Last month, when the founders of start-up StreamElements - Doron Nir, Or Perry, Reem Sherman and Gil Hirsch - watched Marc Zuckerberg present his vision of the Metaverse, the three-dimensional virtual world where we will all live and work within a few years, the main thought that went through their heads was, "What took you so long?"
For years, StreamElements' entrepreneurial team has observed what has been happening right under the noses of social networks and the major cable and streaming companies: more and more young people choosing to disconnect from legacy television networks and even streaming services, becoming what the traditional industry calls "inaccessible." As Netflix CEO Reed Hastings put it, "Disney Plus and Amazon Prime scare me less than YouTube and Fortnite."
Accessing the inaccessible
In fact, they are very accessible to anyone who knows them and knows where to find them. They live in the boxy virtual world of Minecraft - currently the most watched game on YouTube - in 3D games like Roblox, in the frenetic Fortnite universe, and in arcade games like World of Warcraft and League of Legends. When they’re not playing, they’re watching other influencers broadcast themselves playing adventure games or chess, programming code, or just sharing their day-to-day experiences or thoughts. Although the vast majority, both of the audience and of the broadcasters, come from the gaming worlds, video games are just a pretext for socializing.
"These influencers only play part of the time - the rest of the time, they watch video clips or trailers together, talk about Covid or have a laugh with their audience," Doron Nir, one of the founders of StreamElements, tells "Globes". "They’re gamers but they’re also community managers. They are the rabbi and the pastor for their audience, who consume any content they stream, just like the older generation, when they were kids, took in everything that came out of the MTV VJs’ mouths."
And they do so less and less on older platforms like Facebook or Twitter, more on YouTube, TikTok and Twitch - the Amazon-owned YouTube-like site that allows these opinion-makers ("streamers") to broadcast live to their followers. Conversations aren’t conducted by the usual means, but through Discord, a distributed, almost underground service that enables players to communicate on computer games via text messages, voice calls, and video calls.
The gaming advantage
Not everyone is interested in this world of young people, cut off from the mainstream media channels. Heavy gamers, like serial entrepreneurs Doron Nir and Or Perry are more likely to understand the sector’s exponential growth. Half a decade ago, Perry saw growth in the number of top streamers on Twitch and set up StreamElements to enable them to gain sponsors, and get paid by their fan base. Nir, who together with Perry launched Israeli computer games website Vgames more than a decade ago, had seen how social networks and video and live-streaming platforms were losing their power in favor of independent content creators who operate on several platforms simultaneously. Nir realized that the growing community of gamers-broadcasters needed a single solution that would allow them to distribute content across all platforms at once, keep in touch with their audiences, and leverage their fame to generate revenue.
They were joined by co-founders Reem Sherman (CTO), who previously served as Head of Development at Pepper (Bank Leumi’s digital banking platform), who also collaborates with Nir on establishing the successful Israeli podcast network Geekonomy, and Gil Hirsch, CEO of Face.com, which was acquired by Facebook about a decade ago.
Creators have the Power
One of the significant reports leaked from within Facebook in recent months touched on the failure to attract young, thought-leading content creators. Younger users perceive Facebook as an outdated platform, used more for conversing with older family members, and less for communication between young people who use alternative platforms like Snapchat or Discord. One conclusion reached by Facebook was that it needed to attract serious content creators and pay them a lot. Like Facebook, more and more companies are realizing that power is shifting away from platforms and towards creators.
StreamElements had already realized the power of creators five years before, and made the strategic decision not to charge creators but to provide a free service, and only take a fee on every dollar that came in. The company also decided not to embed ads or images within streamers’ broadcasts. Instead, StreamElements focuses on bringing sponsorships for creators, who incorporate products and logos during their live broadcasts. For example, for Sony Studios or 20th Century Studios, StreamElements streamers shot a live review of the trailer and a viewer recommendation. Another streamer, who specializes in audio, recommended Sennheiser earphones, while another gamer-streamer proudly demonstrated how he ate Nutter Butter snack cookies and drank 7 Up to stay alert during a long video gaming session.
Revenues have doubled
Through direct access to tens of thousands of independent broadcasters, StreamElements has managed to double its revenue - and the revenue of influencers accordingly. Gross revenue in 2020 was $23 million, while 2021 revenue is expected to be $50 million. Given the fact that 70% of the revenue goes to the creators, StreamElements will be left with an estimated $10-15 million in gross profit by year’s end. Fame, and the money that goes with it, is enticing more and more young people to become content creators and join the platform; the number of streamers at StreamElements has grown from 700,000 last year to 1.2 million today - the company's best year for growth.
To continue to attract more content creators, and to compete with platforms like Logitech, StreamElements has expanded its commercialization options. It has set up an online store for creators to sell merchandise like shirts or mugs, a payment platform for transferring donations, and a video-on-demand interface so that streamers can keep making money - even when they are not broadcasting.
StreamElements
- Business: A platform for independent video broadcasters
- History: Founded in 2017 by Or Perry, Doron Nir, Reem Sherman and Gil Hirsch (CEO)
- Stats: The company, which employs 220 people and is valued at $ 400-500 million, raised $116 million, including from Softbank, State of Mind Ventures, Pitango, PayPal, Mivtach Shamir and Menora Mivtachim. Revenue in 2020 was $23 million and is expected to reach a revenue run rate of $50 million this quarter.
- Competition: The most prominent competitor is Streamlabs, which was acquired by Logitech for $106 million and has no commercialization platform. The company, founded in 2011 by Murtaza Hussein and Ali Moiz and employs 62 people, has raised $38 million.
Published by Globes, Israel business news - en.globes.co.il - on December 7, 2021.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2021.