Professional gaming has been around for a decades, however its appeal remained confined to a relatively small demographic in the early 2000s. Emmett Shear, together with Justin Kan, changed that forever when they founded Twitch in 2011. Just 3 years later, the streaming service was purchased by Amazon for US$970 million. Now, in 2020, the company’s estimated value is $5 billion.
Unlike many entrepreneurs, Shear’s success didn’t rely on disrupting any existing industries. Through their creativity and willingness to experiment, Shear and his co-founders developed a unique product and a platform that could be used to advertise to a demographic no one else could effectively reach —young tech-literate men.
Shear studied computer science at Yale, graduating in 2005, before launching his entrepreneurial career in 2006. Together with Kan, Michael Seibel, and Kyle Vogt, he developed and launched Justin.tv, which was simply a 24/7 live feed of Kan’s life. Building on this idea, they launched a live streaming platform in 2007, where users could live stream whatever they wanted. Unlike a simple live stream of Justin Kan’s life, this idea caught on like wildfire.
Justin.tv grew rapidly, with users live-streaming a wide variety of content. The largest category, gaming, eventually gave rise to Twitch.tv, which was spun off in 2011. When it was shut down in 2014, Justin.tv had 30 million unique visitors per month, making it one of the world’s biggest live video platforms.
Taking over the internet with Twitch
Twitch became its own website in 2011, and continued to grow. In 2014, before its acquisition by Amazon, it was the fourth largest source of peak internet traffic in the world, comprising 1.8 per cent of all traffic with 55 million unique visitors per month. Today, Twitch hosts 2.2 million broadcasters, and has 15 million daily active users. In order to achieve this incredible success, Shear leveraged a new type of product to reach a previously unreachable online market.
A new way to engage an audience
At first glance, Twitch might have seemed like a competitor to YouTube. This, however, turned out not to be true. Live-streaming provides a different type of content from the more polished and choreographed content offered by YouTube. This has less to do with the quality of the content, and more with the fact that it allows viewers to engage directly with streamers in real time. This was important, because the primary audience for gaming-streamers are their peers —other gamers. Viewers who can directly interact with streamers can build social connections and share ideas and tips with the audience and other streamers. Moreover, they can engage with others in the audience, allowing streamers to build communities around their channels.
Advertising to an unreachable audience
Most Twitch users are tech-literate young adult men, who are notoriously hard to reach with advertising. They tend to use ad-blockers, and typically don’t watch television. Twitch is one of the only platforms that can effectively and reliably advertise to this audience, because they occupy a niche that is, at this point, still dominated by this particular demographic. By placing short ads in front of video streams, Twitch has found a way to advertise in a way that users can’t circumvent. Moreover, relying on user generated content means that the burden of getting users to stick around to watch the entire ad is on streamers, not the company itself.
What we can learn
By finding a way to capitalise on amateur gaming, Schear developed a unique product that catered to a non-monetised audience. Unlike many entrepreneurs, who start a business with the aim of solving a clear problem, or disrupting a particular industry, Twitch was born out of an arguably ill-conceived social experiment —live-streaming Justin Kan’s daily life. This shows us how imagination and a willingness to experiment can be as useful in business as corporate experience and careful market research.
The value of creativity
By simply taking a shot in the dark with Justin.tv, Shear and his business partners discovered a virtually untouched market segment. Justin Kan’s “lifestream” didn’t turn out to be viable, because of the way viewers interacted with him by pranking him, and even calling the police to his house, a practice now referred to as “swatting”, potentially putting him in physical danger. Through this experience, though, they discovered the unique potential of live streams and direct interaction as a way to attract an audience.
Shear’s entrepreneurial experiences show us how to not only build on existing ideas, but how to find new and unexpected ways to capitalise on them. While neither the technology, nor the basic concept of a livestream was new, the way he deployed it and developed it into what would become Twitch, allowed him to build a business with a secure source of revenue, and no significant competitors.