Twitch's Revenue and User Engagement

It's clear that Twitch doesn't struggle with attracting users and maintaining their engagement – even public figures, like politicians, can amass substantial audiences through game streaming.

However, effectively monetizing video content presents a significant challenge, and Twitch has fallen short of its revenue projections in recent years.

Understanding Twitch's Income Streams

The question then becomes: how does Twitch generate revenue? Furthermore, what underlying psychological principles are employed within its iOS application to motivate viewers to increase their spending?

As a UX analyst and the founder of the UX community Built for Mars, I routinely deconstruct leading products, revealing their construction and, crucially, identifying areas for enhancement.

My recent analysis of Twitch has been completed. This extended version is specifically designed for Extra Crunch subscribers, aiming to connect Twitch’s strategies with actionable UX improvements for your own products.

Key UX Insights for Product Teams

Below are three UX recommendations to incorporate into your next team discussion.

UX Tip 1: Leveraging Social Proof

Twitch prominently displays viewer counts, chat activity, and follower numbers. This is a powerful application of social proof.

People are more likely to engage with content that appears popular. Seeing a high viewer count creates a sense of excitement and encourages others to join.

UX Tip 2: The Power of Variable Rewards

Twitch’s Bits and subscription models utilize variable rewards. Viewers don’t know exactly what they’ll get when they cheer with Bits or subscribe.

This unpredictability triggers dopamine release, making the experience more addictive. It’s similar to the mechanics found in slot machines.

UX Tip 3: Fostering a Sense of Community

The live chat feature is central to the Twitch experience. It allows viewers to interact with streamers and each other, building a strong sense of community.

This feeling of belonging encourages viewers to return and spend more time on the platform. It transforms passive viewing into an active, social activity.

The Anchoring Bias

The Anchor Effect is a cognitive bias where individuals heavily rely on the first piece of information presented to them – an “anchor” – when making decisions. This initial data point influences subsequent judgments, even if it's irrelevant. For instance, perceiving a $1,000 iPhone as a bargain might occur after initially viewing a $1,500 model.

Consider the user experience on Twitch. New subscribers are first informed of the advantages of a subscription, and then prompted to select a duration before being presented with the associated cost.

This phenomenon is widespread. The arrangement of your pricing options, for example, can significantly impact conversion rates. This is potentially why Mailchimp displays its pricing plans in descending order.

Due to the typical left-to-right reading pattern common in Western cultures, the more expensive $299 package initially captures attention. Consequently, the $14 standard tier appears comparatively affordable.

Should you immediately restructure your pricing tables? Not necessarily; the application of this principle is more complex.

However, it’s crucial to be aware of these anchoring effects. They exert a subtle influence on human behavior. By recognizing them, you can strategically adjust them to achieve desired outcomes. The initial information a user encounters will invariably serve as their anchor.

The Mechanics of Virtual Currency on Twitch

Twitch employs a virtual currency known as “Bits.” These Bits are utilized by viewers to purchase items within the platform, with a portion of the revenue ultimately being distributed to the content creator – functioning as a direct form of support.

This system was characterized as one prioritizing increased expenditure over optimal user experience, primarily due to the inflexible purchasing options for Bits.

The acquisition of Bits is structured around predetermined, often inconvenient, amounts.

Twitch isn't isolated in this practice; Microsoft previously implemented a similar approach with Microsoft Points, requiring purchases in fixed bundles that frequently exceeded the cost of desired items by a small margin.

While it’s improbable that your organization operates with an internal digital currency, businesses offering software as a service may utilize a “budget” system where users pre-fund their accounts.

Therefore, how can user experience be enhanced in such scenarios?

Consider this: Enable users to add funds to their accounts in adaptable increments that align with their actual spending needs.

For example, if a subscription service is priced at $7.99, avoid mandating top-ups in $10 increments; instead, allow users to choose their desired amount and offer refunds for any remaining balance.

Improving UX with Flexible Top-Ups

Offering flexible top-up options can significantly improve user satisfaction. It removes a point of friction in the purchasing process.

This approach demonstrates respect for the user’s financial control and encourages continued engagement with the platform.

• Reduce Friction: Eliminate the frustration of forced, larger purchases.
• Enhance Control: Empower users to manage their spending more effectively.
• Boost Satisfaction: A smoother experience leads to greater user contentment.

By prioritizing user-centric design, companies can foster a more positive and sustainable relationship with their customer base.

Mitigating Risk in User Decisions

Generally, guiding users towards a definitive action – such as initiating a subscription – should occur only after a comprehensive understanding of the associated advantages has been established.

A curious phenomenon emerges when individuals commit to a course of action: the very act of deciding to proceed significantly increases the likelihood of actually doing so.

While seemingly self-evident, this principle is often overlooked. Setting an alarm for 7 a.m., representing a deliberate choice to rise early, enhances the probability of doing so, even in the event of an alarm malfunction.

This presents a challenge for user experience (UX) design: identifying precisely when users reach a decision point within an application’s workflow.

Frequently, the decision is made during the initial click, rather than at the culmination of a process. For instance, a user may decide to purchase an item upon clicking “check out now,” and not necessarily when finalizing the transaction with their payment information.

Therefore, a valuable technique for UX professionals is to proactively de-risk decisions for users who are not yet prepared to commit. As an example, Twitch prompts users about subscribing to a streamer prior to viewing any content.

This approach is overly binary. A more effective strategy would be to use phrasing like “learn more,” allowing users to explore further without immediately confronting a commitment.

Effective UX can steer the decision-making process to align with your desired timing. Consequently, evaluate whether you are requesting commitment from the user prematurely or belatedly. (Employ A/B testing to validate your approach.)

Further UX Insights

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