How I Built This with Guy Raz - Twitch: Emmett Shear

Episode Date: July 18, 2022

In 2011, when Emmett Shear pivoted the live streaming service Justin.tv into the video game platform Twitch, people warned him that gaming was just a niche. But unlike his first two ventures, video games were something Emmett instinctively understood: he and his co-founder Justin Kan had been playing them together since they were kids. Emmett built a user base on Twitch by asking streamers exactly what they wanted and giving it to them: revenue opportunities, streamer fan clubs, customizable emoji. As it grew, Twitch attracted users from the darker corners of the web, but Emmett believes the site is first and foremost a way for people to come together and build supportive communities. In 2014, Emmett sold Twitch to Amazon for just under a billion dollars but stayed on as the CEO. Today, the platform has 31 million daily visitors who stream trillions of minutes of live video every year. Not bad for a niche business. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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It had tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.ca. There are lots of people who are saying, who would want to watch other people play video games on the internet? I mean, how many times did people say that to you? I mean,

I used to get that question every interview. Usually what I would do actually is I'd ask them, Well, first of all, just tell me, what? Do you watch TV? Oh, well, what do you watch? Oh, you like watching the NFL? You like watching football. Oh, interesting. Well, it turns out people who like video games do the same thing. Right.

But the best news, fundamentally, is I don't need them to understand it because I got it. And the people watching got it, the people streaming got it. For the people who loved it, it was self-evident. The instant they saw it, like, they were like, oh, this is, yes, this is what I want. This is what I've been waiting for. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how Emmett Shear turned a 24-7 live stream of his best friend into a billion-dollar gaming platform, Twitch.

What if I told you you could make money, a lot of money, by taking fruit and arranging it like a flower bouquet? You might say, wait, doesn't edible arrangements already do that? And the answer is yes. Except back in the early 1990s, before edible arrangements was created, the founder, Tariq Farid, would tell people about this idea. And most people thought it was ridiculous. I mean, who would want a bunch of shish kebab-like fruit skewers delivered to their door? Well, it turns out a lot of people,

Edible arrangements would go on to become a half a billion dollar business. It took Tariq Farid's foresight to see that opportunity. Now, say I had another idea about 15 years ago around video games. My idea? To create a website where you could watch other people play video games. You might think that's a cool idea, but very few people at the time would have agreed. A wise investor might have asked, Who's going to spend hours watching other people play video games?

Well, we know the rest of this story because today, video gaming is a multi-billion dollar industry, and watching other people play is a huge part of that. And Emmett Shear, the co-founder of Twitch, had the foresight to build a streaming platform for those fans. Last year, gamers and viewers spent one trillion minutes on Twitter. And today, it's the biggest streaming video game platform in the world with over 30 million daily users. But the idea for Twitch was, at the time, a gamble. Emmett and his co-founders had already built a live-stream website called Justin TV. And they were starting to turn it into a social media platform.

But a small, tiny number of users happened to be gamers. And Emmett believed that the future of the business depended on serving them. So in 2011, he started focusing the platform on gaming and changed the name to Twitch. The bet paid off. Just three years later, Twitch was bought by Amazon for almost a billion dollars, and Emmett is still running the company. Now, Twitch has had its share of controversy, but Emmett has always seen it as a community, warts and all, which we'll talk about. Emmett grew up in Seattle, and his best childhood friend was actually the person he would eventually create a multi-million dollar business with, Justin Kahn. We actually grew up three blocks away from each other, like right almost next door.

But I didn't know him until I was eight when I switched to Evergreen Elementary where he was already attending. And yeah, we met in second grade and became friends almost immediately. It's amazing because you would later go on to found huge companies together and you were like met in second grade. And we were like, you know, reasonably close. Like maybe not in second grade, but certainly by third, fourth, fifth grade, we'd be over at each other's houses pretty often. I think I went over to his house more often.

He had two brothers and more importantly he had a video game system, which my parents would not buy for me. What did he have? If I recall correctly, it was a Super Nintendo when we were, you know, and then later other stuff. So his house was the superior house for hanging out because there was more video games. Got it. Okay. So you guys went to the same elementary school, into middle school, and then you went to different high schools. And then you go off to college, to Yale, and he does too. You both go to the same university, your childhood friend, like your closest friend in elementary middle school, and then you both end up at Yale.

yeah was it quick just coincidental totally coincidental no planning there at all actually just had been planning to go to wharton um and uh and kind of changed his mind to the last minute and so that was real happenstance and in college i think uh you know certainly reconnected with just in a deeper way one of the really interesting things was i just i found i liked his dorm just had a collection of people that i really connected with more deeply um more easily. And so I just wound up spending a ton of time with Justin, but also with all of his roommates. I was kind of an unofficial, you know, fifth member of the, of the room. And when you got to college, did you, I know you studied computer science at Yale. Did you

have a sense of what you thought you were going to do? Like, did you figure, okay, you know, I'll get this degree and then I'll go work for a tech company? I actually purposely didn't take any computer science because I loved programming already. Like, I enjoyed programming a lot as a hobby. And I kind of didn't want to ruin it by making it a profession or a career. And then it got to be junior year. And I spent freshman and sophomore year taking entirely electives, whatever I wanted. And I was like, I have nothing that resembles a major. What am I going to take, you know, another, you know, 11 courses in in the next two years? And I was like, well, I know I'm good at programming. I know it's something I love. Maybe I'll try taking

computer science. And I almost immediately was like, oh, well, this was silly. Like, I'm, not only am I, do I, am I good at this, but like, I really, really enjoy the, like, the work is fun. And so then I just took, you know, took 80% computer science for the next two years and finished the major. And while you were an undergraduate, and you sort of got in with Justin's kind of cohort, there was a guy named Matt Fong. And from, from what I understand, at a certain point in college, he said to you and Justin, maybe others, hey, we should start a business. Is that what happened? Yeah, Matt, Matt's a really good friend. He was one of Justin's roommates freshman year.

Matt is my most, like, finance oriented of my friends. And I don't mean that he's interested in money. I mean, like, he looks at the entire world in terms of, like, what's underpriced and what's overpriced and what should I be doing based on that today. And he looked around in college And he said specifically not that we should start a company, but we have better access to intellectual capital today than we ever will in the future at a lower opportunity cost. And so we should take advantage of that, which means we should start a company. I mean, he's just any, I mean, did he have an idea of what? Nope. No.

Wow. So when he was like a 20-year-old at Yale, he was like, hey, we're at Yale. We're surrounded by all these, like, world-class professors. We have access to these amazing libraries and resources. and they're just part of our tuition, let's use it and start a business. Yeah. Wow. I mean, just to think about that, and this is like 2004 or 2005, like that's pretty, you know, pretty prescient.

Oh, absolutely. I mean, Matt's always been a few years ahead of everyone else, I think. And while you were at college hanging out with these guys, presumably you all played a lot of video games together. Oh, yeah, a lot. What was your game? during college mostly World of Warcraft, which came out my freshman year, and is, you know, an incredible game that I played for the duration of college. And then had to get, Justin, when we were starting a company, right if we graduated, he had a real talk conversation with me, which I think was very fair, which is, but I think you're going to have to choose the video game or the startup, which is it, which is it, World of Warcraft to the startup. And I chose the startup and quit World of Warcraft, which I think with you, I think he was right.

All right. So Matt had this idea that you guys should start a company while you're in college. and what was the next step? It was like, okay, let's start a company. Yes, that sounds great. What should we do? So Gmail had just come out, the summer of 2004. So, like, right before our senior year, I think we all looked at Gmail and we said,

this is the future of, like, software. Like, everything's going to be like Gmail in the future. I think we could all just see that. It was like having desktop software, but better. And what we did was, we're like, oh, well, Gmail's missing a calendar. Like there should be a, like Outlook has a calendar. There should be a calendar that goes with a email client.

