Twitch: Emmett Shear

title: Twitch: Emmett Shear
author: How I Built This with Guy Raz
contenttype: podcast
publication: How I Built This with Guy Raz
published: 2022-07-18T03:10:00-04:00
sourceurl: https://rss.art19.com/episodes/0b363d5e-4554-46af-908b-704949df1cf7.mp3?rss_browser=BAhJIg1PdmVyY2FzdAY6BkVU--3fdaf693ac55dc369c0201a1ede82e0232030d6c

word_count: 16766

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From millions of businesses, that tool is Shopify. Shopify is the commerce platform behind millions of businesses around the world, and 10% of all e-commerce in the US, from household names like Hines and Mattel to brands just getting started. With hundreds of ready-to-use templates, Shopify helps you build a beautiful online store that matches your brand style. Shopify is also packed with helpful AI tools that write product descriptions, page headlines, and even enhances your product photography. Start your business today with the industry's best business partner Shopify and start hearing. Sign up for your $1 per month trial today at Shopify.com slash build. Go to Shopify.com slash build. That's Shopify.com slash build. 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 do people say that to you? I mean, I used to get that question every interview. Then 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. 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, 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 Raaz, and on the show today, how Emmett Sheer 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 Shishka Bob like fruit skewers delivered to their door? Well, it turns out, a lot of people, edible arrangements would go on 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 gonna spend hours watching other people play video games? Well, we know the rest of the story, because today, video gaming is a multi-billion-dollar industry, and watching other people play is a huge part of that. And Emmett Sheer, 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 Twitch. 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 JustinTV, 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 bad 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, works 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 Khan. We actually grew up three blocks away from each other, like right in 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 reasonably close. Not maybe not in second grade, but certainly by third, fourth, fifth grade. We would be over to each other's houses pretty often. I think I went over to his house more often. And he was more of a family, and he was more of a family of 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 Hey 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 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 just coincidental? Total coincidental. No planning there at all. Actually, Justin had been planning to go to Wharton, and kind of changed his mind to the last minute. And so that was real happenstance. And in college, I think, you know, I certainly reconnected with Justin 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, more easily. And so I just wanted to spend 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 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 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, this is silly. Not only am I good at this, but like I really, really enjoy the work. The work is fun. And so then I just 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 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's a really good friend. He was on 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, 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've 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 in this is like 2004, 2005. That's pretty, you know, pretty prescient. Oh, he absolutely. I mean, Matt has 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. You 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. Sure. And then had to get Justin, when we were starting our company, ready for re-graduity. He had a real talk conversation with me, which I think was very fair, which is. And I think you're going to have to choose the video game or the startup, which is it, which is it World of Warcraft or the startup. And quit World of Warcraft, which I think 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. You know, 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 software. Like everything's going to be like Gmail in the future. I think we could all just see that. It's like having desktop software, but better. And what we did was we're like, oh, well, Gmail is missing a calendar. Like there should be a like outlook as a calendar. There should be a calendar that goes with an email client. And so we decided building it, because that seemed like the right thing to do. And I look back at it and there's 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 the 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 why 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 this was going to be the next thing. And so a calendar integration would be cool. And just like curiosity, was the idea that you all had, like let's build this 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 calendar 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 sort of a software company. But the idea was let's start with the calendar. Was the idea that you guys had was 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 like missing piece of the universe. Like there is a, there is 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. I got you. That worked like Gmail. And if you 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 time was 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 why that'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 that 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 the Y Combinator, which was headed up at Paul Graham. And was one of the really well 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's like a Paul Graham fanboy through college. I'd been reading his essays. I love, you know, I loved his writing. When I heard like, oh man, he's doing a incubator. So 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 this, it was this, what a, what an amazing positive lucky coincidence that this thing exists now. So we applied, I know we applied with, with Kiko 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, per interview. What do you remember about the interview? Was it, I mean, Paul Graham, sort of his famous for asking like, well, what's your monetization strategy? 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 does it you do again? Oh, how are you going to get customers? Could this be big? Yeah. Yeah, how are you going to make money? 