Streaming.

Twitch vs.

I’ve started to get a fair bit of feedback on this newsletter, which is great! Feel free to respond or share it. One of the things that someone asked for was more “case study” type posts. Instead of going through one companies story, I’m going to talk about a situation of three companies, and how one became the brand. So this is not a case study, it’s more of a “moment” study. It’s an example I use when people don’t want to focus on a specific market that makes up more than 30% of their users.


In 2005-2008 there were three major companies who saw a consumer market opportunity for livestreaming online: Livestream, YouStream and Justin.TV.


In 2007, Justin.TV had gone through YCombinator and evolved from being a channel following Justin around, to being a network for anyone to livestream to anyone else (more scalable). Justin TV had been created by Michael Seibel, Justin Kan, Emmett Shear and Kyle Vogt.


In 2007, both Livestream and YouStream were founded.


In 2007, my Dad asked me if he should invest in Justin.tv. I’m assuming that he wanted a “young persons” perspective on the market. I said, “If anything you should invest in Hulu.” I had recently become obsessed with Hulu, which was playing all my favorite shows online. I then proceeded to bring up Alexa rankings for both of them and showing that they were comparable in traffic, but Hulu was more consistent. Long story short, he went against my advice and invested in Justin.tv… and by default invested in Twitch, and Cruise Automation.


In 2010-11, my first company, Xpert Financial had just gotten approval from the SEC to transact secondary securities! Over the next six months, I would cold email and call Livestream CEO and Founder Max Haot, have dozens of calls and get him to work with us on a secondary transaction for his company. He would eventually ask me to be a board observer as well.


I didn’t know YouStream, but the brand was well recognized. It might have been the best brand in the sector actually. Founded by Brad Hunstable, John Ham and Gyula Feher.


Over those founding years, no one was leading the charge. Livestream and Justin.TV were both profitable, but barely, and they were all incrementally gaining more traction. However, the data suggested one thing that Justin.TV, Livestream and YouStream were all able to see: streaming video games was one third of their business.


Now, the question is what do you do when you notice that one third of your revenue is being generated by the engagement of one sector?


The incremental answer is, “Let’s see what other markets we can grow.”


The exponential answer is, “Let’s rebrand and launch a new product.”


Only one of the three of these companies launched a new product completely targeting the video game sector, making the assumption that it would continue to grow, and that was Justin.TV, which launched Twitch. The result was that the 30% of video game streamers on YouStream and Livestream, left YouStream and Livestream and migrated to this new product Twitch, because it was made for them!


Each of these companies ended up doing well, IBM bought YouStream, Vimeo bought Livestream… but Twitch, is Twitch.

So when you gain insight into your user behavior on your product, be stubborn on vision, but flexible on details. Tactics can change and should. Listen to your customer.

By Adam Draper

I ponder as a VC.

It's a quick one minute read to make you think, smile, or laugh.

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