The Twitch Adpocalypse Has Begun [Explained]

[00:02] the years but this one we're going to talk about is particularly bad I'm Devon Nash I'm the CMO over at Novo a brand advertising agency and in this video I'm twitch is going on through right now and what is happening please do remember to

[00:17] subscribe if this video has some kind of positive effect on you and these interesting to you so first we got to kind of explain the problem and I started off in October by making a post about

[00:30] what was happening basically I went up on Twitter and I said hey there is a we are going to be in a nightmare situation where twitch is going to not have enough ads to run the website and

[00:45] kind of same type of YouTube ad apocalypse that they that YouTube went through in 2017 I wrote up a whole thing on that and it got some traction lots of going to happen and of course uh I don't know what we 16 days later here we are

[00:59] so streamers are reporting that ad revenue is going down in fact um several large broadcasters have said that their revenue has dropped as much as

[01:12] 95% um lots of people saying that their revenue used to be $10,000 a day and is now $2,000 a day lots of people saying that um there are some huge problems on Twitch with ad revenue and recently we saw a person end November that and

[01:27] accidentally leak their ad revenue and they actually made $71,000 off of ads with about 6,000 average viewers on a 24-hour subathon so those numbers seem to have gone the way of the dinosaur and we're going to kind of discuss like what

[01:40] happened there and why that is uh you also can uh take a look at some of the controversy that's happening so and that's a one of the notable advertising firms has posted their continued concerns as well as encouraged a lot of

[01:54] the advertisers on Twitch to poll so what is happening basically is Twitch has had inconsistent enforcement of extreme

[02:11] content for years and that can be political it can also be just kind of uh just offensive type of stuff basically all kinds of different

[02:23] things that um advertisers don't want to be a part of okay and this inconsistent enforcement has since been noticed by the uh by a couple of communities that

[02:36] are kind of getting together to let advertisers know about the twitch ad situation and how bad it is and with a lot of emails out and also just lot of emails out and also just increased media attention on Twitch it's

[02:49] now becoming apparent that twitch is platforming a lot of um frankly just like really extremist type of content and this came to a head with a lot of the political rhetoric that was going going on pre-election in November so uh

[03:03] about what is happening here is that this is basically an exact copy of something that happened before and that is the 2017 YouTube adpocalypse it's

[03:15] like actually a cut and paste and what the what happened in paste and what the what happened in 2017 was there was a YouTuber who most of you probably know and his name was PewDiePie and he said some offensive

[03:30] stuff and a bunch of media particularly The Wall Street Journal which at the time um had a lot more readers basically said hey this is crazy and a lot of these ad people the

[03:44] advertisers suddenly started realizing that their ads were being shown with in front of this kind of content and so this person says something and now these people are getting really angry they're getting a lot of emails and bad stuff is

[03:58] getting a lot of emails and bad stuff is happening and so YouTube says shoot okay happening and so YouTube says shoot okay well we have no ad targeting so without ad targeting we really can't control where

[04:10] these ads are showing up versus what is anywhere so we we can't tell what's going to happen and and so now without this ad targeting we the ads are going crazy and there's ads on all kinds of

[04:24] and worse and worse and YouTubers started to see ad drops of 70 to 80% does this sound familiar so all of a sudden basically

[04:36] the whole website is going up the primary way that people make money off of YouTube is ads and with all these ads being pulled by major companies like Disney and and and Warner Brothers all of a sudden YouTube ad Revenue starts

[04:48] dropping off the cliff and people are making 70 80% Less on ads the exact same Twitch with people reporting that they're losing 80 to 90% of their ads and we'll explain why that is happening in a minute because essentially what is

[05:00] of AD targeting so you see these words of AD targeting here what YouTube had to do to fix this problem was YouTube said okay we're we're in serious trouble if we don't fix this problem the the main way that we the main

[05:16] way that we the main way that we make money on YouTube and creators make money is ads and recently this has become increasingly true for twitch as advertisers have given twitch a chance

[05:30] and now advertising is a pretty significant form of income for people that are on Twitch so if we don't fix this problem well we don't have YouTube YouTube's gone and so what they decided to do was they decided to start doing

[05:45] what's called ccls or content classification labels and the very early version of this addressed things like political content address things like offensive content violence

[06:00] vulgar language and things like that YouTube started to develop machine learning so that the algorithm could detect this kind of stuff and you could still post it on YouTube they're not going to remove it from YouTube but the

[06:15] problem is that you can't have ads on it so that that was that that led to many creators being demonetized and at first through 2017 to 2019 this was a really painful process what ended up happening was a lot of people got demonetized and