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, do you have you thought about this? Do you, do you have an answer? Does your answer make sense, at least in theory? And, 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 win their challenge, they neither rebel nor acquiesce. And I think that's a, that's one of the most important traits and startup founders, actually. And you guys actually get accepted to this program. You get into, into white combinator, which I guess was in Cambridge, Massachusetts at the time. And so you and Justin are working on this thing. And, and I guess at the end of your time there, were, were you able to get some real investment? Yeah, we managed to convince two of Paul's friends who had worked with him at Yahoo. We, we can convince them to invest in us and give us, I don't know, like a, talk 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 on to the world? Because you started in 2005 or 2004, when, 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, we 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, in the, in sort of the fall of 2005? I mean, most people are still on dial up at that point. We got, we got coverage on TechCrunch. Like that was, which was the, which it was sort of getting started on that time. It was basically known for doing startup coverage. We try to get other press sometimes. But honestly, that's a really good question that we would have, 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 sent 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. Yeah. You didn't, you didn't fully understand like the user acquisition side, right? Because that's, 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. And what point did you come to the conclusion to June just and 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 were faced with like, well, here 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 built this thing and like 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, asset sale, all of the assets of the startup, including the domain name, the logo, all the software, all the customer relationships. We will sell you the whole thing. And two cows in Toronto bought it. Is that a software company? Yeah, it's a, it's a domain register. Got it. So this company was basically buying the domain name, the underlying software, you know, and the, you know, the code, everything. And the domain name was Kiko.com. Yeah, Kiko.com. How, how much should they pay you for it? Or would they buy it on eBay for it? It was on eBay. I believe $265,000 was the winning bid. Wow. 13 bidders. And once you, it was an asset sale. So once you paid taxes on it, paid off the investors, and you, you divvended 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 take the, taking this huge risk and like, 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 else. You're selling 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. And so it was a very clever way to basically generate a bunch of publications 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, 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. Yeah. 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 where we were going to build a YouTube, but for audio. And we would then go build and launch these products in like, 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 originally immediately. Right. And we get the spirited and we 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 feel 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. 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 gradually have college, right? And you're, 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 talked to him about what you're working on and 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 onto 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 that lets you print a blog or a, you know, a 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. Okay, well, we 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. But we should just record all of our conversations and then upload them. Oh, well, 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 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 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, honestly, thinking 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 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 they're with a bad idea than a bad team with a good idea, or even a OK 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 $50,000 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 Ross, and you're listening to how I built this. Every business right now is asking the same question. How do we actually make AI work for us? Because the possibilities are huge, but guessing is risky. And sitting on the sidelines, that's not really an option, because chances are your competitors are already making their move. That's where NetSuite by Oracle comes in. With NetSuite, you can put AI to work today. NetSuite is the number one AI cloud ERP, trusted by more than 43,000 businesses. It brings everything together, your financials, inventory, commerce, HR, and CRM, all in one unified system, a single source of truth. 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But if updating your site feels intimidating or worse, if you keep putting off small changes because they take too long, frame or might be the website builder for you. With real-time collaboration, a robust CMS with everything you need for great SEO and advanced analytics that include integrated AB testing, Framer empowers you to build and maximize your.com from day one. Learn how you can get more out of your.com from a Framer specialist or get started building for free today at framer.com slash built. For 30% off a Framer Pro annual plan that's framer.com slash built for 30% off. Framer.com slash built rules and restrictions may apply. Hey, welcome back to how I built this. I'm Guy Razz. So it's around 2006, 2007 and just in an Emmett are kicking around with 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 that was sell coverage. Literally six months before that. So it had just become technically possible. 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 or 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. But we couldn't afford to do it expensive. So that was the solution. But I think you were able to build up the team a little bit, right? Because I think around this time you brought on somebody new name Michael Sybil. Who is a friend of Justin's? That's right. Justin reflected and noticed correctly that we kind of had a highly distractable way of engaging with our startup where we wouldn't stay on target. And we wouldn't, we would, we would jump at the new shiny thing. 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 steady. And Michael is a very steady, calm, also very smart person. And Justin was like, I think we need Michael on the team. And retrospective was totally right. And it was a incredible addition. And I guess you guys 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 what we need to do now. But especially then, Silicon Valley. And so we piled all of our stuff into my Honda Civic, all of our world depositions. 