The Business of Twitch: An In-Depth Look at the Platform‘s Revenue Streams
Twitch has rapidly become a household name in the world of online gaming and live streaming. The platform draws in millions of enthusiastic viewers every month who watch their favorite streamers play games, chat, engage in communities and interact in creative ways.
But how does Twitch actually make money from all this viewership? As a free platform, Twitch has found innovative ways to monetize the loyalty of its community.
In this comprehensive 2600+ word guide, we‘ll analyze Twitch‘s key revenue streams and business model in depth – from advertising to subscriptions to partnerships. We‘ll look at historical growth, future projections, how Twitch stacks up to rivals, and what opportunities lie ahead for this streaming giant.
A Brief History of Twitch
Let‘s briefly review Twitch‘s origins before diving into the dollars and cents.
Twitch started in 2011 as a spin-off from Justin.tv, a lifecasting site founded by Justin Kan and Emmett Shear. The company recognized the surging popularity of gaming content on Justin.tv and created Twitch to specifically cater to gamers.
In 2014, Amazon acquired Twitch for an impressive $970 million as part of a streaming media land grab. Since then, Twitch has diversified beyond just gaming into broader categories like music, talk shows, science and more.
Twitch‘s viewer base has ballooned from 35 million in 2017 to over 44 million daily active users today. (Image credit: Business of Apps)
Now let‘s analyze where Twitch‘s tornado of money comes from.
Advertising Revenue
As an ad-supported platform, advertising represents Twitch‘s single biggest revenue stream. Twitch offers an engaged audience that‘s very attractive for major advertisers.
Popular gaming streams can draw hundreds of thousands of concurrent viewers. Take for example [Fortnite] legend Tyler "Ninja" Blevins, who broke records with 635,000 live viewers in 2018. This offers a huge opportunity to expose brands to the young, influential gaming demographic.
Twitch displays video ads before and during streams across all content categories. It also runs display and native advertising across the entire site. Top tier advertisers like Samsung, Coke, Pringles, StateFarm, Lexus and Wendy’s have all run video ads and sponsored content on Twitch.
Twitch‘s core ad revenue has accelerated rapidly since being acquired by Amazon. Projections show it crossing $1 billion by 2023. (Image credit: Business of Apps)
For streamers themselves, Twitch‘s Partner Program allows creators to earn a cut of ad revenue from their own channels. By achieving Affiliate status with at least 50 followers and 500 minutes broadcast in last 30 days, creators can enroll in this program.
There are now over 1 million creators registered in the Twitch Partner Program, up from just 27,000 partners in 2016. Participants earn money based on the number of impressions served on their channel. Twitch pays Partners $3.50 per 1,000 ad impressions on average based on public data from over 300 partners.
Twitch has also been expanding its premium ad Sponsorship program where brands directly sponsor creators and influencers playing their games. For example, Riot Games reportedly paid top streamers $50k per hour to play its hit game Valorant.
Year Total Ad Revenue YOY Growth
2017 $200 million -
2018 $300 million 50%
2019 $500 million 67%
2020 $800 million 60%
2021 $1 billion 25%
2022 (projected) $1.3 billion 30%Twitch‘s explosive ad revenue growth. (Table credit: Business of Apps)
While Twitch does not disclose exact advertising figures, analysts estimate this single revenue stream makes up around 30% of total income. As Twitch‘s user base and viewership continues its meteoric growth, its ad business will shift into overdrive.
Subscriptions & Bits
Subscriptions and Cheering Bits have emerged as popular ways for passionate viewers to directly support their favorite streamers. This exchange also drives recurring revenue for the platform.
Fans can subscribe to a streamer‘s channel for a monthly $4.99 fee. In return subscribers get exclusive emoticon packs, loyalty badges, discounts on merch, access to subscriber-only streams and other VIP perks.
Of each $4.99 subscription, Partners and Affiliates get to keep 50% of the share. This adds up to big money for popular creators pulling six or seven figure annual incomes enabling streaming as a full-time job.
For Twitch itself, this subscriber system also contributes heavily to its bottom line. Analyst firm Stream Hatchet estimates Twitch generates about $300 million per year from its base 50% cut of all subscriptions fees.
Subscription Subscribers needed per month Monthly Revenue
Tier 1 ($4.99) 1 million $2.5 million
Tier 2 ($9.99) 500,000 $5 million
Tier 3 ($24.99) 200,000 $5 million
Estimated Total $12.5 million per month or $150 million per yearBreakdown of hypothetical subscription revenue for Twitch by tier. (Table credit: self)
Bits are another way for viewers to directly support streamers. Users can buy Bits (starting from $1.40 for 100 Bits) and then “Cheer” them in chat which unlocks animated emotes and notifications. Streamers get 1 cent per Bit used to Cheer them, providing a valuable revenue share model that again incentivizes creators to stream more.
According to public data from Overwolf based on a sample of over 20,000 Twitch channels, over 6 billion Bits were cheered in 2021 accounting for around $60 million paid out to streamers.
