Episode 3: Twitch
53:33 Share

Are you do what you're ready?

I'm ready. Been .

alright.

Busy, you wait you with that, you who got. Easy, you busy, you with you, sit me down, stand.

Well, to episode acquired the one where we talk about to which today we're going to try something a little bit different. We've been listening to our our listeners ers and getting a lot of feedback that not only do David, I agree too much, but we're doing .

softballs.

And thank you. We really like hearing from everyone. And you know, well, originally our goal was to set out and only review the super Stellar is spectacular ones that only went super well. And what we can learn from those, it's a little boring. People are telling us .

they want some space. yeah.

So we're going to do um obviously, twitch has a has been a little bit more recent. It's a twenty fourteen acquisition and here recording in a november of twenty fifteen. And there are still a lot of open questions. And I think you know people are generally positive and optimistic and there's a exploding market there. But um a lot more to talk about .

whole lets talk about as always. Thank you, everyone for the reviews for the feedback. You can check out our website at require that FM. We're on twitter at acquired F M, and please keep the feedback coming.

okay? Listeners, now is a great time to tell you about long time friend of the show service now.

Yes, as you know, service now is the A I platform for business transformation, and they have some new news to share. Service now is introducing A I agents. So only the service now platform puts A I agents to work across every corner .

of your business. yeah. And as you know from listening to us all year, service now is pretty remarkable about embracing the latest AI developments and building them into products for their customers. AI agents are the next phase of this.

So what are A I agents? A I agents can think, learn, solve problems and make decisions autonomously. They work on behalf of your teams, elevating their productivity and potential. And while you get incredible productivity enhancements, you also get to stay in full control.

Yep, with service now, A I agent proactively solve chAllenges from I T H R customer service software development. You name IT. These agents collaborate, they learn from each other, and they continuously improve handling the busy work across your business so that your teams can actually focus on what truly matters.

ultimately service. Now, an agenda I is the way to deploy A I across every corner of your enterprise. They boost productivity for employees and rich customer experiences and make work Better for everyone.

Yeah, so learn how you can put A I agents to work for your people by clicking the link in the shower notes or going to service now doc m slash A I dash agents.

So we're change the locations little bit tonight. Um we are in the the wonderful day of of David home um here on the creative and secure S A I D of default.

We're really creative in .

the houses. So thank you so much for your generous, generous hospitality. David jane.

always happy to be. And you .

listeners as well .

jump into IT. So right about was this fourteen months ago, there have been acquisition rumors swirling about a Young three year old live streaming network, primarily used for streaming games called twitch. That T, V, which itself has.

has A A crazy history, crazy history.

If you are watching .

either of the previous incarnations of this company, you wouldn't see this and coming.

And the international tions being first just in that TV, which I believe was one of the first right combination companies. M I right there?

Yeah, I don't know a batch.

One of the one of the early one, like two thousand seven.

I think Justin TV is this incredible before smart phones, before a lot of the or before some market phone's got big anyway kind of before go pro and all that just in kind strapped camera to himself and broadcast what he was doing all the time and twenty four seven um and that up going through .

my combination with the it's hard to state how crazy that in two thousand and seven this is like either pre iphone or like right when the first iphone came out and the idea that you would stream your life twenty four seven on the internet, yeah, youtube was already out there, but that was recorded video alive. And this was a crazy concept. yeah. And ultimately.

IT didn't work. No, even when they know they got a little bit, became a platform or anyone could stream anything live, there are competitors. There was you dream what what is the other big one? This was sort of an era where there were platforms coming up this classic build platform before the use case, where there's platforms coming up for people to to stream whatever they wanted live. There was incredible amount of piracy, a whole unch of CD stuff, and there wasn't a clear winner yet for what the thing was that was going to win in live streaming and what the purpose of IT was.

Yeah, so that was two thousand and seven fast for a couple years. Total fail didn't work a instagram, which we talked about on our lash, had happened, uh, was not yet acquired by facebook, but was a thing. And Justin TV still kicking along.

And what do they do? They work on a new pivot spin off this company called social camp. You remember social camp? interesting. yeah.

And that was kind of funny because was actually, remember, I think they launched at south by southwest because I was down there and that was very first saw a whole bunch of the the marketing for IT. Now you know, as a super core concept, I think that was in parallel. I think the Justin TV was still .

running at that time.