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, you know, stop along the way was too much time. We needed to get started right away. And in retrospect, that was crazy. Like, of course, we could have taken a data stop. But I think the sense of urgency was was important. Like it was 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 that it's really important. And we got to go like we had to go fast. Yeah, so you so when you arrived 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 it wasn't that 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 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. Exhibitionist isn't maybe the quiet word I'd use. Justin's always wanted a little bit to be famous. There's a reason why he's you know runs a Snapchat channel and he has a YouTube channel now. Right. Right. 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 in a minor way. And also we would 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 was 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. Right. 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 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. Yeah. So this is that definitely worked. When we were walking around 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 every... Well first of all everyone's been hearing about 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 are you doing? He slept. We put the camera on a tripod and pointed it at him. As he slept. Watch Justin sleep. What about when he took a shower? 24-7 even in the bathroom. In the bathroom we pointed it like the wall. Like a shower curtain or something. But you could hear... You could hear... If you want pee, you could hear it going pee. That's right. Wow. There was a whole thing. One time he'd pee neglected to wash his hands. There became this whole meme and chat of them making fun of him and reminding him to wash 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... I don't really go there normally but what about like... Romantic life. I mean, did he just... How did he handle that? He went on some dates. I mean he was up front with what he was doing. I don't think any of them went that well most of the time. Because it's an awkward experience. But if 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. All of our friends lived around there. They ever started streaming out of the building and coming up to him and congratulating him on having had a good date. And you watched 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 sending like hundreds of pizzas to your door and like calling 911 and the police would show up. Because there was a report of like a robbery or a... I mean all kinds of things were happening in your apartment. We all the harassment that streamers deal with today. We got in spades because we were the one target. I had a gun pulled on me. They reported a stabbing in our apartment and the police came in, weapons drawn. And I had a pistol pulled on me by the police. They pretty quickly realized, wait, this is a bunch of engineers like in their underwear programming. Like this is not a stabbing. But that was a really scary moment. And 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 something here? Did you start to get interest now? No. About 100,000 people watched it in the first month. And our CDN bills just started piling up. CDN's like for the... a 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 and hand trying to raise money and really struggled. Because they thought it was a gimmick, they just said we're 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 raised I think from about... From like five investors, we raised like maybe $350,000 total. Which was enough to pair bandwidth bills for a little bit and keep us going. 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 sound 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 gonna 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, 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 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 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 to himself, like doing sidewalk art and stuff like that. I just mean, 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... what were your biggest expenses at the time? I mean, I'm assuming you guys were not paying your sales much, but still, you had to pay for servers and what else? What were your expenses? Rent, 500 bucks a month, each, and spending money. And then infinite bandwidth bills forever that were constantly crushing us. It was so expensive. Those delivering the video was really expensive. And so how did you finance it with just a few hundred thousand dollars? We went and raised more money. So about six months later, I'm trying to remember exactly when we raised our series A. We raised two million dollars, 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 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 had not turned on any monetization. But how did you, as you started to acquire, or as you started getting 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. Yeah. What they thought. Right. It was that YouTube would just become a live streaming platform, and that would be the end of Justin TV. They did actually eventually launch YouTube live five years later, but it took them a while. And so then we raised an additional, I think, four million dollars, six million dollars, plus two million adventure debt, something like that. 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 giving money out. No one was... You could not raise money after the financial crisis. Especially not for a money-losing business that's whole... Don't worry, we'll figure out monetization later. And so immediately after the crash, we were kind of like, oh man, we've got to get profitable. 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 fast way to get some money immediately. Right. We sold our... we made our mobile apps cost money. It's funny, that sounds so ridiculous now. Of course, the Twitch app is free, but we were just pulling every lever we could to try to make money. Okay, so one of the ideas was a mobile app. And mobile was new. I mean, 2008, 2009. It's just like early, early days. Yeah, we were pretty early to making mobile apps. That was another thing, it was very clear mobile was the future. Alright, 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 every where we could think to put an ad, and charging money for the mobile apps. And I can't remember, there's probably other 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 were like, we are eight months from 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. Yeah. 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. 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. Of profit. Once we got going, it was fun. We were good at it. And we said we'd 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 a profit. We thought it was impossible. And six months later, we'd gotten to a million dollars a year of run rate of, you know, $100,000 a month of profit. Wow. And that was purely through that triple strategy, 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 just, 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 to do a layoff, because we just couldn't... We couldn't afford all those people. We couldn't afford all those people. Yeah. And how many users did you have around 2010? I think like 50, 60 million a month. Wow. So that's a lot. Yeah. No, it was big. Yeah. So it was already pretty big. Okay. 