And so we just started building it because that seemed like the right thing to do. And I look back at it and there are so many things wrong with the thought process we were going through there. We didn't know who we were building it for. We didn't use calendars. We didn't talk to anyone who used a calendar. We really didn't have any idea what would make a good calendar. We weren't heavy calendar users. Yeah.

And so there's a lot of reasons. I don't think we were going to be successful. But the thing we did that was super important is we just kept grinding on it. We kept working and trying things, even though it was clearly not working. Okay, so you saw in Gmail this kind of new thing. You knew, you realized that this was going to be the next thing. And so a calendar integration would be cool. And just had curiosity, was the idea that you all had, like, let's build this calendar.

calendar, and I think you guys called it Kiko, right? That's right. What did you think the problem people had was that you were solving? Their calendar isn't on the internet, and it would be better if it was on the internet. I mean, the biggest thing that Google Calendar does and that Calendly does is it lets you run collaborative joint calendars with anyone around the world without having to be on the same exchange server, the way that Outlook requires. And that was the big win. Basically, we built Google Calendar roughly a year before Google Calendar was released. and it was going to be a sort of a software company,

but the idea was, let's start with a calendar. Was the idea that you guys had, was it sort of like, let's build it, and then Google will buy it from us? No, not really. I don't think we were that sophisticated. It was more like we wanted to do a startup. We didn't really know what that meant

or how to go about it. We saw this missing piece of the universe. Like there's a mail application that runs on the internet. There should be a calendar application that runs on the internet. Let's go make that. And we just made our own separate calendar application that worked like Gmail. And if you'd ask me what our, what was our long range plan? I actually think, if I recall, we were going to sell advertising based on the better targeting data of knowing what events were open in your schedule, what times were open for you at night, and you'd be able to

opt in basically to like, oh, like, are you interested in finding something for Friday night? like click here to add it to search right from your calendar for cool events you could go to which there's a bunch of reasons where it's a colossally terrible way to monetize a calendar

which I did not realize at the time because I wasn't a calendar user but I'm pretty sure that was our plan. Got it. Okay. So while you were at building this and students at Yale and presumably like doing your coursework you hear about this new thing

called Y Combinator, which was headed up by Paul Graham, and was one of the really kind of early influential incubators, and is now, of course, world famous. And you applied for to be part of Y Combinator, I guess, which they would give you a little bit of money and some support. And what was the, I mean, this was the product that you were, you were pitching them, this calendar product? Yeah, I'd been a, I've been a Paul Graham, I don't know, it was like a Paul Graham fanboy through college. I'd been reading his essays. I loved his writing. When I heard, like, oh, man, he's doing an incubators. This is perfect. This guy's really smart. He's had a successful startup before. And we had no idea how we would, like, how to raise money or, like, what we would do.

We're going to start the company. And what that actually meant in terms of doing things was just other than make a product and put it on the internet. We weren't really sure. And so it seemed like It was this, what an amazing, positive, lucky coincidence that this thing exists now. So we applied. And now we applied with Kigo Calendar, the thing we were building. The original YC was heavy on, like, show us a demo. And interviews are now 10 minutes. At the time, you got 40 minutes per interview. What do you remember about the interview? Was it, I mean, Paul Graham sort of is famous for asking, like, well, what's your monetization strategy and, you know, and how, but he also has an incredible instinct. Obviously. Were you getting hard questions or did they seem encouraging? The YC interview always goes kind of the same. It's funny. Even then, you had more time, but it's always the same thing, which is, what is it you do again? Oh, how are you going to get customers? Could this be big? Yeah. Oh, yeah, how are you going to make money? Like, how will this make money eventually? And they're not looking to see that you have the right answer because there is no right answer. And I think one thing YC really deeply knows is that it's going to change.

But do you, have you thought about this? Do you have unanswer? Does your answer make sense, at least in theory? And then how do you respond to being challenged? I think what YC is looking for is people who can communicate clearly. But most of all, people who, when they're challenged, they neither rebel nor acquiesce. And I think that's one of the most important traits in startup founders, actually. And you guys actually get accepted to this program.

You get into Y Combinator, which I guess was in Cambridge, Massachusetts at the time. time. And so you and Justin are working on this thing. And I guess at the end of your time there, were you able to get some real investment? Yeah. We managed to convince two of Paul's friends who'd worked with him at Yahoo. We convinced them to invest in us and give us, I don't know, between the two of them, I think, like $100,000, which is enough to keep running the business for a year effectively. So as you were working on Kiko calendar, at what point did you have like something you could actually launch and put it onto the world?

Because you started in 2005 or 2004. When was it ready for people to test it out and try it? We started working on it during college, sort of at the, you know, early part of 2005. We didn't really start working until we graduated and like, you know, had, could do it full time. We probably launched it three or four months later. something like that. And how did you make people aware of it

in sort of the fall of 2005? I mean, most people are still on dial-up at that point. We got coverage on TechCrunch. We got like that was, which was sort of getting started around that time. It was basically known for doing startup coverage. We'd try to get other press sometimes. But honestly, that's a really good question that we would have, the answer is mostly we didn't.

mostly we didn't get very many users. I think in the year and a half we used it, we had 90,000 people sign up for an account, which, you know, isn't tiny, but over a year and a half on the internet, it's actually not that many, and most of them obviously didn't keep using it. And I think we had some good core instincts

on how to design a calendar that worked. The problem was we didn't have any instincts about finding an actual customer who might want it. Yeah, you didn't fully understand like the user acquisition side, right? Because that's that, I mean, building it's hard, but getting people to adopt and use it is arguably harder.

I would say even, yes, we kind of imagined what we thought people who used calendars were like, and then tried to solve that imaginary person's problem. Yeah. But at no point did we go talk to actual calendar users. But fundamentally, we were completely right. Gmail should have a calendar.

Well, it turns out Google built the, did the falling off a log, obvious thing and created Google Calendar. Of course they were going to create Google Calendar. Right. At what point did you come to the conclusion, did you and Justin come to the conclusion that it was not viable? This was not going to, this was not going to become a sustainable business. About two months after Google Calendar came out, we finally admitted to ourselves, we have no

ideas for how to make our calendar better than Google Calendar. Right. And Google has a massive, massive engineering, distribution, resource, everything, brand. advantage over us. And we don't even have any ideas for how to make our thing better and work way behind and we should give up. And we had to, we were faced them with like, well, okay, what do we do with it? Yeah. I mean, because it works hard on it. I mean, you could just kill it. You could presumably look for maybe somebody to buy it, but maybe nobody was going to buy it. So did you kind of start to go down that road? Yeah. Our thought process was, well, we don't want to do this anymore.

We've built this thing. And the code's fine. Like it works. It is a calendar. It's a web calendar that exists. Someone must want this. Where could we sell our startup? And we decided, well, the obvious place to sell it would be on eBay because eBay is famous

for hosting, you know, selling weird stuff at the time. Still today, I guess it is. And so we created an eBay auction to sell our startup. We just made a listing that said, you know, for sale, Kiko calendar assets. sale all of the assets of the startup including the domain name the logo all the you know software all the customer relationships uh we will sell you the whole thing and uh two cows in toronto bought it what is that a as a software company yeah it's a it's a it's a domain register got it so this this company was basically buying the domain name the underlying software you know

and and and the you know the the code everything and the domain name was kiko dot com Yep, Kiko.com. How much should they pay you for it? Or would they buy it on eBay for? It was on eBay, I believe $265,000 was the winning bid. We had like 13 bidders. And it was an asset sales. Once you paid taxes on it, paid off the investors, and you dividended out all the money.

Justin and I walked away each with, I think, about $65 grand. Wow. That's pretty great. Yeah, it's pretty good. I felt like that given that we taking this huge risk and started a startup, I felt great about that. Were there other examples of this of other tech startups selling their companies on eBay? No, no one else.

No one's because you would, you sell like old baseball cards or like. Yeah, totally, which is why it was genius because it meant we got all this press coverage, which meant that everyone heard about it. Like the biggest part about selling an asset like this is getting the buyers to hear it, it's even happening. Right. Right. Right.