And yes, it's like some employees left Justin TV or may be was under the same umbrella company. And I think .

in social cam being, this is one of those things that like as bcs, we often hate this for that companies, although sometimes they work, but in this case, instagram for video quote and not a thing at least not a thing at that point time.

Yeah, great, great idea though. I mean, I think that there's a nugget there and is actually one of the most well design kind of consumer apps that had launched around that era. I member thinking that secular team behind this seems highly reputable. They're really touching on a very human nerve here but much like Justin TV never .

found well and it's interesting IT why adoption um with this was the era of the facebook stereos era, just like the facebook steroid era, the nineties when before facebook went public and anyone who could figure out how leverage the facebook graph and get adaption on on mobile absent and websites of those .

they .

were those college PH. They stole the graph. And so and so crazy ido social camp spends out from just in that T, V, in twenty eleven, ends up getting acquired a less than a year later by autodesk.

Autodesk bin acquires social camp for sixty million dollars. Crazy vid, which was another one that did the same thing. I don't know when to have happening to them.

They Peter out, maybe they goto acquire by somebody anyway. That was chapter two of this company. Then chapter three right around the same time um is twitch.

And twitch for twenty one is not A A game where out there actually was looking into a little bit today kind of where the name comes from. And and because that is a certain field to and you go to the site and it's purple and it's got definitely that kind of game revive and IT attracts IT know a pro gamer audience and that a sort of art type and witch game play is the is a reference to you know that there are games that are much more strategy based and there are games that are a 2 yeah。 So witch witch game player refers to any game where you have to very quickly move the mouse around the screen and you know if it's the first person shooter or something and you got ta get one guy quickly move over and get the other guy quickly move over. It's kind of like it's a touch and finance and and and moving very quickly to to do very physical actions rather than a slower in a strategy game.

And and so witch was a dedicated streaming platform for streaming yourself, playing video games on your computer um .

which you I think most of some .

of our listeners.

I can really guess percent but a lot of people today understand .

how .

big twitches and stand .

how increasingly universal I mean coincided around this time with the development and the giving industry of of of mobile and things like league of legends a and and dota um and basically games becoming services and products that could live on and develop these huge outing to be in in the past.

Before about this time, games would be, you know, package software that you buy on a disk and you're stick in your console or your PC and play by itself and you'd have experience may be to play for one hundred hours and then you beat IT. You're done. But now um at this time games started becoming living, breathing service is world the worker to is the first example of this but then it's just completely uh come to to revolutionize the whole industry, this model. And so now you have games that just live on and on.

His experience is the weekly reset. It's incredible to see weekly, monthly as the monthly you reset your journey year one, year two. I mean, it's it's a whole different model.

Yep.

and if you is so funny thinking about sort of the the old ones, if you had told me in two thousand and nine that you know a company be acquired for a billion dollars that let people watch other people play video games crazy.

It's it's almost as if in two thousand and seven, when the iphone came out, somebody would have told you that, uh, what did he was? Eleven people working for instagram when I was quiet, or something thirteen, like a company with number of employees in the teens that made an APP, whatever that was for this smartphone, I would get acquired by facebook for a billion dollars in twenty twelve. You thought they were crazy.

It's interesting how IT reflects a lot of the tenacity of the the Justin TV team. I mean, I think that they touched done something where they probably they obviously didn't know what the use case that would hit was of live streaming, but they had A A sense around live streaming in IT. You know, I pin your square. I was one of the things that we do is like we don't really trust our gut until we prototyped stuff and until we get feedback and see what sort of catches on. And I think that IT really goes to show you, you don't know.

And they were seeing on just an TV a lot of people using IT for gaming purposes, which is why they they I decided to um open to which as a dedicated I think they spend some some time where there were several months where they were just working on witch, not improving just in TV reopened twitch to the public and. IT goes to show you don't really know it's gona stick until you start watching usage. Parents of how people are.

are using your stuff totally. So let's let's get into topic of the show, which is an acquisition. But so to start that out, I don't think we've actually see the actual facts.

August twenty fourth, twenty fourteen, acquisition world rumours have been swing about twitch for months. People think google and youtube were about to buy the company. Makes sense to me, makes a lot of sense.

Youtube, number one, no video platform online, thinking about getting into streaming and live video becoming more of a thing. And course, that makes sense that this would be a great channel on youtube. August twenty fifth announcement drops amazon buying twitch nine hundred and seventy million dollars in cash.