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. Where did you start to think about doing? So we had succeeded at getting profitable, but then in doing 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 from who'd been like at YouTube, like a VC, you know, he came by and he told us like, you're doomed. Like, you reignite and grow as almost impossible once it stops, and if you're not growing on the internet, you're dying. And why weren't you growing? Understand that you cut costs, but explain how that connects to the slow selling down into growth. We'd been adding advertising, which makes it a worse experience. Right. We'd been adding paywalls in 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. And so we kind of had this moment, the founding team, 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, webinars and video conferences. And we could go build that business. And we were all like, yeah, that's probably a big multi-billion dollar business. 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 it is now. I think we were right. But instead we were just not interested in enterprise. You were not interested because it was boring? That was boring? We thought it was boring. We didn't want to do enterprise sales. 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, 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 Sybil, 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 II beta had just come out and Starcraft II was a sequel to a game I played as a child, the original Starcraft. And I was so excited because I like, I couldn't believe they'd finally made a sequel after like, you know, 10 years. Can you describe what Starcraft is? I mean, no, we've had, we've done Riot Games in the show and other so I know League of Legends and Roll of World Cup. I don't know, I can't picture Starcraft. Starcraft is, think of like Starship Troopers. If you've seen the movie, it's like, you know, Bug Aliens versus Terran 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 as 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, esports stars became like, you know, Starcraft stars became like celebrities. And there you 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 Starcraft players. And was anybody putting that content on to Justin TV when it became available? Yeah. Yeah. I mean, that was, that was how I got interested in the idea in the first place. People started, Justin TV always had a smaller small amount, one, two percent of gaming content. And so the Starcraft 2 beta came out. A bunch of people started streaming it. They'd run screen captures after, like, you know, when you're out in a Zoom call and you like, you like share your screen. 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've 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, they 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 tiny, 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 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 from mobile. No one had done great video from mobile yet. There's a lot of photo apps, but not a lot of video. This is before like a mere cat and periscope came out right. This is before Instagram had videos. This is before, before Snapchat. Like this is there is no, there is 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 in mind. It seemed good. Michael felt pretty strongly his feelings. We both thought the other person's made sense. So we got together as the founders. We got together as the founders. We had like a four hour meeting to figure out what to go do. And the conclusion was, they're both likely to fail. 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 two or three employees plus the founder. We're going to go focus on doing that thing. Justin will 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. 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 Raaz and you're listening to How I Built This. Are you inspired by the stories on How I Built This? Take the next step in your entrepreneurial journey with a graduate program at Babson College. 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Vista Print supports you at every step from choosing the right product to getting the design just right they've got you covered. Whether you need a small tweak or a full-on rebrand, Vista Print offers design services that fit your style and your budget. Vista Print, print your possible. Right now, new customers get 20% off with code new20advistaprint.com. Hey, welcome back to How I Built This. I'm Guy Ross. 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'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 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 were 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 were doing something like this. Oh, yeah. I mean, and bigger than us too. It's like the U stream was a live streaming competitor. They had more gaming and they were bigger than us. Livestream.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 did all 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 on, 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 be making like $17 a month. Given how big your audience is and how much money we can make you. And the streamers would say, 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 as a kind of like, you know, fast reaction gaming. Yeah. Well, it's a muscle, right? It's your Twitch month muscles. Yeah, fast Twitch muscles. Yeah. And you kind of had a correlation with like the live-ness of the streaming in addition to gaming. And so it was like, okay, that kind of makes sense. And I could, 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, 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, etc. But I mean, in 2011, I would think that there were lots of people because there's still a lot of people today who say this, but 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 do people say that to you? I mean, I used to get that question every interview. Now I'd say it's only half of it in all interviews. Then 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. 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, people would have said, yeah, but I mean, come on. I mean, Tom Brady is an athlete and they would say, you know, watching, you know, LeBron James play is, is, is, is super human. I mean, a video gamer like people would say, right? They would say that to you. Yeah. Boxer is, is was perhaps 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. 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 a thing. Like when you finally launch it as a standalone site, what they, they just all of a sudden this community kind of began to coalesce and, and just start, they just start walking into the front door of, of, of Twitch. No, so what's interesting is, we'd been growing at 25% 30% a month for almost nine months before we ever launch Twitch. Like I was, 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, we had a very simple closed loop growth strategy. We would make the product better for, 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, you know, for the larger streamers. When 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, we'd make the service a little better. And then we'd go out and read 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 Twitch. 