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| vinlin United States. January 05 2012 09:36. Posts 5 | Profile # |
There has been a lot of heated discussion lately regarding advertising revenue in the video game streaming business and the way broadcasters are compensated for their content. To be sure, it’s a complicated business with many nuances that are often lost in casual conversation. I’d like to dive in for a minute to clear up a few misconceptions.
Note that at TwitchTV, we are dedicated to delivering the best service and greatest revenue possible for our partners, while offering the best viewing experience for our users. We hope this level of transparency will help bring the whole discussion to a more fruitful level for the entire community.
There are two main models for compensating broadcasters: Revenue Share and Flat-Rate.
**Revenue Share** works like this: For every ad, the platform and the broadcaster share in the revenue. For example, if the platform sells a $20 CPM (cost per thousand impressions) ad, the broadcaster receives $10 for every thousand viewers who see that ad.
**Flat-Rate** works like this: The broadcaster is compensated at a specific CPM per ad, $5 being a popular rate. So, in this case, if the platform sells a $20 CPM ad, the broadcaster receives exactly $5 per thousand viewers who see that ad, and the company keeps the remaining $15.
There are pros and cons to each option.
The pro for the revenue share option is that the broadcaster benefits from better sales on the part of the streaming platform (the higher the ad sells for, the higher the revenue the partner receives). The con is that while revenue can be forecast fairly accurately, it cannot be pinpointed with exact accuracy every month, and the broadcaster shares the risk that it will go down.
The pro for the flat-rate option is that the broadcaster can forecast the revenue made in a month more easily because the rate is guaranteed. The con is that they will lose out on revenue made by the platform when an ad is sold above that $5 CPM.
Whether the broadcaster is on a revenue share or flat-rate, both the partner and the company make more money if the company sells more ads. The difference is that for a rev share, the partner takes the risk AND the benefits along with the company, whereas with a flat rate, the partner takes less risk but also less reward.
At TwitchTV, we believe that our partners should benefit if we benefit, thus we have promoted a revenue share model. We do this because we are in close contact with the best video game broadcasters on the planet, and they’ve told us that this is what they prefer. However, we realize that one size does not fit all and we will be offering a Flat-Rate option in addition to our standard Revenue Share option.
Now for the real nitty-gritty advertising 101 primer on how advertising works:
Terms you need to know first:
- Ad Opportunity: This is the total number of opportunities a company has available to deliver an Ad Impression. For example, if a channel has 1000 simultaneous viewers and runs 1 commercial, there are 1000 opportunities to show an Ad Impression. Ad Opportunities are also sometimes described as Ad Inventory.
- Ad Impression: This is counted when a viewer *actually* sees an ad. Impressions are always less or equal to opportunities.
Fill-rate: This is Ad Impressions divided by Ad Opportunities. In an ideal world, everyone sells every single Ad Opportunity to someone. This would mean 100% fill-rate. In the real world, because there are other variables like country of viewer, time of day, number of ads seen by a unique viewer, etc. the Fill-rate is always less than 100%.
- CPM - this is cost per 1000 Ad Impressions. So $3 CPM means you earn $3 per 1000 Ad Impressions viewed. It is important to note that it is not $3 per 1000 Ad Opportunities.
- eCPM (Effective CPM) - this is cost per 1000 Ad Opportunities, thus takes Fill-Rate into account. This is a much better measure of how a company is performing in terms of sales. Thus if someone tells you they offer $3 CPM, but has a Fill-rate of 50%, then your eCPM is $1.50. The way you calculate this is revenue divided by every 1000 Ad Opportunities. For example, if you have a $3CPM, 50% Fill-Rate and 1000 Ad Opportunities, this is 500 Ad Impressions. $3CPM x 500 Ad Impressions / 1000 = $1.50 eCPM.
- Frequency Cap - High paying advertisers usually only allow companies to show their ad 1-3 times per day to a unique viewer. This is to prevent over-exposure of their brand and ensure higher performance. Frequency caps can be as low as none (as in they will allow a company to show their ad as many times as possible) or 1 per day. The ones you see over and over are usually the lower paying CPM ads.
