As our avid readers may recall, this is a series intended to examine the changing face of digital advertising in the era of ad blocking software. Some companies have recently taken up arms against the increased use of adblockers, and are beginning to invest in technology to bypass this software and ensure that their ads are reaching as many eyes as possible. Currently, two groups, Facebook and Twitch, seem to be frontrunners in this new trend.
Following its acquisition by Amazon in late 2014, many wondered if the streaming service Twitch.tv was really worth the $970 million that Amazon eagerly shelled out for it. They were not left wondering for long: according to a report from mid 2015, Twitch claimed 43% of the revenue from the video game content industry, a market totaling upwards of $3.8 billion in 2014.
Video game streaming and content creation have been described by some as a niche market, but Twitch boasts some extremely strong numbers in the viewership department. According to a retrospective published by Twitch themselves, the site averaged 550,000 concurrent viewers over 2015 (with peak concurrent viewers reaching over 2 million), and the average monthly minutes of content watched per viewer was 421.6. For comparison, the average monthly minutes watcher per user on youtube was a mere 291 in 2015. By September of 2016, Twitch.tv was averaging 622,000 concurrent viewers.
Given these statistics, it is understandable that advertisers would be interested in reaching this consistent audience. For years, Twitch had used an advertising system that ran ads as a sort of overlay that would play on top of the video feed run by the streamer. This system allowed ads to be easily detected by ad blocking software, as the advertisements themselves were easy to distinguish from the “real” stream. In late 2016, however, Twitch introduced a new advertising system called SureStream, capable of delivering unblockable ads. With SureStream, Twitch itself handles the advertising, integrating the ad into the content stream, making it impossible for adblockers to tell the difference between ad and content.
Twitch justified the change, saying “broader reach and more reliable delivery of ads make Twitch a more attractive ad platform”, but this was not the only reason for the implementation of a new system. Twitch.tv’s methods of monetization actually extend well beyond simply running ads over streams, including a significantly complex partnership and revenue sharing program with certain popular streamers. This partnership program revolves around Twitch splitting ad profits with the streamer (although they do not disclose the details of the split), and adding a subscription feature to the streamer’s channel that allows viewers to pay a flat monthly fee for ad-free viewing, among other benefits.
Twitch also offers a service called Twitch Prime that offers freedom from “pre-roll” ads run by Twitch themselves, but not those run by streamers. Given the sheer volume of options available on Twitch, it’s hard to pinpoint whether Twitch is trying to attract advertisers, or drive viewers towards paid features. This dichotomy may evolve into a problem for Twitch further down the road, but for the time being the new advertising system simply has not been around long enough for meaningful data to have emerged regarding its efficacy.
Overall, Twitch seems to be joining the trend of digital content platforms looking to shore up their advertising delivery in the hopes of cementing relationships with advertisers, and ensuring that they are reaching as many eyes as possible. With Facebook posting massive gains in their desktop advertising revenue following their implementation of harder to block ads, it is no surprise that content services like Twitch would be eager to see similar results.
Next week, we will look into just how effective Facebook’s implementation of a similar system has been, and what can be expected of their approach to digital advertising going forward.