By the way, who could have force seen this huge strategic err by the witch management team and board not negotiating for stock here? So amazon closing share Prices on August twenty five, twenty fourteen, three hundred dollars and thirty four, three hundred thirty four dollars and two cents. Amazon closing share Price today, fourteen months later, six hundred and sixty five dollars and sixty cents .

a IT would be a win. If I actually own the property here and see at all, it's a shame of school renting. Uh, you just mentioned something about.

uh, not negotiating for stock.

Do we know that was an .

could have been two billion dollars, but that's a that's a technical take me go detail. Everybody was still happy in the moment and probably still however, twitch has continued post acquisition to just grow like a rocket ship. So when twitch was acquired, I believe they had about fifty five million monthly unique viewers.

That was in August twenty fourteen. They announced in january twenty fifteen that they passed one hundred million unique monthly viewers. They haven't announced stanny stats since then. That's the latest we have, but that was ten months ago.

which is taking about the context of the last acquisition who we talked about, I guess yeah last one, instagram, you know, celebrating now years after the acquisition, hitting four hundred million monthly active users. Now these visitors are not necessarily logged in, but there, I guess there by tracked by ipa arrest or something so .

they know exactly .

to reconcile ons, but one hundred million monthly active visitors. It's crazy. I mean, it's gotta be like every the demographics are are wider staying in this. But like every teenage boy .

in america, not america, I think this is one of the key things about twitch too. Like it's america, but like that only a small part of IT.

It's everywhere around the .

whole world, south amy the world, yeah uh, professional game in capital of the world. And um it's it's really amazing platform m so one of the other really cool things, I think about twitch, unlike a lot of there's one other start to throw .

on there one point five million broadcasters. So that's actually a little bit above. But it's always interesting to think about you know the added that for every one hundred in the redit terminology, hundred workers you have you have one one poster .

and that rao roughly holds uh what do things I think is particularly interesting about twitch as a internet and digital media property um is that it's got a really robust and diverse monetization strategy um and he has for much of its life.

So would you call a three prong approach .

called the three prong approach? And and it's interesting, you know, I could easily be a four pronged approach. If twitch we do, eventually they will get their act together. But basically, for our viewers who don't know, twitch makes money in three ways today, a theyve advertising that they sell on the for anyone who's visited .

twitch and knows you get about three seconds of game play before you have something .

really embraced. Ve yes, all the takeover ads and banner ads all over the site and then um they have twitch turbo, which is basically a nine dollar in eight, nine, eight months subscription that you can pay to get rid of that advertising on twitch is .

so when you get you know there's a variety of other things you can have, you know colors of your text and customer models and a bad and a lot of the sort came a fight, virtual goods. But like that's a lot of money just to evade .

from one website. Yes, a lot of money we talk in one hundred dollars a year.

That's more than netflix to simply remove ads from .

one with on the internet or .

spotify or I mean, I guess on the family plan spotify.

But yeah, then I think this is just brilliant. The other half of of twitches business model comes from revenue shares with their broadcasters, which are referred to a streamers in the form of subscriptions. They make IT really easy, which is a button on the site, on the page of of a of a streamer, to quote, subscribe to that streamer for five dollars a month. And then twitch keeps half of that two fifty.

And this blows my mind. Think about like marketplace business is where you can take a fifty percent tag or at twenty percent take or you look at like the real estate business .

or you can get like our airbnb has person.

okay, but fifty percent.

fifty percent, fifty percent. So their twitches .

is getting away with murder.

basically getting away with. And and then let's let just run through some of the stats. So this this is some some numbers that are publicly available in the internet would do some back of the envelope math here.

They're about one hundred million twitch viewers out there. They announced that in hundred million unique views, roughly, the conversion rate on viewers to subscribers is about one percent. And we know this from a few twitch streamers have a openly talked about and called open source their economics.

So can we assume there's like a million ish?

So you can assume there's about a million ish subscribers. They're paying five dollars a month. Uh and um subscribers or subscriptions.

i'm assuming subscriptions, okay.

So there are probably a fewer than that who actually subscribed the subscribe to multiple channels.

If this is sample data based on an individual.

this is one individual streamer, the percentage of people that watches channel to convert. So I think that would be actual subscriptions yeah on the same.