Here are the major factors that determine if a viewer sees an ad:
- Country: The country that a viewer is watching from is one of the biggest factors in determining whether someone sees an ad, how much the ad costs, and how many they see. Of course, every company is trying to sell 100% of the ad inventory - it would be silly to accuse a company of not trying to do this. However, in many countries the online video ad market is not yet as mature as in countries like US, UK and Germany. We all do our best to sell, but viewers and partners need to understand that not every country is near 100% fill-rate at the high CPMs.
- How many ads a viewer has seen each day: If you as a viewer have been to other video sites or even other channels and see other video ads before arriving at a partner channel, then whatever ad you see on the current channel you're viewing will be lower in CPM value than the first ad you saw that day. Most big brands frequency cap video ads at 1 per 24 hrs, which means you should only see their ad once per day as a unique viewer. So as you see more video ads through the day, the value of the ad decreases.
- Ad blockers : Of course this is an issue and we are working on helping partners learn how many people are using ad blocker and educating people that using ad blocker is detrimental to folks who are trying to create great content and entertain people.
Now that you are armed with this knowledge, back to the two revenue options available to broadcasters.
As you can see, comparing a flat-rate CPM to an eCPM without insight into fill rate is very misleading, and unfortunately this is exactly what is being compared with regards to TwitchTV. The best way to compare apples to apples is to look at eCPM (effective CPM, or revenue per ad opportunity). At TwitchTV, we are confident that we deliver an equal or higher eCPM than any gaming platform out there.
We strive for complete transparency with our partners. That’s why we will offer data on both ad opportunities and ad impressions in the partner dashboard. This way, partners can understand how they are doing and how we are performing for them. I urge all broadcasters, when deciding which platform to go with, to get this kind of transparency. Otherwise, it is easy to be deceptive when it comes to how much revenue a broadcaster can potentially earn.
There are competitive options out there - we know this very well. In addition to our industry leading eCPM, we are constantly driving innovation on the product. We were the first to build commercial breaks, the first to offer live transcodes, the first to offer channel subscriptions, the first to offer advanced chat moderation tools, and on and on. We pride ourselves on staying ahead of the competition when it comes to broadcaster tools, and we will continue to build great features that gamers need.
There is always room for improvement. We will continue to make TwitchTV not only the best place to find great gaming content, but also the best place for partners to broadcast their content and to earn a living by doing what they love.
Sincerely,
Kevin and the TwitchTV Team |
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| Cush United States. January 05 2012 09:43. Posts 565 | Profile # |
| Thanks for clearing this up! Answered a few questions. |
| | "That's not your main base Stardust.....Stardust.....that's not your main" Sayle |  |
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| Wesso Netherlands. January 05 2012 09:43. Posts 942 | Profile # |
| Thanks, transparency is always appreciated and this subject is pretty interesting to boot. |
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| integrity United States. January 05 2012 09:44. Posts 1008 | Profile # |
im to un-educated to understand all the advertisement stuff.
can someone break it down for me.
if not thats fine Last edit: 2012-01-05 09:45:12 |
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| gregnog United States. January 05 2012 09:45. Posts 289 | Profile # |
On January 05 2012 09:44 integrity wrote:
im to un-educated to understand all the advertisement stuff.
can someone break it down for me.
if not thats fine
He did very clearly. You just don't want to read it all  |
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| FnaticPink Denmark. January 05 2012 09:48. Posts 255 | Profile # |
| Wow this is very nicely written. I am happy to broadcast with you guys although i dont yet reep the benefits =) |
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| EntropyFails January 05 2012 09:48. Posts 78 | Profile Blog # |
Hopefully this will lead to more nuanced discussions of how much people can earn via streaming and how the various platforms handle ad dollars. Some of the chat and reddit comments are filled with misinformation. TL discussions have been better but I hope that people really understand this before they decided to spread the misinformation further...