[06:29] because the YouTube classification system was weak so from 2017 2019 um system was weak so from 2017 2019 um many creators lost money and some even quit and many quit actually many quit and many careers were ruined people that

[06:46] were previously okay with ads or making full-time income off of YouTube maybe they had like a uh let's say like a like like that now are suddenly being demonetized for every single video and

[06:58] demonetized for every single video and even today in in 2024 this is not a completely perfect process but it is now the best content classification system that exists anywhere so YouTube did

[07:10] successfully go through this period of Pain by spending billions of dollars and that now properly identifies this kind of content and as a result we have a a everyone now I'm sure there are many people who would kind of disagree with

[07:26] that they're wrong I mean YouTube is the big biggest video platform and the successfully while simultaneously uh enabling so many careers is incredible and that is kind of a miracle that this happened so now

[07:41] if you understand the 2017 ad Apocalypse on YouTube it literally is a copy and paste of that over onto twitch instead of PewDiePie it is this particular streamer named Hassan the Hun who is being um uh basically crucified for um

[07:59] extremely uh extreme takes which lots of people um are just saying are absolutely actually tend to agree with that opinion and I think that those things shouldn't be here in fact in my tweet I called for

[08:13] a ban on all extremist content and I I think um people are are criticizing me notifications popping up are probably people criticizing me and uh uh I I I I

[08:26] particular side but my standpoint point is that because twitch has failed to create this content classification system and you can see that they are they're trying to do it so there have been some improvements in it over time

[08:41] uh particularly the uh um let's see like you're seeing like these new labels so um this was just announced where twitch classification labels for politics and sensitive social issues creators who

[08:53] create this content must label their streams viewers can hide this or viewers out of ads so you're seeing like the very first type of this type of thing happening where advertisers can opt out of this stuff to create a YouTube like

[09:08] system now my take is very extreme and I think a lot of people are not believe that twitch will not develop this system fast enough they don't have the billions of dollars that YouTube has and they're going to bleed out before

[09:21] they're able to build the system so the simple thing to do is simply ban all political and extremist content until you can solve this problem um but we'll that we'll address that it it's it's kind of important to understand like

[09:34] here's why the revenue is the way that it is and like why why streamers are losing this Revenue basically uh you have a bucket okay so we'll draw a bucket we'll draw a white bucket it's our bucket okay and in

[09:48] the bucket is some water and you got to pretend that the water is the ads it's full of uh it's full of ads okay and then there's a bunch of really thirsty the thirsty streamer we'll move this over here okay

[10:02] so like here's a thirsty streamer and we're going to copy and paste him many times because there are lots of them okay he's all over the place look at all these people that need that water they're very very thirsty oh that one's

[10:15] just ahead maybe he's just a a react streamer so he doesn't he doesn't have a full body because his content's not so good okay so everybody's got a drink but enough water in the bucket then some people are just going to not be able to

[10:28] drink and that's the situation you have here in a healthy ecosystem there's so that everybody drinks and everybody makes money but when there isn't enough ads you see it's a there's a concept called fill rate and basically that fill

[10:41] people and people are losing revenue and you're going to see this continue as the ad Apocalypse of twitch goes forward now there are the trouble is that there's like no real reason for this bucket to be refilled Because unless twitch

[10:57] classification problems they're not going to be able to put more water in this bucket and in fact it's going to be a much bigger problem than that and we will get into what that problem is but first if you're here at 11 minutes in a

[11:11] Devon Nash video it's right it's time for the secret call out it's been one for a while you got to post it is exactly 1118 so 11:18 Post in the comments section that you're still here uh thank you very much everybody for

[11:24] Nash and I make videos about marketing content creation and New Media in the and if you benefited from something I made I would love you to subscribe and also check out the patreon patreon.com Nash it's the link below in the

[11:37] description has over 150 videos about marketing business how I run businesses and how I do everything it's super good for $5 that's all it is I'm not selling anything no course nothing like that just five bucks gets you in the door or

[11:49] you can um go to our weekly masterminds at the $20 tier so it your support would mean a lot because this channel um takes a little bit uh costs a bit to run so I benefit it and I'd appreciate that so okay we're going to go on to showing

[12:05] kind of what's next and what's going to happen well twitch obviously needs to fill this bucket back up with nice healthy water to feed all the react streamers okay they're very thirsty right now and um to fill that bucket

[12:18] to be a couple of things that have to happen I mean the content label system is a kind of first step to that but the problem is that advertisers have to have

