Twitch’s rise shows how social networks usually succeed on accident

Twitch’s rise shows how social networks usually succeed on accident

June 27, 2018 0 By Nazmul Khan


It hasn’t even been four years since Amazon bought Twitch.tv, the live-streaming platform that has become the primary destination for broadcasting the playing of video games. Since then, the service has grown to 15 million daily users, with the average person watching 106 minutes per day. In hindsight, it’s no wonder that Amazon was willing to pay $1 billion to snap up Twitch — but for a long time, it was an open question whether anyone would buy it at all.

Twitch began life as Justin.tv, a web-based live broadcasting platform. As venture capitalist Mike Maples Jr. of Floodgate Capital tells us on this week’s episode of Converge, it wasn’t always clear that Twitch would thrive. In fact, it was more or less stagnant before the company pivoted into games. “They were Justin.tv for five years before Justin.tv Games took off, and we realized that was the company,” Maples said. (In a nice Silicon Valley twist, Twitch has lately been embracing all sorts of non-gaming video, effectively pivoting back to Justin.tv’s original vision.)

The only reason Twitch lived long enough to be sold to Amazon is that its creators were patient with it, Maples said — spending less money than they could, and continually experimenting to figure out which parts of their streaming service resonated the most broadly. “Where I give the Twitch founders a lot of credit is they survived five years to have that discovery,” Maples said. “And most startups would have spent too much money too soon, felt the pressure to grow super fast, and run out of money before the discovery ever happened.”

Twitch is an unusually successful company. But social apps often succeed by accident, Maples says — and as one of Twitter’s first investors, he would know. “To me, these exponential outcomes happen when you have great founders with very specific and deep domain knowledge of some major new shift that’s even bigger than the company,” Maples said. “Twitter happened because everybody was getting connected, everything was getting mobile, and the web was kinda going through this new phase of not just being a place to go visit pages, but becoming a platform to connect people. And they just were right place, right time, right product.”

Maples lays out his investing strategy on this episode of Converge, an interview game show where tech’s biggest personalities tell us about their wildest dreams. It’s a show that’s easy to win, but not impossible to lose — because, in the final round, I finally get a chance to play and score a few points of my own.

You can read a partial, lightly edited transcript with Maples below, and you’ll find the full episode of Converge above. You can listen to it here or anywhere else you find podcasts, including Apple Podcasts, Pocket Casts, Google Play Music, Spotify, our RSS feed, and wherever fine podcasts are sold.

Casey Newton: So what’s your message to people working on startups who want to make sure their growth isn’t fake?

Mike Maples Jr: I’d say that real growth is a combination of ambition and acceptance. The biggest unfortunate value creation strategy for too many companies is what I call the denial strategy. The company’s burning capital but not growing fast enough, relative to the capital they’re consuming, and when that happens, eventually, the company isn’t worth the money it raised.

Right.

And then, the founders are just dependent on the generosity of VCs, in terms of how much they’re gonna give them when the acquisition happens. And VCs aren’t always so generous with people.

What I’m hearing you say is don’t buy customers until they’re profitable, or don’t buy a lot of them until they’re profitable, on an individual basis.

I like to say, “hack value before you hack growth.” Whenever I see a company, and we’re not making the numbers, and somebody says, “We need a growth hacker,” I’m like, “No, we need a value proposition.” And there’s no point in adding growth resources to a value proposition that hasn’t been achieved.

So, for Twitch, what was the value proposition that made it different from Justin.tv?

People really liked collaborating in their game-playing activities, and it surprised [us]. Maybe the Twitch guys would recount it differently, but I don’t think that it was a premeditated discovery.

It’s like, “Wow, this is taking off. Let’s understand why. Hm, maybe that’s the company.” And you know, sometimes, that happens. But where I give the Twitch founders a lot of credit is they survived five years to have that discovery, and most startups would have spent too much money too soon, felt the pressure to grow super fast, and run out of money before the discovery ever happened.



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