IT could be high or self as one percent of his viewers subscribe. It's likely that or it's possible that, that viewer also subscribes to a different channel too. I don't know behavior is why IT may .

be one point something. You will see a million subscriptions a lets the same on to which at five dollars a month um and at A A fifty percent revenue share to twitch that thirty million dollars a year in basically one hundred person margin um I mean I guess twitch is paying credit fees out of that, so take a six double IT because they only taking half of the reviews. They're paying credit processing fees on the whole, so take six percent out of so ninety percent margin.

not not margin that be they take because like the margin, we're not figuring in A S costs.

This is this is just complete. There's still monotony in other ways to advertising and turbo. This is just like really incremental marginal.

no additional, no literally no IT .

accept credit processing fees and putting a little purple button that says subscribe on their side. I'm said this continuing cost like incremental .

margin talking code.

Now imagine syn nerves, the date of U. S. It's prety incredible. It's pretty incredible. And then and then this man might be end of being. The biggest form of um of motivation for twitch in the long term is tips. So there is this behavior that emerged on the twitch platform um where a stream twitch doesn't enable this is all at all.

Streamers are hacking this together with with third party software where as they are streaming and speaking to their their fans and their viewers as they are streaming the games they're playing ah those solicit a tips just like kind of a street performer would. They've got a tip jar and they're using three party pages to um to uh do this and um and and people are paying them like incredible amounts of money and streamers have made, people have given. It's just like the mobile games business, you know people their whales that have given like thousand dollar tips, ten thousand dollar or tips like at once. And right now, twitch isn't monetizing any of this, but you got to imagine they are planning to break this natively into the platform and take a cut out out of this.

I'm trying to imagine a scenario where something happens that's awesome enough in some game play that i'm watching where I decide it's worth a thousand dollars. Are people that .

spend thousands of dollars on clastic and spend yeah.

yeah, this is difference .

rentier pricing for entertainment .

and i'd argue but I know .

some says I know scary are basically I think the punch line of this discussion here is twitch has um very quickly remember red this this whole business, even though was a spin out from just in TV, was started in two thousand eleven.

Yeah, it's funning.

I mean, we say years old.

you would think in all of this pivoting around and changing companies and spinning out other companies that this is extremely expensive and know a lot at times like you look at like a job o and are these companies to take like a series e and f around and get into the private equity and that sort of thing that they take huge some of money. They only took three rounds of funding.

and IT was only forty two million dollars.

So I can keep I an a lot of they kept IT relatively cheap serving the outcome.

I think I talk I won't use any numbers or names. But when I was in business school, I in turned uh the summer between my first and second years at a one of the top um a really, really amazing venture capital firm um called marathon in there a late stage a venture capital firm, the only delete stage investments and uh IT was late spring and I I had already lined up my internship.

I was going to a spend the summer with them and I got A A call from one of the partners there and said, hey, i'm looking at this uh deal uh, for a company that's raising money ah the company is called twitch uh, if you ever never heard of IT, do you know anything about and I didn't know anything about IT, I research and you know, being a eager, soon to be in turn to impress, I thought i'm going to do some research and rate some thoughts, you know, help them look at this. Even though I am started working yet, I really can't wait to dive in. And I just looked at the space, I thought, you know, there's no way this is like, it's interesting what's happening here, but there is no way this is going to be big.

I mean, this is like a, this is like a derivative of a sector of the economy that itself is like not that big. And gaming and right like IT can be that big in the value. And they wanted for this round was at the time seemed like a very large valuation.

IT was much less than the eventual acquisition Price. And so I I wrote a long email, I I member, I was, I was Jenny and I, my wife, Jenny and I were in sonoma for the weekend for a business school trip. And I spent to bound to the weekend writing off these thoughts on this memo.

Senate partner basically can't recommend we do this. And this goes to show you, I have so many stories like this. Venture capital is a humbling business.

What company name were you knock to say there?

Oh, I wasn't gna talk about any the .

number of .

yeah but face to say had maritime invested in in twitch in this round that happened and I forget who did leave the around, but would have been a very nice return. But you know it's into that would have been a very nice return. And especially the late stage investor where you're trying to get a know three extra turn is a good return of .

five extra n is a great return. And and you're talking total fund.

yeah but actually great investor. It's on individual investments because you're hoping that most investors yes, yes, I .

think is .

amazing. Think about this acquisition when twitch was acquired for a billion dollars, even I had thought much about twitch since that summer. Wow, I was wrong. Like guess, I did turn out to be a big company. But now look at a year later.

billion dollars is pretty cheap. Yes, this is the fun part, the show. Now I think there's one of the reasons we wanted to do this was because I think there's a lot of, first of all, easy numbers to look up and and very it's almost it's the same reason that gossip is fun conversation to have.