[12:31] two reasons to be on the website right number one they've got to feel like the website is safe for their ads and if this content still exists on the website and it's being featured that is it doesn't really matter that it's

[12:45] demonetized because if if if everybody is still making Wall Street Journal getting pounded in emails over and over again saying hey look at this thing that you're representing it doesn't matter it's like that's why um some people

[12:58] why can't we have pornography on Twitch well we could just put it in a separate category demonetize it well because it's still there it's like the same reason why you can't advertise on a website like pornhub or something right like you

[13:10] it's it's if as soon as you make room for that type of content on the platform you are now allowing that type of content on the platform and it's going to be associated with those advertisers even if it's not directly there and and

[13:24] YouTube solve this problem well YouTube doesn't surface content to people that don't want to see it so if if if you turn off certain settings or actually

[13:36] you just aren't like you will never see not only will your ads never appear but you will never actually see that kind of like extreme sexual content or anything like that on YouTube because your algorithm just feeds that stuff out and

[13:48] don't want to see it there's all kinds of different options that you can do to for for safety so even though that stuff exists on YouTube it's really really not like that twitch is a kingmaker system the people that have more viewers

[14:01] tend to rise to the top of every category and so it's impossible to ignore somebody like Hassan who has 30,000 viewers um or or or you know even a kais not kais not obviously doesn't do anything controversial in my view but

[14:14] I'm just using him as an example to like he's always at the top of the category so if he did do something like that it he would just it would represent the them or whether you put the ads off or not so this is a problem I think that's

[14:27] something that they can't just get out of by just like demonetizing categories and throwing people into those categories and this is why on my tweet I said um this is why on my tweet uh in my profile wherever that button is I I I I

[14:42] said that this isn't just a simple matter of throwing them into a category categories and demonetizing but it's too far G that twitch kingmaker system still Discovery you can't fool advertisers really but it's a stop Gap that might

[14:55] and behold like 6 days later they come out with content classification labels to do exactly that so everything's been along the lines of everything has proceed everything has proceeded exactly as I have foreen right and that's all

[15:09] fine but the problem is that twitch has some fundamental issues that YouTube got through um that that that because it's a VOD platform that twitch as a live more challenged by it's kind of Uncertain what's going to happen there

[15:21] the other problem I mentioned there was two right one is that whole thing I just said about like like you got to feel like you're safe okay so likeing safety is obviously one issue over here okay but the second issue is uh do the ads

[15:35] work okay and that's something we just have to talk about also and the truth of have to talk about also and the truth of that sadly is like at least as coming from a guy who runs a huge budget of ads across all different platforms that's

[15:48] brand advertising agency I work for Brands and I I I try to figure out what is the most effective way to advertise these products and services for these is it what is it right and and that's my whole day that's all I do I this this

[16:02] whole content creation thing is part-time well uh twitch is not good for R ads unless you're a a publisher game publisher if you're playing video games then it's pretty good um but for other stuff it doesn't convert that well and

[16:14] kind of go beyond the scope of this video um the demographic doesn't tend to younger they they they tend to not have as much disposable income they tend to in basements and they're like and their parents house and stuff so not the best

[16:28] people to serve ads to and as a result twitch really can't challenge the what we would call a CPM which is like a cost per 1,000 views of like what YouTube has like YouTube YouTube is just much better to advertise on there's like actually no

[16:42] real reason to advertise on Twitch again unless you're a video game company uh to be enough to to prop up an entire website which uh like twitch so the ads don't work and the problem is that like let's say I think one important thing I

[16:58] here we go okay is there's a thing called an uh there's thing there's ad budgets okay and AD budgets usually comprise of a kind of like main budget the total budget is like $5 million maybe the like four

[17:14] million 4 million 7 of that or something is going to be the main budget and stuff like PPC which is like Google AdWords stuff maybe like stuff that works before like um billboard advertisements stuff like that digital

[17:29] like that stuff that that's really comfortable and then 300,000 of that is experimental budget okay and the experimental budget is when they tell us in the agency World hey this is the money that we've or we suggest to them

[17:44] like hey here's the money that you could allocate to kind of things that might be much higher risk but also much higher reward twitch is solely in this experimental budget nobody runs twitch as part of their main budget that that

[17:57] would be a crazy thing to do because twitch is really risky so when an experimental budget goes wrong it's often the first and easiest thing to cut it's also interesting because when you see somebody like uh let's say Ford or

[18:10] uh like Mazda or somebody is advertising on Twitch or like or or like Colgate or somebody you go oh wow like twitch must be really going on the up and up they and everything is like amazing well actually the problem is that that's like