And so it was a very clever way to basically generate a bunch of publicity, which I think was a lesson that really we took with us to Justin TV. Yeah. All right. So it's 2006. You've sold Kiko for, and you guys each have about 65 grand. And did you both immediately know that you were going to together once again start something new? We didn't even talk about it. It was just assumed. Like, I can't remember. I don't remember a conversation. I don't think we're like, oh, should we start another startup together? It was like, what startup will we start together? What's next? Was the only question. I think the other thing we did during Kiko that's super important to remember is like every two or three weeks we'd get, I don't know, bored, dispirited, it wasn't taking off. And we'd have some other great idea. Like we had this idea we were going to build a social network for families or we were going to build a YouTube but for audio.

And we would then go build and launch these products in like a, we'd like spend three weeks and we do a sprint and we just build this product from scratch and we'd launch it. and then it wouldn't take off immediately. And we'd get the spirited and we'd go back to working on Kiko Calendar. And so we probably built six startups in 18 months. I think we had this mental model that the way you had success in startups is you have this great idea

and you build it and then you launch it and people like, wow, this is amazing. And they just like, immediately it starts working. That was our mental model for like what success looked like. And so we just, you know, we'll just take more shots. So we took like six shots on goal

on having something that would instantly take off. And of course, that is not how it works, and none of them worked. But through that process, we learned so much about how to build things, how people react when you launch something. And it was this real – it was like grad school for building a software company. Wow. So after you guys sold Kiko – and by the way, at this point, you graduated college, right? and I think you're still in the Boston area.

Were you still getting advice from Paul Graham? Oh, yeah. Paul was super encouraging. Paul's superpower is you talk to him about what you're working on or what you might work on, and you walk away feeling like you could, you're not only could you take over the world, but like you're on to something and like you're going to. Like this is bigger than you think. And I really, really appreciated that.

And so basically what happened was We were like, okay, Paul, we figured it out We want to go do this company And he's like, all right, hit me with the idea And the idea we brought to him was We were going to make a service Let you print a blog Or a, you know,

Flickr website as a coffee table book Which was a terrible idea And he was like, that's not a good idea Basically, what else do you have? Maybe you have a second idea That's better than that one. We're like, okay, well, you do have this other idea. We had this idea

basically our conversations are really interesting. People would love to listen to us talk, which I don't know if that was true, but we had the delusion. We should just record all of our conversations and then upload them. Oh, well, that's, that's too much work. We should just record all of our conversations and stream them live all the time because we're not going to bother to cut them and upload them. Okay, well, if we're just going to stream our audio live all the time, why don't we just like stream everything, audio and video live all the time? And we're like, sort of thought that was funny and then left it there. And then we started telling people like that was our startup idea.

And I remember Chuck Foreman at a at a YC, a little YC, like after Happy Hour thing, told Justin, like, you're full of shit. You're never going to work on that. And I think, I honestly think in some ways that was the deciding moment. We're like, yeah, we will. We'll show you. But Paul saw that this was bigger than we thought it was. It wasn't just us streaming. He was like, oh, you could let anyone do this.

That could be a new form of entertainment. And we were like, yeah, totally. We could let anybody do this. And he's like, great. And we got a $50,000 check to go start our next thing. So it was basically just on the strength of this idea that Paul Graham was like, yep, I believe in you guys. And I want to put $50,000 into this idea. This is actually just how I would say a lot of angel investing in Silicon Valley, or in this case in Cambridge.

But like tech angel investing works. In the beginning, the investable. asset is not the idea and it's not the execution and it's not the research or whatever, the investable asset is the founders. Yeah. And you're much better off investing in a good team that has no idea what they're doing or there was a bad idea than a bad team with a good idea or even a okay team with a good idea.

And Paul thought we were a good team, which I think in retrospect, he was right. We were a good team. And so on the strength of the team, we got 50 grand to start our next thing. When we come back in just a moment, how Emmett and Justin use that money to launch a live stream of Justin's life, capturing every minute of his day, including sleeping and bathroom breaks, and how that experiment eventually turns into Twitch. Stay with us. I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2006, 2007, and Justin and Emmett. are kicking around an idea for their next business,

an idea that at the time seems kind of bizarre, turning a camera on themselves and streaming it. The first idea was just, we should do a live stream of Justin's life. EVDO modem cards, which were the very first generation of sort of on-the-go internet, had just become available. So you could get broadband video streaming-capable internet

anywhere there was sell coverage. like literally six months before that. So it had just become technically possible. And explain how this would work. Like he would wear a webcam or there would be a videographer following him around or what? Yeah, well, we couldn't afford a videographer to follow him around 24-7. That's expensive. So he's just going to have to wear the webcam and be the cameraman also, which in retrospect,

having someone be the cameraman and also the talent doesn't make any sense. sense, but we couldn't afford to do it expensive. So that was the solution. But I think you were able to build out the team a little bit, right? Because I think around this time you brought on somebody new named Michael Seibel, who was a friend of Justin's. That's right. Justin reflected and noticed correctly that we kind of had a highly distractible way of engaging with our startup, where we we wouldn't stay on target and we wouldn't we would we would jump at the new shiny thing we got we got overly inspired too quickly and he basically thought we needed adult supervision not like an older person but someone who would like be a little more reasonable and uh and steady

and michael's a very steady calm also very smart person and jess was like i think we need michael on the team and retrospect he was totally right michael was a incredible addition and i guess you decide to launch Justin TV, not in Boston, but to go to San Francisco to launch it. Yeah, because if you're going to start a tech company, San Francisco is like the place to do it. It's still now, but especially then Silicon Valley. And so we piled all of our stuff into my Honda Civic, all of our worldly positions, me, Justin, Michael, and all of our stuff. and we drove across the country at like a sprint pace

took us four days from New York to San Francisco because we were convinced that like we taking two extra days to go stop along the way was too much time. We need to get started right away. And in retrospect that was crazy. Like of course

we could have taken a day to stop but I think the sense of urgency was important. Like it was silly for us not to stop. driving across the country. And if we'd been the kind of people who would have stopped driving across the country, maybe we wouldn't have succeeded. Because you kind of have to have this feeling like it's really important. We've got to go. Like, we'd go fast.

Yeah. So you, so when you arrive to San Francisco, I think you launched it in around March of 2007. Does that sound right? Yep. Okay. And the idea was, all right, we're going to 20, 24-hour live stream of this guy Justin's life, this totally unknown person. And, and, and the idea was, all right, And it wasn't that, and I'm trying to understand this, because it wasn't that it was Justin was like this sort of this exhibitionist. It was more like he was the guinea pig that would essentially be the test case for what this could be. Or is he an exhibitionist? I don't know. I'd say it's a little bit of both. Like exhibitionist isn't maybe the quite the word I'd use.

Justin's always wanted a little bit to be famous. There's a reason why he runs a Snapchat channel and he has a huge. YouTube channel now. He has all these Twitter followers. He's always wanted to be famous. And so I think it was both an opportunity for him to go, become a little famous, you know, in a minor way. And also, we were a guinea pig for the system we wanted to build at the same time. So it was a good fit. And it was his perspective, right? The camera would be mounted on his head, but also there'd be cameras inside the apartment. mostly it was just from his perspective all the time and sometimes he'd take the camera off and pointed at himself while he was doing something but it was his perspective most of the time walking around actually one of the big things we discovered was almost immediately people liked him taking off the camera and talking to them more than they liked almost anything he could be doing if he was doing something really interesting like he's taking a trapeze lesson or something

then the point of view camera could be interesting but 98% of the time you you actually would rather have him just be sitting at the computer talking to chat, which is, in fact, how everyone does it today, because that was actually just more compelling as content. Was it, I mean, he would walk into a restaurant or a bar or a store or something. And I guess this, people probably didn't know what was going on. Like, people didn't know that they were on this video stream, right? It's interesting, right? It was a stunt.