It's because it's is losing fruit. Everyone can very clearly draw the dotted line and everyone can laugh about IT every everyone can romanticized and fantasy and wish they were picking that winner. And you see, oh my god, forty two million and funding going to a billion dollar acquisition.

Oh my god, I can do the math and know exactly how big that that multiple is. And that conversation happens over and over and over again. And I think the thing that we just don't talk about that much is great.

A billion dollars. So now you, let's say, amazon, individual person, that person's. Now a billion dollars in debt.

How do you grow that investment? How how do you get your money back? And then some and what are the kind of market forces and things going on with an amazon right now that actually make that fun to watch.

and we haven't part of the rest now for wanting to do this episode too, is we're here in seattle and amazon um is one of the most impressive near times articles about the company and workplace culture there now withstanding one of the most impressive and greatest technology companies, not only of our time, but probably ever. I mean, the innovation that is driven within that company is just incredible. That continues to be driven.

And the companies are you know a hundred billion dollar revenue run rate and still innovating like a tiny start up, which is amazing. And the impact that has had on seattle, on the ecosystem, physical on the city is just incredible. So we really wanted to have an excuse to talk about amazon. We hadn't really talked about the amazon t um but with amazing, we've left twitch pretty much alone.

Yeah we we saw something launch a couple weeks ago, but you would think after something like this gets acquired, like well, they're take some the video technology and make IT available very quickly as a higher abstraction layer in A W S. Or they're start bucketing in some part of twitch with prime or theyll, you know, throw the amazon bar on top.

Did they do single slog that the .

first thing I launched was not a unification with the rest of amazon's properties? IT was switch creative? Yes, they did the swab. Ross, super, super clever, you know, marathon of watching barboux paint to kick off. You can watch creative people perform their craft um well there are while their lives streaming IT like you would watch anybody do their game while their life streaming IT too too soon to really know anything about that but is really interesting how .

the company did indeed largely leave IT alone. Yeah and over time, maybe we'll see them integrated more into in in some ways into amazon. You know I think about when we are talking about instagram in our last episode and how instagram also has been largely left alone by facebook.

However, behind the scenes um we talked about uh ad buying and how uh facebook been very open ah especially on their earnings calls with uh about how successful selling join address to to to to advertisers between facebook and instagram has been. And it's interesting that we talked about some of the direct monetization aspects that twitch has. But um advertising still by all estimates, we don't really know, but by all estimates, uh, is probably the biggest revenue stream for twitch and amazon.

A lot of people don't know this but has a very big advertising business. Um and you can imagine amazon has big advertising business, especially two companies trying to sell products on amazon. Um a lot of uh video game companies, both console manufacturer, P C gaming accessory manufacturer and and games themselves advertise and cell on amazon. They also advertise on twitch. You could imagine that being a sync in the future.

Yeah, yeah, it's a really interesting business frame is on because one of the things that they are able to do, you know by having that, that add network and letting you view products on other sites and that you know that little lie frame advertisement ment that you see if any name on doc products or in the other thing that they're using to um on their red network is they get a good picture of what websites you shop on.

So yes or or even just visit. So if you come to EMS on that com, they can use that an aggregate with your purchase history or if you're not assigned in user to just understand sort of what sites you ve been visiting, what sort of things you're going to buy. You know, if having witch as a first party property and integrating of that technology with the large advertising business, that is switch was .

a lot of and and let's think about where twitch is going now and might be going in the future with twitch creative, potentially other channels. These are all, let's take creative, for example, painting um uh digital tool, creative tools. These are all areas that they are very natural advertizing opportunities and very natural product selling opportunities. Can imagine integrations with amazon on that room. Yeah I am integrations .

of amazon of point. I want to bring up looking back at um old old post from the the Justin T V folks in the early days. I think they started on aw s moved off for at the time what was what was cost reasons and and customization reasons.

I think they just needed a little bit more grain of our control with the whole streaming video stack. But then um at least by some point between twenty two thousand and twenty thirteen had pretty much holy move back on. Aw s, so being acquired by the very company that powers your entire technology platform .

is a harbinger of things to come. The amazon you could say amazon might have had a real window, you know for me what in the venture capital business, I did have spend a lot of time thinking about tech and twitch was like totally under the radar stream, under the radar screen for me.

