How Does Twitch Make Money? Twitch Business Model

Twitch started in 2007 as, broadcasting the life of Justin Kan, one of its co-founders, used to prove the concept of enabling anyone to broadcast their lives on the web. Once pivoted, Twitch quickly grew, and by 2014 it was acquired by Amazon for almost a billion dollars. Titch now makes money via subscriptions, bits, advertising, and merchandising.

Origin Story

How Twitch pivoted from, to become among the most successful streaming services, bought for a billion by Amazon.

Twitch is a North American live streaming service with a focus on esports broadcasting and video game streaming. Twitch was founded as a spin-off to Founders Justin Kan and Emmett Shear noted that the gaming category on was the most-watched category on the site. 

Three years after Twitch was founded, it was identified as the fourth-largest source of peak internet traffic in the United States. As a result, the parent company of was rebranded as Twitch Interactive and was shut down. 

Twitch Interactive was then acquired by Amazon for $970 million, enabling the platform to become integrated with Amazon Prime.

Twitch continues to dominate the gaming and esports streaming market, boasting over a hundred million actively monthly users. The platform has since expanded to offer creative content, music broadcasts, and affiliate programs for streamers.

To understand Twitch’s origins, it is important to travel back to 2007 when founders Justin Kan and Emmett Shear launched the video broadcast service The first broadcast showed Kan as he went about his daily life and in 2008, the platform was divided into several categories such as Music & Radio, News & Tech, Animals, Sports, and Entertainment.

Over the next four years, became popular thanks to hordes of users who illegally streamed sports matches and other copyrighted content. When the practice was eventually outlawed, it left Kan and Shear with business whose major drawcard had been surrendered almost overnight. pivots

Kan and Shear knew that people loved to watch live streams of sports, but they wondered if they could find a sport that didn’t belong to anyone, so to speak. 

The answer, as it turned out, was right under their noses. Gamers on had carved out a small but passionate niche on the platform, but the pair had always considered them a nuisance. In the early 2010s, video game streaming was poorly misunderstood and somewhat maligned because it required a lot of bandwidth. 

In a 2012 interview with Fast Company, Kan explained that while he didn’t understand the practice, he did acknowledge that streaming could become a viable source of revenue: “It’s advertiser friendly. When you have a webcam, anything can happen. Gaming is much more controlled.

TwitchTV is launched

With the gaming category on the most watched on the site, Kan and Shear were encouraged to launch TwitchTV as a spin-off to in June 2011. The name “Twitch” was a reference to twitch gameplay – a specific type of scenario that tests a player’s response time.

Twitch amassed around 17 million monthly unique visitors by 2012 with the company’s aggressive approach to turning the best gamers into sports started paying dividends. That same year, Twitch raised $15 million in a round led by Bessemer Venture Partners to expand its engineering team and improve live streaming infrastructure in Europe.

Three years after Twitch was founded, it was identified as the fourth-largest source of peak internet traffic in the United States at around 1.8% – a number that eclipsed the likes of Amazon, Facebook, and Valve. 

The parent company of was rebranded as Twitch Interactive and was shut down. Ultimately, the move reflected the importance of Twitch as the company’s main business over itself.

Amazon acquisition

Twitch Interactive was then acquired by Amazon for $970 million in an all-cash deal, enabling the platform to become integrated with Amazon Prime. According to Forbes, Google was in talks to acquire the platform but later backed out over concerns that ownership of both Twitch and YouTube could raise anti-trust issues. The deal was completed on September 25, 2014.

Under Amazon’s ownership, Shear continued as CEO of Twitch Interactive and noted that the company would take advantage of Amazon’s existing relationships with big media players. Later in 2014, Twitch acquired e-sports team owner GoodGame Agency and, in 2016, introduced the microtransaction emoticons known as “Bits”. 

2016 also saw the introduction of Twitch Prime, a service for Amazon Prime subscribers with additional perks such as exclusive add-on content, ad-free streaming, and game discounts.

Today, twitch continues to dominate the gaming and esports streaming market, boasting over 100 million active monthly users with 30% of those daily active users (DAUs). The platform has since expanded to offer creative content, music broadcasts, and affiliate programs for streamers.

The Amazon acquisition explained by Twitch co-founder

Justin Kan, co-founder of Twitch explains how he sold the company to Amazon for almost a billion dollars!

Now Twitch is part of the Amazon’s empire:

In 2014, Twitch was bought by Amazon for $970 million. Therefore Twitch is part of Amazon, comprising other subsidiaries bought over the years, like Audible, Whole Foods, and Zappos (in total, Amazon has 12 subsidiaries). Therefore, as of 2020, Twitch is a multi-billion dollar company, making money primarily via advertising through its video streaming platform (creators use Twitch today across many other verticals).
Amazon is a consumer e-commerce platform with a diversified business model spanning e-commerce, cloud, advertising, streaming, and more. Over the years, Amazon acquired several companies. As it operates across several industries, Amazon has a wide range of competitors across each of those industries. For instance, Amazon’s E-commerce competes with Shopify, Wix, Google, Etsy, eBay, BigCommerce.

Twitch revenue generation

Twitch has an extensive revenue generation model – despite being predominantly a freemium product. Without further ado, let’s delve into the finer details.


To show their support for a favorite creator, Twitch users can subscribe to their channel.

There are three, tiered options, with the latter two accommodating those who generally wish to provide more support:

  1. $4.99/month is the minimum amount, giving subscribers access to creator emotes (Twitch-specific emoticons) and other benefits which each creator can define.
  2. $9.99/month – offering one extra emote.
  3. $24.99/month – offering two extra emotes.

Irrespective of the plan chosen, Twitch takes 50% of the total revenue. In limited scenarios, Twitch allows popular creators to keep 100% of the subscription revenue as an incentive to keep them on the platform.


Bits are essentially Twitch currency and can be bought on the platform by users to cheer for creators using emoticons in live chat.

The more Bits a user purchases, the more noticeable their cheering becomes in a chat.

100 bits can be purchased for $1.40, with 25,000 bits available for $308. The creators themselves receive $0.01 for each bit that is used in their chat.


Twitch also incorporates video advertising on live streams and pre-recorded content.

The company first negotiates with an advertiser and then the creator receives a portion of the advertising revenue. The total amount a creator receives is dependent on their CPM (Cost Per Mile), or a fixed price per one thousand views.

Twitch works with each creator to agree on a unique CPM. Confidentiality clauses mean that exact CPM rates are hard to quantify.


Merchandising is a hallmark of the acquisition by Amazon in 2014.

Fans can purchase Twitch-branded merchandise via the Amazon website. This merchandise is exclusive in the sense that it cannot be purchased elsewhere. Clothing is the most popular form of merchandise, but Twitch fans can also purchase gift cards and pet accessories.

Amazon Prime integration makes these purchases exceedingly easy. Such is the popularity of Twitch that profit margins are also high.

Key takeaways

  • Twitch is a live streaming video platform founded by Justin Kan and Emmett Shear. The platform was created after Kan and Shear noted the surge in video game streaming popularity on
  • After becoming the fourth largest source of peak internet traffic in 2014, Twitch was acquired by Amazon. Its product range quickly expanded to include music broadcasting, affiliate programs, and other creative content.
  • Twitch makes money by offering creator subscription plans. Fans can also purchase in-house currency to show their support using proprietary emoticons. Twitch also makes money on exclusive, high-margin merchandise.

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