I think we learned something from the eBay experience. which was if you do something that's a little bit provocative and crazy that people want to talk about, people will talk about you. So that definitely worked. When we were walking out San Francisco, people might not have understood that they were on a live stream, but they definitely understood there was a camera. It was novel. I think now everything, everyone, well, first of all, everyone's being recorded all the time because of smartphones.

But there's a whole culture around it at the time. It was like, oh, cool, am I on camera? Like, what are you filming? What's going on? What do you do when he slept? We put the camera on a tripod and pointed it at him. As he slept? Watch Justin's sleep, yep.

What about when he took a, what about when he took a shower? 24-7, even in the bathroom. In the bathroom, we pointed at like the wall, more like in the shower curtain or something. But you could hear, like, if you went, yep. If you went pee, you could hear it going pee. That's right. Wow. There was a whole thing.

One time he neglected to wash his hands, there became this whole meme in chat of them people making fun of him. and reminding him to watch his hands every time he went to the bathroom from that point forward. And what about, I mean, I hesitate to say this because this is like not, you know, I don't really go there normally. But what about like, you know, romantic life? I mean, was it just, how did he handle that? He went on some dates. I mean, he was up front with, you know, what he was doing. Yeah.

I don't think any of them went that well most of the time because, like, you know, it's a awkward experience. but there was an incredible experience after he went on one of the dates where it just felt like it went well and he was walking home and people start streaming out of the buildings where all of our friends lived around there. If they ever start streaming out of the building and coming up to him and congratulating him on having had a good date and you watch the date and then you're watching that and that was a really interesting like that was a cool experience like there was a you could see this like glimmer of something happening there that was kind of dynamic and interesting.

And, I mean, people knew where you lived. Like, you were getting, people were sending, like, hundreds of pizzas to your door and, like, calling 911 and the police would show up because they, there was a report of, like, a robbery or, right? I mean, all kinds of things were happening in your apartment. we all the harassment that streamers still with today we we got in spades because we were the one the one target um i had a gun pulled on me um there's a they had a they reported a stabbing in our apartment the police came in weapons drawn and i you know i had a a pistol pulled on me uh by the police uh they they pretty quickly realized wait this is a bunch of engineers like in their underwear programming like this is not a stabbing but uh that was a really scary moment. And, you know, we had, we had the fire trucks called. And even if the fire trucks had showed up, we would deal with it off camera so that there wasn't a reward for the person doing it. And that

it definitely, over time, cut down on the amount of harassment we experienced. Did you, having launched, I mean, when you launched Justin.TV, did that attract investors? Were there investors who were like, hey, this is there something here? Did you start to get? interest? No. No. About 100,000 people watched it in the first month. And our CDN bills just started piling up. CDN's like for the content delivery network for the video. And we went up with just these huge bandwidth bills.

And we were like, oh, crap, we have to raise money. Stat. So then we went out hat in hand trying to raise money and really struggled. Because they thought it was a gimmick. They just were like, who, what is this? This is like tabloid. I mean, is that what the response was? I think it was more like how.

is this going to get 10 times bigger. Right. Like, what's the pathway for this to get really big? But some number of investors believed we got, we raised, I think, from about, from like five investors, we raised like maybe $350,000 total, which was enough to pay our bandwidth bills for a little bit and keep us going. Right. And once we launched to let anyone stream, that started driving more growth for us. But the first nine months, I think it was just Justin's life, right, in real time. Maybe for six, I think.

Six months. I mean, it sounds really boring. I mean, 24 hours a day of anyone's life. I don't care if you're like, I don't know, like a Marvel superhero. Like, even parts of your day are going to be boring. Everyone sleeps like eight hours a day roughly, right? Like that's definitionally one third of the time. If you are the most interesting possible human, you're still not interesting.

No. No, no, this was a terrible idea, like fundamentally terrible. A 24-7 live stream is a gimmick. it was a good gimmick. It got us a lot of attention. And then the other people who were streaming on Justin TV using the technology didn't do 24-7 streams. They did three-hour streams of something interesting. And I think Justin TV worked to some degree because our actual customer was the streamer.

And because we were trying to build something that worked for us as a streamer, we built something that actually worked because we deeply understood the needs of our customers because we were the customer. Right. We discovered actually very early on, although we didn't, I don't think we fully realized it at the time, people found community hanging out watching Justin. And I think that was the, that was a really big insight. And we did a lot of things right leaning into that, making chat good, making moderation good. And how many people, as you, as you made it available to anyone, did you, was there like a flood of people coming in? We had a pretty long beta list, you know, a few hundred people signed up for the beta. In the first month of the beta, we had probably 80 people streaming. And then as we opened it up, we had hundreds, thousands of people stream, eventually

tens of thousands. And what were they streaming? What were people doing on it? All kinds of stuff. One, someone guided street art and streamed himself, like, you know, doing sidewalk art and stuff like that. I Justine had a show. We had talk shows. We had some gaming. We did some of the very early gaming streams. We hooked up our Xbox and we streamed ourselves playing Call of Duty. And how, how, what were your biggest expenses at the time? I mean, I'm assuming you guys were not paying yourselves much, but still, you had to pay for servers and what else. What were your, what were your expenses? Rent, 500 bucks a month each in spending money, and then infinite bandwidth bills forever that were constantly crushing.

It was so expensive. Deliuch delivering the video was really expensive. And so how did you finance it with just a few hundred thousand dollars? We went and we raised, we raised more money. So about six months later, I'm trying to remember exactly when we raised our series A. We raised $2 million. And two million dollars was enough for us to continue. We could hire some employees. We could continue paying our bandwidth bills. And then we were like running out of money again. At this point, we'd grown quite a bit, which was great, except we had still made no money. We'd not turned on any monetization. But how did you, as you started to acquire or as you started to get more and more users, you were not monetizing it.

The idea had been, hey, we'll eventually just have advertising around this? Yeah. It's literally just like YouTube. The idea had been we'll sell ads eventually. And I think everyone else looks at us and they're like, you're going to get crushed by YouTube more or less. was what they thought. Right. Because YouTube,

I mean, the idea was that YouTube would just become a live streaming platform and you would, that would be the end of Justin TV. And they did actually eventually launch YouTube Live like five years later, but it took them a while. Right.

And so then we raised, we raised an additional, I think, $4 million, $6 million plus $2 million in venture debt, something like that. Yeah. And then the 2008 crash happened.

And thank God we raised that money when we did because. Because you, would have been in trouble. We would have been dead. Nobody was, nobody was, nobody was giving money out. No, no one was, was, was, you could not raise money after the financial crisis. Especially not for a money losing business that's whole, that's like, don't worry, we'll figure out monetization later. And so immediately after the crash, we could, we're kind of like, oh man, we, we've got to get profitable. So, so what'd you do? How did you do that? Well, the first thing we did was you just threw Google AdWords on the site because that was the fastest way to get some

money immediately. Right. We sold our, we made our mobile apps cost money. It's funny. Like, that sounds so ridiculous now. Like, of course, the Twitch app is free, but we were just pulling every lever we could to try to make, make money. Okay. So one of the ideas was a mobile app. And mobile was new. I mean, 2008, 2009, this is like early, early days. Yeah, we were, we were pretty early to making mobile apps. That was another thing where it was very clear mobile was the future. All right. So, some money's coming in, but I have to assume it's not quite enough yet. Actually, over the course of the year, by relentlessly cutting every cost we could cut, putting advertising everywhere we could think to put an ad, and charging money for the mobile apps.