[18:23] running $150,000 on Twitch of their $400 million doesn't sound as impressive right and you can kind of understand why it's so easy for somebody like Ford to to like get a few emails and they're like wait

[18:37] budget there and the agency just cuts it right like instantly because it's way so that's the kind of situation we're in is like twitch has a lot of these sort of experimental ad budgets and as a result it's it's it's really hard to

[18:50] justify keeping these ad budgets on Twitch and that's and the problem is on top of that the ads don't work so so in addition to the brand safety thing it convince somebody because it's not part of your main budget it's not producing

[19:02] you a ton of results in sales it's not too hard to convince advertisers to weave but then if the ads it's going to be even harder for them to get back which is return on Advertising spend is not there uh so shoot like now we're in

[19:16] we're really screwed once the ads advertisers leave it's really really advertisers come back to YouTube because YouTube ads kill YouTube ads slay the average return on a YouTube ad is 2.6 to one meaning for every dollar that you

[19:30] one meaning for every dollar that you spend you get two $26 60 actually $2.60 campaign that's a pretty good deal and twitch has none of the data like that guarantees or results at all they can't tell they might they can't tell you

[19:44] themselves because there's no demographic targeting or ad targeting so YouTube was able to reclaim its advertisers because they had really good ads and the ads work but they also had the whole AdSense system behind them

[19:58] like by 2017 they had already been running ads as a primary function of their business for 13 freaking years so there it's just a totally different in some real trouble trying to solve these problems they they can't

[20:12] realistically afford to build the ad targeting system that YouTube has I called for them to start doing that like back in 2012 I think when I was making videos and they just never did it just laziness and slash like bad management

[20:28] and not hi having it as a priority so I I I guess this kind of all comes down to I I guess this kind of all comes down to the the Omega question you know which is to know a and that's just will twitch make

[20:43] it like is is is Twitch G to survive

[20:56] at this point that there's a couple of options I mean like more in general I just think and this has been like my prediction going continue to see like the slow deterioration of the website that's a

[21:10] hard word to write did I get it right no du duration du duration determination uh it's going to suck more and more there we go okay yeah we're just going to see it slowly deteriorate

[21:23] streamers are going to keep losing money going to keep losing money less ads um more like I think that twitch Prime is which is the free service you can use to subscribe to

[21:37] Twitch is probably on The Chopping Block because it just makes no sense uh it was originally a product that hopefully was going to get some people to be interested in Amazon Prime but there's

[21:51] interested in Amazon Prime but there's been no compelling data that shows that twitch streamers are converting up into Amazon Prime subscribers Amazon to be spending you know the 20 to $50 million a month that it costs to

[22:05] give people free subscriptions on Twitch and so I think that that is on The Chopping Block after twitch Prime gets cut people will start to really worry about the website that I think happens sometime in the next two years no real

[22:17] all this could be reversed though if like a new CEO comes in um Amazon changes management right any of that kind of stuff could happen and then it's just all up for grabs we'll probably cover

[22:30] that here on this channel um but right now under the current CEO and the situation as it is I think we're just going to see the Su ification what is people describe uh social media platforms with have you guys ever heard

[22:44] this word it's in ification or whatever where it's just the every we every website goes through like a golden age and then just gradually becomes happened to Skype it's happening to Discord in real time where I still can't

[22:56] turn off at notifications on my disc it drives me absolutely crazy why is that by the way Discord um like I'm in there all of the time why can't anybody why can't I change why no notifications huh what's going on there and Sh ification

[23:09] is just going to continue to affect twitch and unless Amazon makes some I don't really anticipate that it's going to happen but I'm like although my always saying that twitch is going to die I I I have never actually really

[23:23] increasingly become worried about streaming on the platform and I think at this point it is should be really clear to people that basically everybody mean I said this four or five years ago but uh it should be pretty obvious now

[23:37] getting off of contracts with twitch twitch is no longer offering paid money and now everybody is just saying okay we actually should multistream so multistream to like X and you multistream to YouTube at a bare minimum

[23:50] like maybe Tik Tok or something like that is going to be wise going forward bit hard to trust the trajectory of this website but it has limped along this long uh maybe Amazon just takes a look at it one day and it's like wait what's

[24:04] under like it's like wait it's burning what kind of Revenue and like maybe they that's like kind of extreme more than likely it's just going to keep in toying and uh we produce more videos like this so now you understand what's

[24:17] happening exactly with the twitch ad apocalypse and you can tell your friends apocalypse and you can tell your friends or share this video or uh lament in twitch's infinite Despair and misery at I

[24:29] do H until next time everybody thank you for watching this video see you later