Um but amazon with A W S, they kind of have this like dashboard, until like what's actually had among tech companies at all times, like what did they see this? And they like gosh twitches twitches under valued. We should buy IT because we have the data, I don't know, but again, back to the we know the point we made earlier about the impact that amazon has had on the entire tech go system. But the huge impact here in seattle, I mean, everybody here is you know zero degree connect, uh degrees of separation away from amazon in everything in this ecosystem here.

Yeah so that ended up I I can't second that enough. So the other point that I wanted to make on top of the fact that they're integrating with their technology stack in a very vertical way is prime. You know prime looks an awful lot like turbo.

Yes.

I mean it's a prime mais has has become a mechanism where um people buy almost three times the number of things on amazon when there are crimes subscriber and it's an annual subscription fee that you pay up front for later um returns of of many different things that you would have recruit over a long period of time. yes. And and boyd herbal is a thing that you pay off front to begin the month that pays ahead of time for all the ads you would have seen. And what is historically.

amazon has made huge efforts to get Young people in the form .

of students hooked on the prime and and may be free.

What's the average age of a of a twitch viewers? You know, it's a, you know, I wouldn't call, well, I wouldn't all either of us old, but the every day of a twitch here is definitely Younger than well uh let's face IT um and and you imagine someday soon turbo becomes prime and is part of amazon prime and then you've just hooked a new generation on amazon prime .

sure is a compelling value prop. I could pay my what is eight, eight or nine books of months for turbo.

or I could pay nine, nine dollars year for amazon prime and get turbo plus everything .

else in prime videos. Ship.

yeah.

yeah.

Drones dropping things off for your doorstep.

not to be cut.

No, nothing. They haven't announced.

All right listeners.

our next sponsor is a new friend of the show, huntress. Huntress is one of the fastest growing and most loved cybersecurity companies today. Its purpose built for small aide size businesses and provides enterprise grade security with the technology, services and expertise needed to protect you.

They offer a revolutionary approach to manage cyber security that isn't only about tech, it's about real people providing real defense around the clock.

So how does IT work? Well, you probably only know this, but IT has become pretty trivial for an entry level hacker to buy access in data about compromised businesses. This means cybercriminal activity towards smaller medium businesses is at an .

all time high. So hunches created a full managed security platform for their customers to guard from these threats. This includes end point detection and response, identity threat detection, response security awareness, st. Training in a revolutionary security information and event management product that actually just got launched. Essentially, IT is the full sweet of great software that you need to secure your business, plus twenty four seven monitoring by the elite team of human threat hunters in a security Operation center to stop attacks that really software only solutions could sometimes miss. Countries is democratizing security, particularly cyber security, by taking security techniques that were historically only available to large enterprises and bring them to businesses with as few as ten, a hundred or a thousand employees at Price points that makes sense for them.

In fact, it's pretty wild. There are over one hundred and twenty five thousand businesses now using, and they rave about IT from the Hilton PS. They were voted by customers in the g two rankings as the industry leader in. Point detection and response for the eighth consecutive season and the industry leader in manage detection and response again this summer yeah .

so if you want cutting edge cyber security solutions backed by a twenty four, seven team of experts who monitor, investigate and respond to threats with unmatched precision, head on over to hunt us dot com slash acquired or click the link in the show notes are huge. Thanks to hunt us right so .

this section is the part of we talk about um you know does IT is the fall in the category of people, technology, product or business line? Or is there another thing completely um and um you know this is a pretty good framework to sort to understand. I think we ve talked about you know the various reasons why they would do this acquisition, but to sort of give a framework for what buckets to drop certain things into um and is a good opportunity for David night to agree a little bit too. So they think i'm .

a little torn here could be a product. However, i'm going to go business line because I think. Especially thinking back to I really think you you're onto something with this prime when we talk about the value of the a acquisition and measuring its success and again, being speculative here.

But if you imagine the value to prime here, which is one of the core parts of amazon, twitch adds a new layer of benefit to prime. Me know there was prime instant video before, what you could argue is somewhat similar, but I think this is a different thing. You know that's like movies versus television and this adds the television to um to amazons offerings and to prime and what what prime subscribers gets. So I think and and I really do think that this is a four shadow what I want to talk about in the the section I like um I think witch over time will be more than games. I think that will be A A platform for uh watching live um watching people do things live internet almost like Justin T V originally was formed for.