And I can't remember. There's probably a list of other things we did, too, that I'm forgetting now. We got to profitability. We had a doomsday clock on the wall where we had a weekly all-hands with the employees. And every all-hands, we're like, we are eight months from bank. bankruptcy. We are seven months from bankruptcy. We are six months. And at first, it was falling at like, you know, we're at 14. And then the next month we'd be at 12. It was like accelerating because as we grew, it was costing more money every month. And then, but then as we started to bring monetization online, we started to pull out of the dive. And the worst all hands was we are eight weeks from running out of money. And then we were 10 weeks from running out of money. And then we were, you know, 20 weeks from

running out of money and then we were we'd hit profitability and but it wasn't i'm assuming it wasn't massive profitability uh we set a goal for the company that we get we wanted to make a million dollar we wanted to run rate of a million dollars a year of profit of profit wow yeah a profit because we once we got going it was fun we were good at it and we said we take the whole company to Hawaii if we got to a million dollars in profit which at the time we were making like 10,000 dollars a profit we thought it was impossible and six months later we'd we'd we'd gotten to a million dollars a year, 100,000 a month of profit. Wow. And that was purely through that triple, or that strategy of cutting costs, just advertising wherever you could get ads

and the mobile app. Those were the tactics, but like the underlying thing we did was sit down every month and ask our, like go through the whole P&L, every cost, every revenue line up and ask, how could we make this bigger? What else could we do? What else could we cut? Wow. And it's just relentless focus on those lists. And how many people did you have working for you in 2009, 10? At the start maybe like 40, by the end, I think, like 24, because we had we had to do a layoff because we just, we couldn't afford all those people. We couldn't afford all those people.

Yeah. And how many users do you, do you remember, how many users did you have around 2010? I think 50, 60 million a month. Wow. So that's a lot. Yeah, no, it was, it was big. Yeah. So it was already pretty, it was already pretty big. Okay, I guess, I guess around this time, you start to think about, you know, the kind of taking this to the next level.

And you guys started to talk about maybe trying out different strategies, different products. Tell me about the conversation. What did you start to think about doing? So we had succeeded at getting profitable, but then in doing something, so we'd entirely killed our growth, and we were no longer growing. And we started trying to reignite growth, and we had all these ideas for these products we'd build, and they pretty much all failed in a variety of different ways. And so we were kind of bumbling around, and, God, who was it?

This guy who'd been, like, at YouTube, like a VC, you know, as he came by and he told us, like, you're doomed. Like, you reigniting growth is almost impossible once it stops, and, uh, and, and, and, and, And if you're not growing on the internet, you're dying. And why weren't you growing? I understand that you cut costs. But explain how that connects to the slow, slowing down to growth. We'd been adding advertising, which makes it a worse experience.

We'd been adding paywalls at a bunch of places. And more to the point, I think we'd kind of like hit the natural size of the people using the thing we were doing without improving the product further. Right. And so we kind of had this moment, the founding team, it's basically like, he's right. We got to have a second act. What are we going to do? And we started having these conversations about that. Like what do we do? How do we actually reignite growth? Yeah, what should we focus on? What is the next thing we should do? And I think we all said, well, it's pretty clear that the biggest thing in live video, based on what we've built so far and looking around is actually corporate, you know, webinars and, and video conferences. Yeah. And we could go build that business. And we were all like, yeah, that's probably a big multi-billion dollar business. Yeah.

Does anyone want to work on that? No. Okay. We're not doing that. Like, we just didn't want to do enterprise software. That would have been, I mean, look at how successful Zoom is now, right? Right. That would have been, I think we were right.

But instead, we were just not interested in enterprise. You were not interested because it was boring? Mm-hmm. You thought it was boring? We thought it was boring. We just, we didn't want to do enterprise, sales. We knew what that was going to. We had friends doing enterprise companies, and we knew what that was going to get us into. It's not building great, beautiful software to win. It's building

good enough software and great sales. And we just, that wasn't what we got into the game to do, I don't think. I mean, consumer software is like buying lottery tickets. You have no idea, like, when it's really successful, the biggest consumer-oriented companies are incredibly successful. Right. Enterprise software is a little more rational, maybe more boring, but like, yeah, The pathway to success is more controllable. We decided we'd like to buy more lottery tickets instead. Yeah, right. I mean, it's why everyone knows what Facebook and Google is, right?

But not everyone knows what, like, SAP is, even though it's a huge company. That's right. Exactly. All right. Okay. All right. So you guys are, at this point, you're kind of at a crossroads, right? And from what I understand, you had a couple of different ideas about where you wanted to take the company. like Michael Seibel, who was running Justin TV at this point, he had one idea, you had another idea.

So what was yours? What did you want to do? The StarCraft 2 beta had just come out. And StarCraft was a sequel to a game I played as a child, the original StarCraft. And I was so excited because I couldn't believe they'd finally made a sequel after like, you know, 10 years. Can you just describe what StarCraft is?

I mean, I know we've had, we've done Riot Games on the show and others so I know League of Legends and World War of World Warcraft. I don't know, I can't picture Starcraft. StarCraft is think of like Starship Troopers. Oh yeah. If you've seen the movie, it's like, you know, bug aliens versus Taryn space marines. So you're

looking at the battlefield from the top down, but you're building an army and you're commanding it versus other players. I see. Okay. I got you. So, and you love playing this game, and this game had been, there was a streaming element to this game already? Yeah. So the original

Starcraft is a very deep multiplayer competitive game. Think of it. Playing it is kind of like playing real-time chess plus poker at the same time. It has a very high skill cap. It's possible to get very, very good at it. Okay. And so in South Korea, particularly, it really took off. And there were basically, you know, e-sports stars became like, you know, Starcraft stars became like celebrities. And they had a cable TV channel devoted to, you know, the matches, and it became a whole league, and there was a whole culture around watching the very best Stargraft players. And was anybody putting that content onto Justin TV when it became available? Yeah, yeah. I mean, that was how I got interested in the idea in the first place.

People started, Justin TV always had a small or small amount, 1, 2% of gaming content. So the StarCraft 2 beta came out, a bunch of people started streaming it. They'd run screen capture software. Like, you know, when you're out in a Zoom call and you, like, share your screen. Yep. So they do screen share with the video game, plus their webcam sort of overlaid on top so you could see their face. But this was a tiny number of people who were consuming this content. Yeah.

It's maybe, it was maybe 50 streamers and like maybe in total 500,000 people a month. Okay. But you liked this as just even though you worked for Justin TV, as a consumer, you liked that? it was the first time I'd ever actually enjoyed watching my own product. Like, we'd been running an entertainment product for like four years at this point, and I was like, this is fun. I like watching this live. This is great.

I can ask the pro questions. I'm hanging out with other people who also like the same thing I do. And I know that if other gamers who I know understood what I would be, had the experience I'm having and understood it, they'd like it too. And so I was like, I think there's something here. I think we focus on this. we could grow something really big. I think gaming is the vertical for us to work on.

Even though it was just one or two percent. So a tiny subset of people who were doing gaming. But you thought, you know, this is really, I think people want to watch other people play video games. Yeah. I mean, I don't just think I wanted to do it. And I was like, I don't think I'm alone. Okay. But again, at the time, Michael, who's a CEO, had a very different idea of where he wants to

wanted to take the company. So what was his idea? Michael's insight was it was obvious mobile apps were going to be massive. There's going to be a wave of social media mobile stuff. And we should focus on being video for mobile. No one had done great video for mobile yet. There's a lot of photo apps, but not a lot of video. Right. This is before, this is before, like, Mirkat and Periscope came out. This is before Instagram had videos. This was before Snapchat. Like this is there is no there was no video recording stuff on mobile yet really and so we had these two ideas and we're like we don't know which one is right. I felt pretty strongly mine seemed good. Michael felt pretty strongly his feeling good. We both thought the other person's made sense.

