July 17, 2018

AMZN - Twitch Attracting Spending

By Jacob Smith
Amazon.com’s Twitch esports streaming platform is attracting advertising spending by giving brands a window into the rapidly growing community of video game streaming.

Advertising spending on Amazon.com Inc.’s Twitch increased or remained the same yy for all five responding sources during 2Q18, driven by the rise of popular games like Fortnite that have expanded the platform’s audience. "Advertising spending on Twitch is up significantly this quarter [yy]. A lot of that has to do with the emergence of Fortnite, which is by far the most watched game on the platform. More and more gamers are watching their favorite games being streamed on Twitch,” one source said. Another said, "We're more actively looking for opportunities to spend on the platform since the audience size is more attractive to brands than it was a year ago."

Sources also said Twitch is beginning to gain share of digital video budgets, with four of seven sources reporting Twitch represented 3%-5% of their video spending in 2Q18. "Twitch is anywhere from 1%-5% of our current digital video budgets, but I see it increasing in the near future with advertisers warming up to the platform," one said.

In addition, Amazon’s expansion of its Amazon Media Group has enabled broader adoption of the advertising platform because of greater access to resources and more mature advertising tools. “Amazon Media is very new, and this year they've devoted more resources toward their sales team, which has made integrations easier,” a source said. Five of six sources expect Twitch advertising spending to increase during 3Q18 yy, driven by continued audience expansion and growth within the Amazon Media Group. 

Twitch’s Target Demographic and Reach Key
Advertisers cited Twitch’s target demographic and reach into the esports community as key catalysts driving growing adoption of the platform’s advertising. "Twitch is a great platform to reach the male 13-34 demographic. It’s become much more recognized by clients, and now they’re asking if Twitch is included in our strategy," a source said. Another source said the gaming community is an increasingly valuable demographic. "A key factor helping Twitch is the generation of people that grew up playing video games and now have disposable income. Gamers have aged into a valuable demographic for advertisers, and Twitch stands to benefit from that," the source said.

One source commenting on Twitch's vast reach said, “Twitch is at a point now where audience sizes are worthwhile from an advertising standpoint. A few years ago, top streams would attract no more than 10,000 viewers at a time, but now we've seen popular streams like Ninja reach upwards of 600,000 viewers.” Another said, "We're seeing that younger audiences [are] more inclined to watch their favorite streamers on Twitch instead of their favorite cable shows. Sometimes they also prefer watching a skilled streamer play a game rather than play it themselves."

Sources also said Amazon opened up more inventory during 2Q18 and enabled the use of more consumer data to effectively target users. “The supply of inventory has really opened up this year, which has allowed us to spend more on their fantastic integration opportunities for brands." Another said, "Twitch's close relationship with Amazon has helped them monetize their platform further. They've been leveraging Amazon's troves of consumer data and use it to showcase products that you previously viewed on its marketplace."   

Pricing at a Premium
Most sources said CPMs on Twitch are priced at a premium to other digital video platforms, largely because of still-limited inventory and direct access to a coveted group of highly engaged video gamers and streamers. "CPMs are much higher on Twitch than other platforms like [Alphabet Inc.'s] YouTube and Facebook [Inc.]. Inventory there is more limited and also seen as premium because of the specific gaming audience it attracts,” one source said. Another said, "CPMs are more expensive on Twitch compared to YouTube. To digital buyers, it’s seen as a premium video platform because it specializes in the gaming and esports arena." Although advertisers are confident their message reaches the gaming community through the Twitch platform, the premium paid can hamper efficiency. “Twitch is not the most efficient spend in terms of CPM, but is certainly the most qualified in terms of the target audience we are looking to reach," a source said.

Brand Safety an Emerging Concern
A few sources said brand safety was a concern when considering spending on Twitch because of the platform’s self-produced content. “Brand safety has been an issue on Twitch because of the nature of live content streams and sometimes unpredictable streamers. YouTube has been the clear winner compared to Twitch when it comes to brand safety because Google has contributed more resources toward fixing the issue." Another said, "Brand safety is always a concern of ours when spending on digital video, but we're not any more concerned with Twitch than other platforms." 

Esports Community Growing
Several sources highlighted Twitch’s prominent role in today’s esports environment and were upbeat about future prospects of the rapidly growing entertainment segment. "There's a lot of growth trajectory for Twitch going forward from an agency spending standpoint. The older generations at agencies are retiring and being replaced by younger minds that better understand the appeal and dynamic of the gaming industry. To them, spending on esports doesn't look as far-fetched. Twitch has positioned itself very well within esports and the gaming community as a whole, but from a micro standpoint, things will get very competitive with other platforms like YouTube Gaming," said a large agency source. Another large agency source contested the notion of future esports competition between Twitch and YouTube saying, "We don't consider esports on YouTube; we would rather go to the official partner of a gaming event for our advertising needs. I don't think brands have a long-term esports strategy for YouTube; it’s really shifting to Twitch." The source also said, “The audience for esports will be bigger than Monday Night Football in 10 years. It’ll attract huge spending from marketers."

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