke
not not like is it the best business
move I no but I mean it could be
fun if you can't be profitable when you
have a surgeon demand you have something
structurally wrong I mean yes DJ program
R is pretty abysmal so far how do you
mean tiny jams that's interesting are
you in it is that why you have a uh uh
like a DJ thing which DJ is that what
you have that I might have to get you on
stream next week maybe we can have some
time and chat about it I'd love to know
uh know more just opt it in interesting
I I definitely would be curious um maybe
uh yeah hit me up in on Twitter or
Discord or something if you want no no
pressure in recent years switch as
biggest payers who are crucial to its
Revenue have been spending Less on the
platform subscriptions and donations to
creators according to documents reviewed
by the Journal which takes a cut of
those payments and internal projections
forecast that if that Trend continues
the platform could shed nearly a quarter
of a billion dollars in Revenue by the
end of 2025 company said overall
Commerce revenues continuing to grow
year-over year Rich's advertising sales
have plateaued since the pandemic ended
according to the documents and people
familiar with the matter overall the
platform is the 18th largest source of
us web traffic down from 4th in 2014
when Amazon bought it according to
network intelix and security for uh firm
Nokia deepfield web traffic is a measure
of bandwidth used by the site last year
twitch's longtime CEO and co-founder EMT
sheer left the company was succeeded by
Clancy former and exe formerly executive
at Google next door Clancy joined twitch
as president in 2019 before taking the
Reigns in the state of twitch memo
issued to employees in May Clancy listed
improving the platform's mobile
experience to drive shorter and more
frequent user sessions as a critical
goal um hence the waight on clip
Discovery and viewing and and
and boom boom boom swipe swipe swipe
being able to find something interesting
to watch very fast but going back to the
mobile thing and I won't harp on
it I would wager that people spend a
significant amount of time watching
people they already follow over
discovering new creators and while that
is important to shifts and and make it
easier to discover new creators and like
reduce a lot of the friction that
they've had in the past you still got to
make it very easy to
find and see what the people you're
following are up
to reflective of that plan twitch
introduced a different look to its
mobile app and we just went over that um
if you're watching on YouTube there's a
video and I actually show the app on
stream and go through it so check that
out including a so-called Discovery feed
that is filled with short Snippets from
creat live streams and it did release
the app uh employees have criticized
Clancy for his work trips to meet twitch
creators around the world and host live
streams from various locations as the
company's laying off employees and
saying it remains
unprofitable which is a really good
point to bring up Dan Clancy has been
like touring the world for for
months like all year basically has been
going
around I mean I don't know like I get
doing it but doing it all the time does
not seem like the best use of time in a
June email to employees viewed by the
Journal Clancy defended his actions and
included the itinerary of his Europe
trips uh with stops in France
Switzerland and the Netherlands each one
included mediumsized dinners with
creators he wrote I was running a
manufacturing company I would be meeting
with the companies that provided us raw
materials why is this the
comparison dude this is a this is like a
tech company like that leans on creators
and and
like Innovation I just so
what like I get it like you you do want
to visit the creators and you want to
improve relations with the creators I do
get it it's not like it's not like the
concept is people are not complaining
about the concept it's it's I'm guessing
they're complaining about how
often you're doing
that and how much time and money you're
spending doing that there's I
mean to me it's it's over the top it's
like way too much
time you cannot possibly be doing
everything to run the company while
you're abroad doing dinners IRL
streaming going on shows like there just
has to be a balance and I don't I I
would agree if this is what the
employees are are complaining about is
too much time being spent doing all the
stuff again and and and and it's an
Optics thing too like maybe you know
maybe he's spending 10 or 20K a month on
like traveling and and dinners and doing
all this stuff and yeah like a single
person getting laid off is never going
to be you know less uh less
expensive you know it's not it's not
like going to these dinners is going to
save one employee but again I just the
Optics of like your company is
struggling and you building Goodwill
with creators has been so important
because before Clancy took over like
when he took
over I don't know how you guys feel but
twitch I feel like the morale of the
community was all time at an absolute
alltime low I mean people were resentful
hypercritical just out the door with
twitch just done with the lack of
communication and transparency and Dan
has done a really good job to bring that
Goodwill back and there's been an
excitement about it it's good it's been
good but it's like okay okay we get it
you like to hang out with creators you
like to stream that's good but like okay
you can go back to your office now and
like go do twitch stuff I mean La
literally January last year it's been a
year and a half they announced like they
were going to do like more sponsorships
like Channel skins and more Revenue
opportunities and they haven't even done
this those things and
now again counter you know I'm not
saying Dan would be sitting down and
coding that but still like y'all put a
lot of effort into things like stream
together and less so much into like
creating this is this is the the key
principle is Twitch needs to create
revenue and opportunity outside of the
wallets of viewers viewers cannot foot
twitch's bill
it's not enough and especially not in
today's
economy you have to you have to make ads
better you have to do sponsorships you
have to figure out how
Brands can can advertise on a site where
creators are authentically being
themselves and viewers have a really
high loyalty and Trust on the creators
they
watch and I feel like and and and I I
would have to look up you know Research
into this but I would bet
that
sponsored like if you bring the Creator
into the the the sponsorship and you get
them to vouch for a product that's going
to go over so much better than just like
having a Tik Tok of like look at my
water bottle it's really cool I can
drink out of it and hang by the
pool you know what I mean
like just made that up you're welcome
Chad well
um you know basically to conclude this
article um you know we we don't get into
like yes we know twitch is losing money
so it's not new news it is interesting
to see that there's more people using
twitch but less time being spent on the
platform um the in terms of Revenue
twitch needs to get more sponsored stuff
connect the creators like twitch has a
bounty board like they need to roll that
out expand it you know give more options
for creators to work with the brands to
promote a product because that
just a very successful way to to pitch a
product versus like R
nads R nads means nothing to a viewer
but if I say if I run an ad for Taco
Bell it's one thing but if I say oh my
gosh I love Taco Bell look at this new
uh nacho fries that I got you know their
new Cantina
quesadilla we just had Taco Bell
yesterday that's it's going to go over
so much better
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