So we got together as the founders with like a four hour meeting to figure out what to go do. And the conclusion was they're both likely to fail. Yeah. Like doing anything new and risky is likely to fail. So let's. fund two skunk works initiatives internally. We'll take resources away from Justin TV. We'll give each of them, you know, two or three employees plus the founder who are going to go focus on doing that thing. And Justin will sort of continue to run the core business in the meantime. And we set these basically growth bars in which everyone exceeds the growth targets we hit for the first three months. We will pivot the company to do that. Right. And so I sort of

grabbed all the Justin TV infrastructure and focused it on sort of customizing Justin TV, building Justin TV to be better for gamers. When we come back in just a moment, how Emmett is warned that gaming will never be more than a niche business. And how that niche grows to tens of millions of users. Stay with us. I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's early 2011, and Justin TV has basically split into two separate businesses, a mobile video service and a gaming platform that will soon become Twitch. The first thing I did was I asked myself, I had had this realization,

I need to actually know who I'm building for. I need, like, I'm tired. I was sick of failing at product. And I was like, I need to know what the, actual problems are and the first thing I asked myself was who's more important here do I need to do I need to build stuff to make it better for the viewers or do I need to build up to make it better for the streamers and obviously they impact each other but like who is my focus and I realized there were about 200 people who are streaming video games across every service including ours

who garnered maybe 80% of the total audience at the time and I was like oh I just need to make them happy I can talk to those 200 people right so just to be clear there were other competing services that that were doing something like this oh yeah I mean and and bigger than us too it's like Ustream was a live streaming competitor they had more gaming and they were bigger than us live stream.com there was a European startup owned 3d that was I think already functioning at this point those were the primary competitors in the beginning and so we deal these little customizations to Justin TV we promoted the gaming content more we made the front page promote a lot of gaming content

more. And I just went out and I talked to a ton of streamers and I just wanted to understand like how did you get started streaming and what do you like about it? What do you get out of this? And the biggest surprise for me was how much they wanted to make money. And not because they wanted to make a living. Like they knew they would be made. I was like, you're going to know you're going to be making like $17 a month given how big your audiences and how much money we can make you. And the streamers would say like, yeah, totally. I know that. That would be amazing. I would love to make $17 a month streaming video games.

And I was like, okay, like, I believe you. And so one of the very first things we did is we started this partner program where you could press a button and we would roll a mid-roll on your channel and we would give you half the money. An advertisement. An advertisement. A mid-roll advertisement in the middle of your stream. Press button, run ad, get money. And it was, we invited like 50 people.

And they loved it. It was super popular, even though they weren't making that much money in the beginning. Right. I think by June of that year of 2011, you essentially moved Justin TV Gaming to a different site called Twitch. That's right. And that name, Twitch, where did that come from? So we had been calling it Justin TV Gaming. We decided it needed its own brand and its own home over time for a variety of reasons. And all the names we had for the product were bad at the time.

and I literally like locked myself at a conference room and just for two days just like went through looked for domain names I could buy, looked for stuff that was available. And eventually I found Twitch through just free associating words associated with gaming. And Twitch gaming is a kind of like, you know, fast reaction gaming. Yeah. Well, it's a muscle, right? It's your Twitch muscles. Yeah, fast Twitch muscles.

Right. Yeah. And you kind of had a correlation with like the liveliness of the streaming in addition to gaming. And so I was like, okay, that kind of makes sense. And most importantly, I could get the domain. And we told everyone it was Twitch and Twitch it was. And Jacob, our designer, made a logo in like two hours. And we launched it.

I mean, you look at it now and you think, oh, that's a no-brainer. People want to, I mean, this is a huge, massive, growing industry, right? Creators, gamers, et cetera. But, I mean, in 2011, I would think that, There were lots of people, because there's still our people today who say this, but there are lots of people who would want to watch other people play video games on the Internet? I mean, how many times did people say that to you? I mean, I used to get that question every interview. Now I'd say it's only half of all interviews.

Usually what I would do actually is I'd ask them. Well, first of all, just tell me, do you watch TV? Oh, well, what do you watch? Oh, you like watching the NFL? You like watching football. Oh, interesting. So you like watching someone else throw a ball around rather than you throwing the ball. Fascinating. Well, it turns out people who like video games do the same thing. People like watching other people do stuff. It's a core human desire. But it never worked. Nobody gets it. You can't explain it that way. Because they would say people would have said, yeah, but I mean, come on. I mean, Tom Brady is he's a, he's an athlete and he's, you know, or they would say, you know, watching, you know, LeBron James play is, is, is, is, is, is, is, is, is, is, is.

There's a superhuman. I mean, a video game or like people would say, right? They would say that to you. Yeah. Boxer is, was potentially the most famous Korean StarCraft player. If you've, if you've never watched Boxer execute a three-site drop tank attack at the same time, you don't understand the level StarCraft can be played at. It is a thing of art. Right. But the best news fundamentally is.

You don't need, I don't need them to understand it because I got it and the people watching got it. The people streaming got it because for the people who loved it, it was self-evident. The instant they saw it, like they were like, oh, this is, yes, this is what I want. This is what I've been waiting for. Yeah, I mean, that's the thing. Like when you finally launch it as a standalone site, what, they just all of a sudden, this community kind of began to coalesce and just start, they just start walking into the front door of Twitch? No, so what's interesting is

we'd been growing at 25%, 30% a month for almost nine months before we ever launched Twitch. Like, it was fully validated by the time that we were launching a new domain name. And that was simply because you were improving Justin TV gaming for gamers?

We had a very simple closed loop growth strategy. We would make the product better for game streaming. We would go out to all the game streamers and say, we've made the product better, you should try it out. Hey, we'll pay you $1,000 to like switch services for the larger streamers. Some of them would tell us, no, you don't do this, you don't do that. And that would become our future request list. And we would go, we wouldn't

always build the thing they suggested, but we would go, we would go solve the problem they were pointing out. And we'd make the service a little better. And then we'd go out and we'd recruit more streamers. And every time a streamer came on, they would onboard all of their audience. They would tell everyone who followed them online, hey, come check me out on Twitter. And then those people would watch the streamer they came to watch, but also spread out and watch other streamers. And it became this cascading, like, exponential growth process where the bigger we were, the easier it was to recruit more streamers, who could then bring across more of an audience, which would then let us recruit more streamers, et cetera, et cetera. And what could the viewer do initially? I mean, could, was it passive or you were watching somebody play a game and you would?

see their face talking into a microphone about what they were doing or was there a chat already integrated into it or you could you could actually you know write your comments from the very beginning on just TV gaming all the way through when we launched Twitch and through the whole time there was always a webcam of the person's face over the over the video uh talking to the audience because you're you're there you come for the video you come for the for the entertainment and the the the the gaming content, but you actually stay for the relationship and for the chat and for the connection. That's been a core part. That was a core part of the Justin Show, is a core part of Justin TV. You can talk to the people making it and they can react to you and you can impact what is happening on the stream in real time.

So you make this available, right? And of course, this exists. There are other streaming services. But I wonder, I mean, I'm thinking of like streaming movies. Like if you started, if somebody went on Justin TV and started. to just like play a Disney movie. I mean, Disney would go nuts, right? And they would shut, they would be shut down instantly. Why weren't the video game company similarly irritated by this?

Because essentially, they could have said, hey, somebody's monetized. Somebody's like making money off this thing that is ours and we sell this product. Did any of the video game companies push back on it? We got, we got some incoming requests where people were like, hey, you're monetizing our IP. Right. And our response is always the same. You're totally right. And that's totally your IP.