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, etc., etc. And what could the viewer do initially? And it could, was it, 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, 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 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 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, 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, 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 companies similarly irritated by this? Because essentially they could have said, hey, somebody's monetized, somebody's like making money off this thing that is hours and we sell this product. Did, 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 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, we'll turn it off, we'll tell every streamers 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 the 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. Because then you want to buy the game, then you want to buy the game, or you want to play the game more, you want 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 in at that point, we're 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. You're going to, you're, you're, 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 wasn't niche except except only a massive niche. Right. It turned out that niche was all, I mean, to be honest, I, one of the properties that 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 that how big it has gotten. I've like, I, 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 onto 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, solve a puzzle with the lights off. And I just turned the lights on. I was like, oh, this is, this is much easier. And, and that was a really powerful experience. Yeah. And by the way, I should, I should just mention that you were at, 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, did you like managing people? Were you good at it? I was not a good manager. What why not? I was at a difficult conversation and giving hard feedback. Bad at, uh, bad at praising people when they did well, bad at delegating effectively, micromanaging when I shouldn't be micromanaging, but then being completely disconnected on things I needed to look at. Like just, 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, it was sort of common in the value of the time. Why do we need managers? Anyway, Google had like, you know, every manager has 40 reports because like, what are managers do anyways? People should just like self manage and do their thing. Why do you need like need managers is pointless middle layer. And that's not true. Managers are a very important function in any kind of organization that's bigger than about 10 people. But, uh, that was sort of our attitude. And the result was, we, 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 was really glad I got to got the opportunity to do it. Yeah. So when you launched it, right when when Twitch was like the thing, it was free, right? It still is. It's free. I can go on and watch stuff. But how was Twitch going to make money? I was pretty clear was going to be advertising driven and I was very excited about the idea of, you know, getting to scale with a gaming video product and selling video advertising. And so my original plan was just just advertising. And then this streamer day nine. There was a Starcraft streamer. I was at an event we were talking and he was 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 we if you made a fan club for them like a subscription, where they could pay five dollars a month and get a badge just so they could be a member of the club and be a supporter. I bet you'd get you'd sell a lot of those. Like I think I think we could sell a lot of this. I think you should build that. And I said, you know, that makes a lot of sense. I believe you let's 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 and chat. And when you subscribed, a notification happened in chat. And he said thank you. Right. And that would and that suggests that maybe you would pay more attention to your comments. Yeah, sometimes there was no promise of that. But yeah, you you you sort of a sense you might pay more attention to the comments. We pretty quickly added special emotes. So you got to use special like emoji that were only for subscribers that you would pay you pay money to buy a bunch of them. But you get while you're a subscriber for five dollars a month, you gain access to all the subscriber emotes. It's it's it's micro patronage. You are getting the positive glow of supporting someone who's 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 a thousand dollars a month. And pretty quickly, I was like, Oh, this is going to be a thing. Because if they can make a thousand dollars a month doing it part time, they're going to go full time. And now we yeah, we have many thousands of tens of thousands of people who are 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 size 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 that's what powers the the jobs on Twitch effectively for streamers. And I'm going to put myself out there and 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 am, you know, I've 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, I 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 like 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 different different ways. But you know, I see a lot of like shooter games, just blood bloody aliens or humans and, you know, young guys. Yeah, whoa, yeah, no way. 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 to I'm sure they're really nice people, but sometimes I, 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 really, they're all really important really good questions. I'm trying to let's take it to take apart the various piece of it. So the first part is screen, 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. If you'll 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 omnipresent, right? More it's easy for it to take over more and more time. There's a there's another thing which is video games themselves. And I, while 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 core users who 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 less feel less alone because they're together because they're together because they're 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 totally get that and you know 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 high built this then we're I know where the right fit like 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 may be so mad part of it may be so mad because you talked about video games and you campfire. And I heard you tell a story that I really related to which is when