Twitch’s new ad rules will hurt streamers, charities, and brands

Update June 7th, 6:10PM ET: On Wednesday evening, Twitch walked back the new ad rules described in this story. “These guidelines are bad for you and bad for Twitch, and we are removing them immediately,” the company said. You can read our story on Twitch’s reversal here. Our original story about the rules follows.

Twitch has introduced new rules governing how ads can be run on the site. The rules will disrupt how streamers have traditionally run ads, impacting their ability to consistently earn money. The rules will also affect how charity organizations raise money on Twitch and impact the brands that advertise on Twitch themselves.

Brands contract directly with streamers in exchange for having their products featured during a broadcast. Streamers have run these ads in myriad ways: they do ad reads, play sponsored games, display ads as graphics directly over their streams, cut away from a livestream to a prerecorded video, and more.

An example of the kinds of advertising tools streams use.

Twitch’s new rules affect what it’s calling “burned in” ads, describing them as “pre-recorded ads or commercials that are embedded directly into the stream.” Starting July 1st, Twitch will no longer allow streamers to feature third-party display, video, or audio ads. 

So, for example, Streamer A has a sponsorship deal with Taco Bell. To advertise Taco Bell, the streamer inserted a graphic that takes up a portion of the stream’s viewing space. Streamer A also decided to stop streaming momentarily to play a Taco Bell video ad. Later, during the streaming session, Streamer A also played an audio ad (think radio) extolling the virtues of a Crunchwrap Supreme. According to Twitch’s new rules, all three of these advertising schemes will be prohibited.

In the statement explaining the new rules, Twitch did share which kinds of ads would still be allowed. Streamers can still perform ad reads; they can also share their affiliate links in chat. Creators can still play sponsored games and feature sponsored products in the background. It is also allowing a form of display ads, provided they take up no more than 3 percent of the screen.

However, there seems to be some confusion about whether the 3 percent rule applies to each individual ad or the total sum of ads displayed.

Other platforms have similar rules in place against third-party advertising. YouTube, for example, prohibits its creators from utilizing a type of ad for which YouTube has a comparable format. This means ad types like pre-, mid-, and post-roll videos are not allowed, as YouTube itself uses those formats in its advertising. The idea is that YouTube doesn’t want to compete with its creators over who advertisers will choose to run video ads with. 

However, unlike YouTube — whose ad policies mostly target video ads — Twitch’s new rules also target static display ads, prohibiting one of the most common forms of third-party advertising on the site. It’s worth noting that Twitch announced that it’s rolling out its own version of static display ads just last month, which would bring Twitch in competition with third-party display ads.

While a lot of the conversation surrounding earning money on Twitch is centered on Twitch’s unpopular 50 / 50 revenue split, the consensus among streamers is that sponsorships are where streamers can make the most and, importantly, most consistent money. 

“My Twitch ‘pay check’ stopped being my most reliable and largest income portion a long time ago,” tweeted Lululuvely, an FPS streamer with 1.3 million followers. “Sponsorships are [the] majority of my income and it’s really sad to see Twitch continuing to make decisions like this.”

“Logos, banners, and other types of display ads are by far the most common form of sponsorship you’ll see,” a chat moderator, who requested anonymity, tells The Verge. “These limitations dramatically impact the revenue stream for these creators and will absolutely push mid-size streamers into an income bracket too low to remain full-time on the platform.”

Esports broadcasts and charity streams also stand to lose out with the new rules. 

“During GCX each year, we run heartfelt ads we get from St. Jude about their mission, history and goals,” Ben Bowman, co-founder of the Gaming Community Expo whose team runs charity streams for the children’s hospital, tells The Verge. “Under the new rules, such avenues of communication go away.”

Bowman also expressed that it was unclear how certain endemic aspects of charity streams are impacted by the new rules. “If overlays are also affected, this could cool the ability to build the hype around large moments on stream,” he said. “It could also interfere with the ability to display information-dense concepts (top 10 or 50 donors to a cause via a branded overlay, for example) that often drive donations.”

Bowman’s example is best illustrated by Games Done Quick (GDQ). It regularly hosts some of the biggest charity events on Twitch and just raised $2.2 million for Doctors Without Borders during its weeklong summer gaming marathon. Throughout its events, GDQ employs tools like prominent milestone bars that track progress toward a goal or on-screen displays of bid wars that incentivize viewers to donate to ensure their choice “wins.” These tools drive viewer engagement and spending, and if such tools run afoul of Twitch’s new ad rules, GDQ would have to change some of the core elements that make its events so successful.

Games Done Quick frequently features video segments like this one from the charities it raises money for. With Twitch’s new rules, it’s unclear if this kind of video will be prohibited.

“Coming from the charity side of things, our sponsors are the ones that makes the event happen,” tweeted Sam Lupo, charity director for GCX and wife of popular streaming personality Dr. Lupo. “If we can’t promote them they won’t help us out & ultimately charity events won’t be as big.”

Esports broadcasts, too, use the same advertising tactics targeted by the new guidelines. With recent stories about esport companies and leagues in financial trouble — with organizations pulling investments and laying off employees — taking a hit via ad revenue imperils an already precarious financial situation.

Bryce Blum, founding partner of ESG Law, a firm representing esports teams and content creators, finds the new rules troubling. “For esports, an area that is struggling to find sustainable business models, stripping away meaningful opportunities to monetize the broadcast is deeply problematic,” he told The Verge.

An example of an esports broadcast on Twitch utilizing a type of static display ad that Twitch will soon prohibit.

Brands also have to take these rules into consideration when choosing where and how to invest money. And for some, Twitch might not be worth that investment anymore. “A move like this is putting brands – especially those who work with long term signed creators – at risk of causing infractions,” says an influencer manager who spoke to The Verge on the condition of anonymity as they are not authorized to speak to the press. “When Twitch puts increasingly difficult hoops to jump through, we find places where those budgets can be better utilized.” 

The Verge has reached out to Twitch for comment, asking why and how these rules were decided and if streamers were allowed to offer feedback before this announcement. On Wednesday, it responded to streamers’ negative reactions on Twitter.

Today’s branded content policy update was overly broad. This created confusion and frustration, and we apologize for that. We do not intend to limit streamers’ ability to enter into direct relationships with sponsors, and we understand that this is an important part of how streamers earn revenue. We wanted to clarify our existing ads policy that was intended to prohibit third party ad networks from selling burned in video and display ads on Twitch, which is consistent with other services.

Shortly after Twitch’s apology, Lil Lexi, a Twitch partner and ambassador, tweeted some details discussed from an emergency meeting with ambassadors and Twitch staff and executives.

“Things are being reviewed and concerns are understood,” she tweeted. “Three percent not acceptable for logos which will be reviewed further.”

Twitch also said that it would rewrite the guidelines to make things clearer. But so far, it doesn’t seem like these language updates will address creators’ biggest concern: prohibiting some of the most common and abundant forms of advertising will negatively affect streamer income and therefore conflict with one of Twitch’s stated goals. “At the end of the day, we are committed to increasing the amount of money a streamer earns,” Mike Minton, chief monetization officer, told The Verge in an interview in March. 

The rules go into effect July 1st.