And if you don't want us to do it, just tell us, we'll turn it off. We'll tell every streamer stop streaming your game. And the reaction to that was universally the same. Whoa, whoa, whoa, let's not be hasty. Because they recognize the truth that watching a movie for free on a service instead of buying the movie to watch it is a substitution for what you're doing. But watching someone else play a game is actually marketing for the game. then you want to buy the game. Then you want to buy the game,

or you want to play the game more, you're going to buy the sequel. And like, it's just good for you. You can't pay for that kind of advertising. If anything, they should be paying us, which in fact,

mostly they do. They buy advertising with us. So if anything, game companies would like even more exposure rather than less. Yeah. And that was actually, that insight was one of the reasons

I was so excited about gaming. I pushed us to go into gaming because I was like, this is the only category where we have this great IP and the people who own the IP are excited about us using it. So, all right, this, this is really taking off. Like, I mean, I think within a year

and a half, it's got 20 million users. And was it, I mean, we're, at that point, were investors just like banging down your door to get involved in this thing? Nope. Huh. We talked to 40 VCs, everyone turned us down. Why? What were they saying? The same thing? Who's going to watch people play video games? It's a niche. It's great. You found something cool. It's a niche. It's not going to get, you're nearly saturated the market already. You're going to run out of people who want to do this. It's not going to be big. I mean, they were right. It was a niche, except only a massive niche. Right. It turned out that niche was a, I mean, to be honest, I, one of the problems I had trouble raising money is that VCs go off of your own confidence. And I'm not very good at

convincing myself of things that I, where I feel it's truly unknown. Like, I thought it could be big, but I didn't know how big it could get. And honestly, I've been surprised at how big it has gotten. I've, like, if you'd asked me, you know, five years ago, how big can Twitch get? I don't think I would have believed it could be as big as it is today. But I knew for sure we were on to something. And it really, it felt like between Justin TV and Twitch, it felt like I'd been bumbling around in the dark, trying to, like, you know, solve a puzzle with the lights off.

and I just turned the lights on it. I was like, oh, this is much easier. And that was a really powerful experience. Yeah. And by the way, I should just mention that you were at this point, you were the CEO of Twitch. Justin was still there, but you were in charge. What was that like for you? Did you like managing people?

Were you good at it? I was not a good manager. Why not? I was at a difficult conversation and giving hard feeding. back, bad at praising people when they did well, bad at delegating effectively, micro-managing, when I shouldn't be micromanaging, but then being completely disconnected on things I needed to look at. There's a whole craft to management, and I was, you name the thing that a manager is supposed to do.

I did it poorly. And I remember at the beginning, our point of view on management was actually, it was kind of common in the valley at the time. Why do we need managers anyway? Google had like a, you know, every manager has 40 reports because like, what do managers do anyways? People should just like self-manage and do their thing. Why do you need managers? It's pointless middle layer.

And that's not true. Managers serve a very important function in any kind of organization that's bigger than about 10 people. But that was sort of our attitude. And the result was we didn't value the coordination function. It didn't really even understand it. And so it was this process both of getting better at it, but also just. coming to appreciate what is the point of having a manager in an organization at all? Like, what does that person do for you and do for employees? Yeah. It was a big personal growth thing for me.

I think becoming a manager was really helped me grow emotionally, grow socially. I'm really glad I got to got the opportunity to do it. Yeah. So when you launched it, right, when Twitch was like the thing, it was free, right? It still is. It's free. I can go out now and watch stuff. But how was Twitch going to make money. I was pretty clear it was going to be advertising driven. And I was very excited about the idea of getting to scale with a gaming video product and selling video advertising. And so my original plan was just advertising. And then this streamer day nine, who was a StarCraft streamer, I was at an event, we were talking. And he was saying how I have these people who really just love my stream, who come and hang out in the comments. And I think if you made a fan club

for them, like a subscription where they could pay $5 a month and get a badge just so they could be a member of the club and be a supporter. I bet you'd sell a lot of those. I think we could sell a lot of those. I think you should build that. And I said, you know, that makes a lot of sense. I believe you, let's try it. So we built a beta version of it for him. And boy, did that work. It worked way better than we expected. Where people were willing to pay money to join like a club That got extra features, extra access. No, you got a badge next to your name in chat. And when you subscribed, a notification happened in chat, and he said thank you.

Right. And that suggests that maybe he would pay more attention to your comments. Yeah, sometimes. There was no promise of that. But yeah, you're sort of a sense. You might pay more attention to the comments. We pretty quickly added special emotes. So you got to use special emoji that were only for subscribers.

You would pay money to buy a bunch of them. While you're a subscriber for $5 a month, you gain access to all the subscriber remotes. It's micro patronage. You are getting the positive glow of supporting someone whose content you like and their gratitude for your help. And some of them really leaned into it. And I could see someone was making, I think, like $1,000 a month. And pretty quickly, I was like, oh, this is going to be a thing. Because if they can make $1,000 a month doing it part-time,

they're going to go full-time. And now we, yeah, we have many thousands, tens of thousands of people who earn their living on Twitch. What's interesting about Twitch is we actually have this very thriving middle class because big streams monetize much more poorly per viewer

than medium-sized streams do. And so there's this, most of the money actually gets made not in the top tier of streamers, not the people with many thousands of viewers, but in the people with hundreds of viewers, that's actually where the bulk of revenue happens. It is that middle class,

of streamer who can have the more personal connection, who has a more intimate community, where subscriptions really work great and where community gifts work, and there's this whole set of dynamics around that community supporting that streamer. That really, that's what powers the jobs on Twitch effectively for streamers. I'm going to put myself out there. I know people are going to hate this, but I'm doing it because I like to have my mind changed. This is why I do what I do. I love hearing from smart people about what they do when I'm skeptical.

And I've talked about this on the show before. I have got two kids who play video games, okay? And they love playing video games. But I'm a little bit more like your parents were, which is I don't love it. You know, like your parents didn't buy you a console because they didn't want you sitting in front of a television set, right? Like I want my kids outside jumping on the trampoline, going on hikes with me. I want them out doing things. But I understand.

The world of people 20 and under today is much more of a virtual world. I get it. But I've watched a bunch of Twitch streams. And of course, they're all different in different ways. But, you know, I see a lot of, like, shooter games, just blood, bloodied aliens or humans and, you know, young guys. He's being like, yeah, whoa, yeah, no way. F, yeah. And, I mean, I'm not saying that's, I know I'm being a bit stereotypical, but I don't know.

Part of me is just like some of these really well-known gamers, too, I'm sure they're really nice people, but sometimes I don't know. There's a part of it that feels not so nice. Yeah. I think there's a lot in there. I think there's a bunch of really, they're all really important, really good questions. I'm trying to take it to take apart

the various pieces of it. So the first part is it's the screen time question, right? I'll note that's not a new problem, right? TV, people watch eight hours of TV a day. People come home and the kids plopped in front of the boob tube, right? And like the electronic babysitter.

That's like a, this is not entirely a new problem for digital entertainment, although I will admit, phones make it more omnipropeer. present, right? More, it's easy for it to take over more and more time. There's a, there's another thing which is, uh, video games themselves. And I, well, I admit there are shooters and violent games. I've learned so much from video games. Video games are incredible teachers. I've learned teamwork. I've learned analysis. I've learned critical thinking. I've learned, I've learned how,

I've learned socialization skills. I've, I've learned so much from video games. And when we ask people, why do you use Twitch? Not new people, but people who have used Twitch for years, who are our core users who love it, who come back day after day is always the same. They don't mention entertainment. For our core users, we are not an entertainment product. We are a community product. I am here because it makes me feel less alone. Because they're together. Because they're together. And lots of people say they have community, but community is not a collection of people who all like the same thing, watching the same thing together. Community is fundamentally about communication between two people being witnessed by a third in that community. I get that. I totally get that. And I appreciate that because people who listen to the show feel part of a community in a different way. And I've met people who say, if I go on a date and the person likes how I built this, then I know we're the right fit. Like if that's happened.

But here's a thing. You gave a TED Talk, which I saw and was really good. But a real part of it made me so mad. Part of it made me so mad because you talked about video games is a new campfire. And I heard you tell a story that I really related to, which is when you were a kid, you'd go to friends' houses and you'd play video games. And I remember doing that. And I'm a little older than you, but I remember doing that. And you were in someone's room.