you were a kid you go to friends houses and you 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 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 a social connection and I think it's not a problem. And social connection and community cohesion is essential for us the same way food is and we can we can provide like not everyone who uses twitch feels as if I say some people it's supplementary there's other reasons but there's a set of people from twitch. It is the the vitamin supplement they need socially and it's I think it's one of the most important functions we we offer and it's a stepping stone. It's a key to the way you get all your socialization from twitch that's terrible it's like getting all your nutrition from a multivitamin like that's it'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. How do we help you go to the salad bar? Yeah, how do we help you go to the salad bar and take 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 the world. Actually looking at my friends and talking to them about them I looked at a video screen and not at my friends faces because they're my friends faces were overload I couldn't handle it. How long did it take you to I mean because it's very self aware thing to say but you probably didn't come to that conversation until later on. No, not. I realized this there's a true 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 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 for what for me it was and I think for hopefully for many people it can be a step towards eventually having deeper more emotional connection. I have you trying to help build community in this way sort of my like life mission it's like the most important thing I do it twitch but it's beyond twitch it's the most important thing I think I can I can work on in a lot of ways. It's a really interesting I think it's really interesting one thing that you said very explicitly is that we're not a free speech platform don't expect to come on to the platform say or do whatever you want will we'll just take it down. And so that's very it's a very different response than say you know some other tech companies but 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 and how do you how do you sort of tell me how you kind of think about standards and and and what's allowed and what's not allowed. So first and foremost I think of twitch as being a it's about community and about connection and part of being part in a community is is being willing to join that community standards and it is not easy to set standards that work globally that makes sense right now we tend to have one global standard which I think is a good safe place to start but we could we can do better and we're fortunate that unlike most social media you can't really go viral on Twitter. It's almost because because it's live it can't go you can't get some oh my god look at this millions of people see it it's like however many people saw it's all that's over it's real time it's a femoral 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 will let our everyone just govern themselves we're not if bad things happen not our fault I don't want that but I let I want to in a way that is levels up the level of nuance levels up the level of buy and have our community over time helps self standard for itself more and I think that's the right. I think that's the right 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 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 that were sold in the quadrant and in most cases was the right decision right. And one that always comes back as Instagram you know people talk about Instagram and 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. So 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 I mean do you think you know I tell me about the thinking in your head about this. So we got paid a pretty good premium over like the last round we raised it been a hundred million dollar valuation not that long ago a year ago you're in half. I think your revenue your reporter revenue at the time was like 70 million dollars. Yeah we weren't we weren't that big yet now we were growing fast as it was clearly a winner there's a reason they were paying a premium but we you know we got we got the forward valuation that I think makes the if you look at it economic sense yes yes Twitch is much more valuable today but I think from an economic perspective I didn't ever I know really worried like oh I didn't make as much money as I should have made a lot 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 to do selfishly like is it 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 the streamers and I really I think the fact that I'm still I with Twitch and so at Amazon shows I think we we chose the right buyer I get to basically really actually be the CEO of Twitch right has 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 and we're can you can we're well after the vesting period at this point I'm doing it because I love to it yeah and when you think about this journey that you've taken from you know starting out Kiko and then Justin TV and then and then this kind of gamble this kind of pivot towards towards streaming games which became Twitch TV to the Amazon acquisition to where you are now seven years in your Amazon CEO I mean a CEO you know an Amazon portfolio company how much of what you've accomplished 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 as the famous quote goes 50% luck 50% skill 100% concentrated power of will yeah I don't know if like that that's you know it's sort of a joke it's sort of not a joke I was very smart I was very hard working I was in 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 four 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 try and then try to new thing and then try to again who hasn't had some level of success eventually you do get lucky now that was it was was it going to be twitch size lucky no no no there's a lot of lower levels of lucky that are still success absolutely yeah and so I think at some level that I was successful I 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 that is undeniable that's Emmett sheer co-founder and CEO of Twitch by the way remember when Emmett and Justin sold 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 they've they've sat on it for years they've never used it they never sold to anyone it's actually I have a I have a fantasy someday I'll buy back Kiko but I just I think they'll want more money than it's yeah that's like a nostalgia purchase it's not like a I don't I don't want to spend like the what the afford letter for now to build a main 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 Ross on Twitter and on Instagram at guy.ross This episode was produced by Josh Lash with music composed by Rumpteen Arableui It was edited by Niba Grant with research help from Claire Marishima our production staff also includes JC Howard Liz Metzger Alex Chung carry Thompson Catherine Cipher Elaine Coates John Isabella Chris Messini and Carla Estevez I'm Guy Ross and you've been listening to how I built this