Twitch: How a Startup’s ‘Terrible Idea’ Made a Billion Dollars
November 4, 2014

android app development companyWatching sports and other competitive spectacles is as old as brain cells. The act of play is what we do to grow, socialize and otherwise participate with others in, and even out, of our own species.

While playing games is naturally a part of the human experience, it is wildly popular in the US to spend free-time watching games, cheering as loudly as possible for teams of choice. There’s a camaraderie built with others who enjoy games that you do, no matter if you are physically involved in the win or loss. Just think about it – when a team wins, we tend to say to fellow fans, “we looked good out there today!,” or “we totally deserved that loss.” After all, how much more fun is it to play a game in front of people cheering for you, or watch a game cheering with others?

Twitch took this concept to a 21st century level. Founded in San Francisco in 2011 with the intention of connecting video gamers online, Twitch has now become a dominant force in live streaming. The site commands 55 million people and counting to the site with one main purpose – to watch other people play video games.

Today Twitch accounts for more than 40% of overall video streaming internet traffic, connecting like-minded people in yet another way online. The viral success was financially proven this year as Amazon finalized a deal to acquire Twitch for $970 million, marking the biggest purchase of the Seattle-based giant.

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There’s a lot we can learn about the plucky startup gone massive internet competitor. How did Twitch tap into the human need for connectivity, love for competition, and the ever popular video gaming culture – and what can we learn for our businesses?

Be Different and Listen

The original site Twitch founders launched was, a live streaming site starring Justin Kan. In 2005 the live streaming phenomenon was still fairly advanced, giving the site an innovative boost the less-technologically inclined could command. Justin’s site certainly wasn’t the only one streaming the life of a young 20-something, but what made it different was the encouraged interaction between and with audience members. This was made possible via live chat feed, 24/7.

However Justin used another one of our primary principles in growing his business – he listened to his audience. Not only that he made the most popularly demanded changes. As the price of webcam hardware/software plummeted, visitors to his site wanted to stream their own live video as well. So expanded to allow exactly that.


While gained some traffic, it didn’t attain the explosive growth Kan and his team were looking for. In response they pivoted their focus and went back to the drawing board, keeping the idea of live streaming and interaction, but became more deliberate with finding a niche.

The next idea for the group was to maintain a social video streaming environment, but to totally nail it with one community. The gaming community became the target, and Twitch launched in 2011.

The formula worked and Twitch quickly took off.

Why? It answered a problem in the market – there was no one go-to place for gamers at a massive scale. From Disney to Diablo, Twitch facilitates a social environment for people who were already online, already enjoyed video games, and allowed options to encourage participation from all walks of gaming life.

Offer Economic Opportunity

The appeal to Twitch is two pronged – one is for social interaction by watching others play games. Yet a second appeal is to be the player of the games and make money from the service. Players who gain a sustained following on their channels can earn subsequent or even full-time income from the site. The most popular players can make as much as six-figure incomes.

The way to make money? Twitch calls popular players “partners,” and allows partners to share with Twitch the revenue earned from their live streams. One way is by running advertisements on their channels, which can be controlled by the partner themselves. Another means is by activating a subscription program that enables a viewer to subscribe to the partner’s channel for $4.99 a month. Yet a third avenue for revenue is if fans are feeling particularly generous, they can pay partners they connect with donations via PayPal.

Stay True to the Core – Keep the Clothes On

It’s happened to the best of us. You’re online and fire up the webcam, but for some reason the idea of putting on a normal t-shirt slipped your mind. While everyone is permitted to make the mistake here and there, Twitch has recently cracked down on live streaming dress code.

In an addendum to Twitch’s terms and conditions released this week, Twitch is requiring gamers to “Dress…appropriately. Nerds are sexy, and you’re all magnificent, beautiful creatures, but let’s try and keep this about the games, shall we?…You may have a great six-pack, but that’s better shared on the beach during a 2-on-2 volleyball game blasting “Playing with the Boys.” What this does is keeps the core of what Twitch started as – a platform for all gamers. Enforcing the dress code can put parents and other Internet users at ease.

Amazon Acquisition

As you can see, Twitch is a big deal and corporate giants have noticed. The popularity of the platform climbed with explosive growth, which originally caused Google to make a play for the platform. Eventually Amazon won the battle with a $970 million dollar deal, and Twitch is a startup success story.

What the rest of us can learn is that ideas, no matter how strange, can take off. Founders need to listen, not be afraid to make strategic changes, but still maintain the core of principles of the original idea. Take it from Justin Kan, who in his interview at TechCrunch last week offered some metered encouragement. “If you look at all startup stories, it’s not a straight line… to success,” Kan said. “If could work and be successful, then no one has any excuse. That was a terrible idea.”

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