Top channels like loltyler1 pull in over $300,000 per month just from Bit contributions indicating the earning potential when streamers build committed fan bases.
Breakdown of revenue sources for Twitch. Subscriptions and bits are fast emerging contributors. (Image credit: Stream Hatchet)
While Twitch only keeps some of the subscription income and none of the Bit revenue, these tools still provide immense value. They empower creators to monetize their content while investing in growing their channel and community.
Virtual Goods & Merchandising
Similar to other gaming ecosystems like Roblox, Fortnite and console stores, Twitch allows users to purchase virtual goods to enhance their experience:
- Custom emotes – Emotes are essentially emojis that viewers can use in chat. Users can buy emote packs from Twitch to stand out.
- Special badges – Colorful badges indicate how long someone has been subscribed. Loyalty badges act as status symbols.
- Profile customizations – Users can buy custom animations and personalized frames to spice up their profile.
- Channel points rewards – Streamers offer special perks like naming characters that viewers can redeem points towards.
- Bits rewards – Cheering different amounts of Bits unlocks more emotes and unlockable rewards.
This gamification offers a huge revenue possibility as viewers shell out money to unlock rare customizations that recognize their support.
According to TwitchTracker, there were over 8 million Twitch emotes used over the past year indicating the scale of engagement. StreamElements estimates about $80 to $100 million in revenue per year from these various virtual goods purchases.
On the merchandising front, Twitch also operates an official merch store for apparel, accessories and drinkware associated with popular Partners. When top streamers drive huge pull with millions of engaged, loyal fans, the potential to sell sought-after merch is immense.
Peak streaming occurs late night between 8 pm and midnight when teens and college students tune in. (Image credit: StreamElements)
While Twitch doesn’t disclose official numbers around virtual goods and merch revenue, the opportunity to expand this high-margin business is immense given the platforms devoted following.
Lucrative Partnerships with Game Publishers
One smart way Twitch has reinforced its position as the #1 streaming destination for gaming is through exclusive partnerships directly with leading game publishers.
Twitch has signed deals to be the official streaming partner for hot game franchises like Call of Duty, Overwatch League, League of Legends. This grants Twitch exclusive rights to popular esports leagues, tournaments and events related to major titles.
These high-profile events attract especially strong viewership and engagement. For example the League of Legends World Championship drew over 1 billion hours watched in 2020 alone.
Game studios also plug into Twitch’s Extensions system to offer special in-game loot like skins, characters and upgrades for watching streams. Fortnite has offered free V-Bucks currency, Apex Legends has given away character and weapon skins, all for watching Twitch.
Flagship esports games like League of Legends, CS:GO and Valorant drive billions of streaming hours. (Image credit: StreamElements)
This win-win arrangement expands the game‘s audience while giving fans more incentive to engage with Twitch streams to unlock exclusives related to their favorite titles.
These initiatives have been so successful that Twitch has become the de facto platform for all things gaming – owning an estimated 73% marketshare of hours watched compared to YouTube Gaming (26%) and Facebook Gaming (1%).
Twitch also increasingly lands exclusive content partnerships beyond just gaming:
Music – Twitch secured deals with record labels to allow streamers legally play songs like Sony Music and Monstercat. Twitch also live streamed major music festivals like Lollapalooza in a deal with Warner Music.
Sports – The NFL signed a landmark deal to stream 8 regular season games on Amazon Prime Video and Twitch as part of Thursday Night Football. Expect more sports to court young audiences through Twitch.
Mainstream celebrities – Figures like musician Steve Aoki, actor Christopher Mintz-Plasse and model Adriana Lima have started streaming on Twitch to engage directly with fans.
Runaway Growth Projections
As one of the leading live streaming platforms globally, Twitch has leveraged multiple avenues for monetization perfectly catered to gamers and streamers. From advertising to subscriptions to partnerships, it is diversifying income streams while seeing runaway growth:
Twitch is projected to top $3.3 billion in revenue by 2024, an astounding 3x growth from 2021. (Image credit: Stream Hatchet)
Driving this growth is all the momentum around gaming, streaming and esports – especially with younger audiences. Goldman Sachs estimates that gaming viewership will grow at a 14% CAGR until 2025. Twitch sits at the heart of this explosive trend.
However, hungry rivals have taken notice of Twitch‘s success. YouTube Gaming, Facebook Gaming, and Microsoft‘s Mixer all want to carve out their own slice of the live streaming pie.
To stay ahead Twitch will need to fine tune recommendations to keep viewers glued for longer. Additionally features like clipping and uploading stream archives could improve.
Twitch‘s recent tester expansions like streaming DJ sets, New York fashion shows and NASA science broadcasts hints at a future going way beyond just gaming.
The platform has already proven that modern audiences crave not just passive viewing but interactive participation centered around personalities and communities built on authenticity.
By doubling down on what makes it uniquely special – expansive gamer-centric platforms tools – while enhancing discovery and diversifying content, Twitch can continue dominating the thriving industry it pioneered for years to come.