It doesn't help esports for misinformation to spread. |
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| shindigs United States. January 05 2012 09:48. Posts 4274 | Profile Blog # |
| Read every word and bookmarking for future reference. Thanks for sharing this. |
| | Twitter: @shindags || Collegiate Starleague www.cstarleague.com || Sponsored by #ESPORTSPROBLEMS || twitch.tv/shindigs |  |
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 Excalibur_Z United States. January 05 2012 09:49. Posts 10284 | Profile # |
| This is pretty interesting. Really appreciated the breakdown of the terms and the models in place. Looking forward to future Knowledge Bombs, thanks Kevin! |
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 discobaas January 05 2012 09:50. Posts 225 | Profile # |
On January 05 2012 09:44 integrity wrote:
im to un-educated to understand all the advertisement stuff.
can someone break it down for me.
if not thats fine
lol it doesn't get much simpler than what's in the OP
nice write-up, tnxLast edit: 2012-01-05 09:50:21 |
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| Soap Brazil. January 05 2012 09:50. Posts 1140 | Profile Blog # | |
| | Customising Dota 2 by tauon - http://www.teamliquid.net/forum/viewmessage.php?topic_id=337793 | |
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| EntropyFails January 05 2012 09:50. Posts 78 | Profile Blog # |
On January 05 2012 09:44 integrity wrote:
im to un-educated to understand all the advertisement stuff.
can someone break it down for me.
if not thats fine
The CEO of TwitchTV did it on reddit... But I guess it deserves repeating here. If you really care, you should read the entire post, however.
TL;DR:
There is a difference between "CPM" and "eCPM". eCPM determines how much money is actually made. eCPM = CPM * Fill Rate. When someone tells you how great their CPM is, you should ask "What's your fill rate?" and then do the math.
TwitchTV has great eCPMs :-)
Emmett Shear
CEO TwitchTV
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| Dalguno United States. January 05 2012 09:51. Posts 2298 | Profile Blog # |
| Awesome information. Love that you're putting this out there, it will put to rest a lot of "How much do progamers make from streaming" questions. <3 Twitch! |
| | "I'm gonna keep making drones cause I'm a baller, and ballers make drones." -Snute |
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 Pokebunny United States. January 05 2012 09:53. Posts 9580 | Profile Blog # |
| Kevin is the fuckin' boss. I love Twitch <3 |
| "Spirit Walk in, Spirit Vessel out." - crzytimes | Teamliquid Staff Writer
Quantic.Pokebunny | Pokebunny.703 | quanticgaming.com | twitter.com/Pokebunny | twitch.tv/Pokebunny |  |
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| ch33psh33p January 05 2012 09:53. Posts 2582 | Profile Blog # |
| Finally transparency. It always seemed a little ridiculous that this was so covered up. |
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| Canucklehead Canada. January 05 2012 09:59. Posts 3577 | Profile # |
Very nicely written and I hope someone can educate the koreans on this because I much prefer twitch over own3d and it sucks to see all the koreans using own3d.
Ok, 1 thing I'd like cleared up if you could. The common number people float around with twitch is that they receive $2 per 1000 ad impressions. You don't need to confirm if that's true or not, but after reading this it looks like the number isn't static like that and depends on the ad?
For example, for the more expensive ads that run only once per day it will give the broadcaster X amount. Then for the less expensive ads that run over and over, the broadcaster will receieve a lower X amount here. Therefore, is it true that you can't simply say it's $2 per 1000 impressions and it depends on what ads are seen?Last edit: 2012-01-05 10:00:40 |
| | Top 10 favourite pros: MKP, MVP, MC, Nestea, DRG, Jaedong, Flash, Life, Creator, Leenock | |
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| CeriseCherries United States. January 05 2012 10:01. Posts 4704 | Profile Blog # |
Hehe very informative except for the formalities at the beginning and the end XD
nice to know how it works... IdrA must make hella money... |
| | Remember, no matter where you go, there you are. |
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| spbelky United States. January 05 2012 10:02. Posts 612 | Profile Blog # |
That was like reading one of my marketing text books from school. Only better.
Looking forward to future Knowledge Bombs. |
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| mouzIllusion United States. January 05 2012 10:06. Posts 1027 | Profile Blog # |
| <3 kevin and ben @ twitch :D |
| | www.twitter.com/mouzIllusion & www.facebook.com/illusionsc2 |  |
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| Bear4188 United States. January 05 2012 10:06. Posts 1795 | Profile # |
On January 05 2012 09:53 ch33psh33p wrote:
Finally transparency. It always seemed a little ridiculous that this was so covered up.
It's never been covered up. This is how the internet marketing industry works and it's never been a secret to anyone wishing to look into it. |
| | "I learned very early the difference between knowing the name of something and knowing something." - R. Feynman | |
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