And you were playing a video game and watching somebody else, but you were in physically the same room. That's very different than everybody being in their own space. and their own computer connected virtually. I get it. That's still a community, but it is different. I agree that it's deeply impoverished versus coming together in person. But I kind of think of, if you think of social stuff

as nutrition, which I kind of think it is, I think it's essential for us. Social connection and community cohesion is essential for us the same way food is. And we can provide, like, not everyone who uses Twitch feels as well. For some people, it's supplementary. There's other reasons.

But there's a set of people for whom Twitch, it is the vitamin supplement they need socially. And I think it's one of the most important functions we offer. And it's a stepping stone. It shouldn't be that you get all your socialization from Twitch. That's terrible. It's like getting all your nutrition from a multivitamin. Like that's not how you should live.

I think that's a great analogy because you're right. You can't get all your nutrition from a multivitamin. Yep. How do we help you go to the salad bar? Yeah, how do we help you go to the salad bar? and take one more incremental step. And I will say that there's a lot of incremental steps there because when I was a kid, what I realized was I wasn't capable of handling the intimacy of real human connection in a lot of ways,

which is why instead of actually looking at my friends and talking to them about them, I looked at a video screen and not at my friend's faces because my friend's faces were to overload. I couldn't handle it. How long did it take you to, I mean, because it's a very self-aware thing to say, but you probably didn't come to that realization until later on in life. No, definitely not. I realized this. Basically the last 10 years, I've been really, like, focused on a lot of emotional growth stuff.

And I probably realized this maybe six years ago. I realized seven years ago. I realized like, oh, that's why I needed to play games so much as a kid. And, like, I still play games, but way less now. And the reason was I couldn't handle actual social connection. Yeah. And this was the scaffolding that got me there. And I think there's a role for it.

I think it's great to get around and play games with your friends. And maybe that, hopefully, for me it was, and I think hopefully for many people, it can be a step towards eventually having deeper, more emotional connections. I view trying to help build community in this way is sort of my life mission. It's like the most important thing I do at Twitch, but it's beyond Twitch. It's the most important thing I think I can work on in a lot of ways. It's really interesting. I think it's really interesting.

One thing that you've said very explicitly is that we're not a free speech platform, don't expect to come onto the platform, say, or do whatever you want. We'll just take you down. And so it's a very different response than, say, you know, some other tech companies. But in general, that's your position. You're like, we decide what people are allowed to say, what games they're allowed to play. And how do you sort of, tell me how you kind of think about standards and what's allowed and what's not allowed. So first and foremost, I think of Twitch as being it's about, it's about,

community and about connection. And part of being part in a community is being willing to join that community's standards. And it is not easy to set standards that work globally that make sense. Right now, we tend to have one global standard, which I think is a good safe place to start, but we can do better. And we're fortunate that unlike most social media, you can't really go viral on Twitch. it's almost because because it's live it can't go you can't get to oh my God look at this millions of people see it it it's like

however many people saw it saw it that's over it's real time it's ephemeral yeah and my my hope is to engage our community more and more deeply over time and helping set rules for itself I really believe that

ultimately as communities grow up they need they you know that there's a sense in which community should become self-governing and I don't think the right there's a sense in which that could be an abdication of responsibility. Oh, not our problem. We'll let our, everyone just govern themselves. We're not, if bad things happen, not our fault. I don't want that. But I want to in a way that is levels up the level of nuance, levels up the level of buy-in, have our community over time helps up standard for itself more and more. And we're just at the very start of that journey. Right now, we're just trying to make the simpler centralized system work. But I would like to get there over time. All right. So I want to ask you about the sale of Twitch to Amazon. And we've done this in the show before where we've had many companies that were sold and acquired. And in most cases was the right decision, right? And one that always comes back is Instagram. You know, people talk about Instagram. And, you know, Instagram was bought for like a billion dollars by Facebook. And people, you know, people think of that as like, or even YouTube's acquisition by Google. to like people call those like the bargains of the century. Now that's sort of in

hindsight. But of course, you know, you look at a company like Twitch, you look at a brand like Twitch and you think, my God, it's just so valuable today. And in 2014, you were acquired by Amazon for a little under a billion dollars. Amazing outcome because it was mostly cash. But still, I don't know. Do you think, you know, tell me about the thinking in your head about this. So we got paid a pretty good premium over, like the last round we'd raised had been an $100 million valuation, not that long ago, a year ago, a year and a half ago. Right. And I think your revenue, your reporter revenue at the time was like $70 million. Yeah. We weren't, we weren't that big yet. Now, we were growing fast. It was clearly a winner. There's a reason they were paying us a premium. But we, you know, we got, we got the forward valuation that I think makes the, if you look at it in economic sense, yes, yes, Twitch is much more valuable today. But I think from an economic perspective, I didn't.

ever, I never really worried, like, oh, I didn't make as much money as I should have made. First of all, I made plenty of money to the point where it doesn't really matter. But also, I just, I feel like when you actually do the math, it was a good deal. The real question for me was like, what's the best home for Twitch? What's the best job for me? I mean, do it selfishly. Like, is this, am I going to enjoy doing this? And I hated raising money. And I really don't like investor relations. I like building the product. I like working with my team. I like working with streamers. And I really, I think the fact that I'm still with Twitch and still at Amazon shows, I think we, we chose the right buyer. I get to basically really actually be the CEO of Twitch. Right. And it's been almost eight years. You've been an Amazon employee for almost seven years, yeah. That's right. Because you can leave. You got your payday. I mean, you can, you can. We're well after the vesting period. At this point, I'm doing it because I love Twitch. Yeah. Emmett, when you think about this journey that you've taken from, you know, starting out Kiko and then Justin TV. And then this kind of gamble, this kind of pivot towards streaming games, which became Twitch TV to the Amazon acquisition to where you are now. Seven years in, you're an Amazon CEO, I mean a CEO of an Amazon portfolio company. How much of what you've accomplished do you attribute to your skills, your intelligence, how hard you worked and how much do you think has to do with being lucky? As the famous quote goes, 50% luck, 50% skill, 100% concentrated power of will.

Yes. Yeah, I don't know if like that's, you know, it's sort of a joke, it's sort of not a joke. I was very smart. I was very hardworking. I was very persistent in the face of a lot of failure. And then I was also very lucky. And for something to be as big and successful as Twitch, you kind of got to do all for. I guess more luck can make up for less.

of the other three, but the best you're going to do is like 50% luck. And I've now been around the valley for 15 years, and I came here with a bunch of people who started making companies. And I don't know anyone who persisted and tried again and then tried a new thing and tried again who hasn't had some level of success. Eventually, you do get lucky. Now, was it going to be Twitch-sized lucky? No, no, no. I mean, there's a lot of lower levels of lucky that that are still success, absolutely. Yeah. And so I think at some level that I was successful at all,

I attribute to some combination of hard work, persistence, intelligence, that I was successful in anything resembling the scale of Twitch, that's, there's a huge portion of luck there that is undeniable. That's Emmett Shear, co-founder and CEO of Twitch. By the way, remember when Emmett and Justin saw, their first business, Kiko, for like $250,000 on eBay? Well, whoever bought it didn't do much with it because the domain name, Kiko.com, is just kind of sitting there. They've never used it.

They've never used it. They've sat on it for years. They've never sold to anyone. I have a fantasy someday. I'll buy back Kiko. But I think they'll want more money than it's, that's like a nostalgia purchase. It's not like a, I don't want to. spend like the what the, a four letter pronounceable domain name probably costs these days.

Hey, thanks so much for listening to the show this week. If you want to contact our team, our email address is hibt at ID.wondery.com. If you want to follow us on Twitter or Instagram, our account is at how I built this. And mine is at Guy Raz on Twitter and on Instagram at guy.org. This episode was produced by Josh Lash with music composed by Rmpteen Arablui. It was edited by Neva Grant with research help from Claire Murashima. Our production staff also includes J.C. Howard, Liz Metzger, Alex Chung, Carrie Thompson, Catherine Seifer, Elaine Coates, John Isabella, Chris Messini, and Carla Estevez. I'm Guy Raz, and you've been listening to How I Built This.