I know I said I was going to disagree, but I think that's the obvious correct choice. I D says a product if it's something that was already sort of being integrated, but they're using this is a completely different channel to a completely different audience. And and we're really not seeing kind of like the, I would call IT more of a project acquisition if you could somehow get to twitch from amazon, but you just can't.

It's a completely different access to a completely new set of customers with a different business line and one that despite all the sort of integrations and synergy that we've talked about, I think it's a self sustaining business, and we don't know that for sure. Amazon doesn't hadn't yet broken that out of learnings, but the super data releases his research reports saying that the gaming video content markets were three point eight billion dollars. I was really for this year in twenty and fifteen, and they're saying that twitch is going to generate one point six billion dollars of that revenue this year.

I think there's no way that, that even if even if a half .

of that like you know, these reports are always a little bit we thank you for the folks of super da for doing the grey research for us. But like even if it's a third of that, right, like let's say it's like five hundred million dollars like that growing quickly. The deal Price was on the a billion or if it's not already a uh you know a profitable decision to to purchase this company on its own without combining any other other things where I ear out.

yeah, I think it's going to happen real fast. okay. So my favorite segment that I want to make sure we keep is what does this acquisition what technology theme does this acquisition illustrate for? You want to think Better and I talk about a lot now. I my favorite things to talk about is like these lasting um deams and technology technologies is the space that changes super quickly.

But there are these teams that the last generation to generation and like the idea that technology comes in waves, or, you know, scale a bill, there are all sorts that they have, has things change? I've got a bit. If you have, have thoughts, go.

I ve got what? I'll go first for me, twitch really illustrates the theme that I just love in technology, which is things often times, things that end up being really, really big in world changing. When they start out, they look like a toy.

And twitch, there's like this, like the definition of IT looked like a toy in the beginning when I was writing that memo, IT looks like a toy to me. Video games what's that? There's no way even if this wins, that category is not that big.

But I totally missed the boat that like a video games were themselves being transformed into something way bigger than the used to be. Um but b video games or just start for twitch and this is speculative here. It's still mostly video games. But I think twitch creative um again for shadows of future or presage is a future um where twitch is about the original Justin T V vision which was people doing things live on the internet, television on the internet and live TV on the internet. And and and I just would think this is such a great example of the this was something so many people dismissed as small as toilet in the beginning, but is actually become really huge.

yes. So what you're sort of to pattern match a little bit here to hear you're saying is that you know you're looking at something and you're aware of the income vents and IT looks sort like a toy to you and that can possibly display whatever the current thing you're using is because it's merely games or it's just a little thing where people are watching other people play video games. What sounds a lot like disruption theory like that sounds a lot like the collected know clain Christian.

So I think the twist here is that i'm not sure even I I don't know that you could certainly imagine that even the twist founders and management team themselves wouldn't have envision this. Yeah I don't think anymore do yeah or any more than I don't know if the airbnb founders visions that one day you they would have more airbnb would have more hotel a night stays in in a single change in the world. Come back. I know if they're not there.

they will be soon. Yeah yeah it's interesting. So I think like if if we are thinking of the context of disruption theory, let's say it's like, you know google dog sort of you know scaring the heck cat of office, what what's the income on? Like what are they displacing here where IT was IT? Yeah, I was a toy. And what's what's the thing there displacing television?

Because if you know what, I don't have to start of him, but something like the average twitch .

user watches like three hours of twitty eight percent of twitch users.

So that's fifty eight million .

people that are tuning in at all during the day. Yes, it's not fifty .

eight because it's .

it's not on a daily.

Love IT speaking of television and commercials and yeah what does that sounds like? That sounds like television where people who watch television watch like on average six hours a day.

Yeah crazy.

crazy. Um then what's your red wait? So are we doing this grade today or grade in the future since this .

is a specular epo? Let's great as if we are historians judging jeff BIOS. So we're in the future. We are future historians .

to a wait task.

yeah. As a future historian, looking back at him is on deciding if this was a good decision or not and the dust is still still settling you. We have pluses and minister and pay plus this.

But I think it's even on the conservative basis of how this business line does alone in its payback here is incredibly short and thirteen to be two years or less. Well, it's hard to thrown exact number. We don't .

know the exactly .

going to do well. It's not a long payback period. And the the ways that they are tanging all the existing parts of the business .

are um you know not .

evident yet. It's just hard to imagine that they're going to screw that part of. I think that you they have had some acquisitions where they they did not do that well on the past. But I think that um you know, if we see them do kind of this prime turbo combination or we see them leveraging 不对 and technology sharing or um you know or even if if IT helps aw s is business grow and and further developed their their video platform for other people。 I think that um I .

just bought elemental technologies.

which is a video encoding and yeah it's it's a soliday.

okay. So here's like again, we've been very we're looking for ageing here. It's it's really hard to disagree with if you if twitch stay on the trajectory it's on, no doubt this is like I thought I really think this could be an instagram .

style acquisition.

