Details like these make traders pay attention and open their wallets. For game companies, sponsored live streams are seen as an important way to generate buzz and convince viewers to buy and play their games. ONE 2019 estimate from The Wall Street Journal suggested that publishers including Electronic Arts and Activision Blizzard have spent up to $50,000 an hour to get top Twitch streamers to play their games. While this impressive number is probably an outlier, it shows how much companies value stream promotion.
But is this money well spent?
Often not, according to new research Ilya Morozov, assistant professor of marketing at the Kellogg School. Morozov, along with Yufeng Huang of the University of Rochester, studied how sponsored and organic (ie, non-sponsored) streams translate into usability and video game purchases.
Overall, it seems that sponsored streams are just not worth what companies are paying for them. “For most games in our data, [sponsored streams] they are not efficient at all—the return on investment is profoundly negative,” says Morozov.
However, there are a few exceptions. For example, for little-known games from small developers, “influencer marketing can be a viable option and can generate big returns,” Morozov adds.
Understanding the implications of sponsored streams
Studying the effects of influencer marketing can be difficult because such campaigns are usually run alongside other, unrelated promotional efforts. If sales of a product increase after an influencer posts about it, the increase could be attributed to the influencer—but it could also be due to TV ads running at the same time, or the product itself being of particularly high quality, attracting many – word of mouth advertising.
“This is the fundamental problem,” explains Morozov. “Does the influencer drive the effects, or would the effects be there anyway?”
In the case of video games, the best way to isolate the effects of stream promotion would be for streamers to stream themselves playing random games at random times of the day. (Unlike YouTube, where pre-recorded content dominates, Twitch’s content is almost always live.)
In other words, if a streamer is consistently live at 6 p.m. and sales of the games they play increase at that time, it might just mean that the 6 p.m. is a popular time to play video games. But if a streamer goes live on Monday at 6 p.m., Tuesday at 4 p.m. and Wednesday at 9 p.m., and sales increase during those specific times, provides much stronger evidence that the streamer, in particular, is having an effect.
And fortunately for Morozov and Huang, this second scenario is very close to reality. Streaming is a full-time job only for a select few. Most streamers work around other commitments. “They go to university classes, work part-time, and then come home and have a few hours to stream here and there,” says Morozov. These sporadic schedules made it easy for researchers to track any spikes in gameplay or sales that closely mirror streamers.
Measuring return on investment in streamer promotion
For their analysis, Morozov and Huang focused on the top 60,000 streamers on Twitch from May to December 2021, as measured by the number of subscribers. Streamers are required to disclose when they are paid to promote a particular game, which allowed researchers to easily separate sponsored streams from organic streams.
To see how many people were playing a certain game at a certain time, they used Steam, the world’s largest online video game platform, which shows how many players are active in a given game at a given time. The sales figures came from media measurement firm Comscore.
Game companies usually don’t disclose exactly how much they pay streamers for promotion. However, the researchers were able to determine roughly how much the streamers in their data set made per month from subscription fees, and used that information to calculate their average approximate hourly earnings—about $144. Obviously, streamers would insist on this for at least an hour of promotion. (The $144 figure is also consistent with sponsorship cost estimates circulating informally on message boards.)
The researchers checked in on their 60,000 streamers every ten minutes each time they went live during their five-month sample period. They noted what game the streamer was playing and whether the stream was promoted or organic. They then matched this information with sales data from Comscore and the number of active users for that game on Steam. This information was combined to calculate the total return on investment.
The results of this analysis suggest that paid offers are often not worth the cost.
It turns out that organic streams slightly increased the number of people playing a game on Steam—by about 3 percent. These effects were stronger among lesser-known games from small publishers, possibly because streaming increased the awareness of these niche titles and helped viewers identify games they might enjoy but might not have otherwise heard of.
But sponsored streams had an even smaller effect on the number of players, as well as the number of buyers, for a given game. The result is that, for most titles, sponsored streams lose money, with an average ROI of -95 percent.
In short, for a standard game on the market, “it’s a really, really bad deal,” says Morozov.
Once again, lesser known games were an exception to this rule. Their sales and player count increased after sponsored streams. “It was a positive surprise for us,” adds Morozov.
Another exception was games that were highly rated by critics. “We’re finding that for these games, live streams on Twitch create big and positive results,” says Morozov.
Is influencer marketing all it’s cracked up to be?
The results of this study throw cold water on the anecdotal reports that influencer promotion can have huge benefits and ROI of 200 or even 300 percent. “Companies should be very careful not to overinterpret these anecdotes,” says Morozov.
Morozov says he’s interested in whether these findings apply to other types of influencer marketing. In China, for example, so-called live commerce — which combines live streaming and online shopping — has grown into a $423 billion industry. The US market is also growing. Companies, including Amazon, have begun hiring popular online personalities to share their favorite products through sponsored live streams on Amazon’s website.
It’s possible that influencer marketing is more profitable in these contexts because consumers come to sites like Amazon ready to shop, while many come to Twitch primarily for entertainment.
“But I think at this point, we just don’t know,” says Morozov. “Until now, I have not seen convincing evidence that the return on investment is really high. But it would be interesting to study it.”
