Recap: Twitch is a beloved platform for many gamers, but its numbers and spending patterns are dwindling, much to the chagrin of parent company Amazon. In fact, Twitch has yet to turn a profit since its acquisition in 2012. Amazon has little patience for such performance, and company insiders worry that Twitch could soon become a zombie brand in Amazon's portfolio. While Twitch is attempting to reinvent itself, it remains to be seen whether it will be successful.
Amazon's near-billion-dollar gamble on Twitch has yet to pay off. Despite moments of explosive popularity, the livestreaming platform remains unprofitable more than a decade after its acquisition in 2012, when Amazon adopted game publishing and saw Twitch as the ideal vehicle for promoting its titles.
Twitch CEO Dan Clancy didn't mince words in January, admitting the company's lack of profitability shortly after laying off 500 employees. Internal projections obtained by The Wall Street Journal paint a grim picture, forecasting a potential revenue loss of nearly $250 million by the end of 2025 if current spending trends persist.
"I'll be blunt: We aren't profitable at this point," Clancy said.
The numbers tell a sobering tale. In 2023, Twitch generated $667 million in ad revenue and $1.3 billion in commerce revenue, accounting for less than 0.5 percent of Amazon's total revenue, according to internal documents reviewed by the publication (Amazon doesn't publicly share Twitch revenue figures).
Web traffic has also taken a nosedive since 2014. Twitch's highest-paying users are spending less on the platform's subscriptions and donations to creators.
The shift has put pressure on the platform's business model, which is already strained by the costs of supporting simultaneous livestreams and content moderation. Part of the problem may be traced to the platform's early days, which were marked by passion rather than profit-seeking, according to insiders who spoke with The Wall Street Journal. Amazon initially took a hands-off approach but began integrating Twitch's ad sales team in 2021 to boost results. However, these efforts have yielded little fruit.
Twitch now faces an uncertain future within Amazon. CEO Andy Jassy's low tolerance for unprofitable ventures has sparked fears among insiders that Twitch could become another "zombie brand" in Amazon's portfolio, joining such erstwhile initiatives as the book-review app Goodreads, the online task finder Mechanical Turk, and the discount website Woot.
A spokesperson for Amazon told the publication that the company remains confident in Twitch's potential.
Despite these challenges, Twitch has found success in diverse categories like "Just Chatting," sports, travel, and music. A recent livestream featuring Kai Cenat, Kevin Hart, and Druski broke North American records with 712,600 concurrent viewers.
To address these trends, Twitch is pivoting towards mobile optimization and shorter, more frequent user sessions. A redesigned mobile app with new features like a discovery feed is in the works, aiming to adapt to changing user preferences.
Some observers remain skeptical and are watching Twitch's progress closely. "If you can't be profitable when you have a surge in demand, you have something structurally wrong," said Mike Hickey, a digital entertainment analyst at Benchmark.