What would you? So here's what going to instagram an, as we talked about on the last show, facebook by instagram for a billion dollars. Two years later, city city group puts out a equity research report on facebook, valuing instagram at thirty five billion dollars.

Within facebook. I really think the same thing could happen here. Whether IT would be two years, I don't know, but you know, short period time.

Here's how I could go wrong if were thinking from the future. Amazon is incredibly strong and a lot of things. Amazon is also a company in a culture that is very monolithic.

And the senior leaders at amazon, the people who drive the business, make decisions um everyday they ve got there are the same people they've been in place for ten plus years. All of them andy, Jessie who runs A W S. He's been the amazon at least fifteen years.

Amazon itself is only twenty years old. Um jeff blackburn, jeff wilky, um all the some all the senior people and jeff bao is s team. Um now twitter very smartly like instagram theyve kept IT totally independent.

Um I max share the sea of twitch is still the quote sea a of twitch was reading an interview with them and he says i'm not the S V P of the twitch vision and amazon and the sea of twitch but let's amazon isn't done this before we're appearance cy at all. This is not silicon valley twitches in silicon valley. If at some point they decide to more deeply integrate this, make twitch the twitch division of amazon, I think they can really lose a lot of .

the mojo here. What you mean if IT looks like like mdb or maybe so a little bit more I got yeah .

you know and like those, the way if twitch is gonna stay on the the growth projected trajectory is on IT needs, world class people and world class talent and people who are motivated. And typically, the way you do that in technology companies and in silicon values with equity and with both little equity and like metaphorically, equity and ownership of the business.

And i've metaphorical I could in this podcast yeah right.

And amazon is not a place that gives that to people you know of within core amazon. It's like you're on the S T, or you're not. So I think that's how they could mess this up. So far. They're making the right moves, but that's my my dome and gloom.

That didn't come with a letter.

Oh yeah um we will got in that case that would be, I don't know, be minus someone. Of course, I would still be great, but I would have been not realizing its potential. I don't think .

you're going to do that sign like a likelihood percentage to that grow up.

They're doing all the right things so far.

Yeah so we'll say minds based on the non dom and gloom perspective um which I think we both agrees the more likely path. But kind of impressive thing there is be miles, even if they managed to get screwed up in a long term integration because return something obvious that .

they got a bargain here. yeah.

So now IT.

the future will tell. Let us know what you think of this episode. The speculative nature, the more free form nature, will see the next time.

Thanks.

everyone. Easy, you, easy, you wait you who got the?

We want to think our long time friend of the show, venta, the leading trust management platform, venta, of course, automates your security reviews and compliance efforts. So frameworks like soc two, I saw twenty seven o one gdpr and hypo complaints in modeling ing vent to takes care of these otherwise incredibly time and resort training efforts for your organization and makes them fast and simple.

Yeah, fanta is the perfect example of the court that we talk about all the time here and acquired jeff basis, this idea that the company should only focus on what actually makes your beer taste Better. I E spend your time and resources only on what's actually going to move the needle for your product and your customers and outsource everything else that doesn't. Every company needs compliance and trust with their vendors and customers. IT plays a major role enabling revenue because customers and partners demand IT, but yet IT add zero flavor to your actual product that IT takes .

care of volvo for you, no where spread sheet, no fragment to tools, no media reviews to couple together your security and complaints requirements. IT is one single software pain of glass that connects to all of your services via s and eliminate countless hours of work for your organization. There are now A I capabilities to make this even more powerful. And they even integrate with over three hundred external tools, plus they let customers build private integrations with their internal systems.

And perhaps most importantly, your security reviews are now real time instead of static, so you can monitor and share with your customers and partners to give them added confidence.

So whether you are start up or a large enterprise and your company is ready to automate complaints and streamline security use, like vantage seven thousand customers around the globe, i'd go back to making your beer taste Better, head on over to vantage outcomes required and just tell them that ban and David, thank you, and thanks to friend of the show, Christina anta CEO all acquired listeners get a thousand dollars of free credit vent outcome slash acquired.