March 4th, 2015
Emmet Shear, CEO of Twitch, a platform for streaming video games, announced yesterday that his company has been acquired by Amazon (and not by Google as some publications reported last month) for $970 million in cash. Writing on the Twitch blog, Shear said, “We chose Amazon because they believe in our community, they share our values and long-term vision, and they want to help us get there faster. We’re keeping most everything the same: our office, our employees, our brand, and most importantly our independence. But with Amazon’s support we’ll have the resources to bring you an even better Twitch.”
The deal is undoubtedly a smart strategic move for Amazon. Firstly, it will provide the company with a steady stream of cheap content. The content producers on Twitch range from gamers streaming from their sitting rooms, right through to more professional content provided by the big console manufacturers, the leading games developers, and the gaming trade press. All Amazon has to do is provide the platform and monetise the content.
Rapidly Growing and Devoted User Base
And with that content comes a loyal community of 55 million users, who are undoubtedly one of the most loyal communities on the Internet. As Scott Nugent, Twitch’s VP of Revenue told VAN back in May, the average active user is on Twitch for 106 minutes per day. Not only that, but the demographics are precisely the type of (mainly) young males who are difficult to reach via TV and traditional media.
Looking at how Twitch will fit into the wider Amazon product range, it may add value to the Kindle Fire tablets, phones and TV set-top boxes, although it’ll be important that Twitch continues to be device and platform agnostic. As the Fire TV also acts as games console, albeit a low level one, we might see Amazon making more forceful moves into the gaming market in the years to come.
As with all things Amazon related, there will be a data angle, and Twitch’s viewers will in all likelihood find themselves being more effectively targeted with ads offering them the chance to buy games, consoles and accessories from Amazon. Equally likely is the prospect of Amazon combining its ecommerce data sets with Twitch’s data to enhance the value and performance of its inventory. Twitch recently took all of their inventory off the exchanges so they can sell it in house, so it’s going to be interesting to see if that changes with Amazon at the helm. Our guess is that it will.
Amazon Bought Google
Looking at the bigger picture, Amazon has also prevented Google from buying one of the most valuable pieces of online video real estate. With its youthful user base and its focus on gaming, Twitch seemed like it would be a great fit for YouTube, although it seems equally likely that YouTube will integrate better live streaming features into the platform in the future. Google already has a strong position in the gaming market with YouTubers like PewDiePie – YouTube’s most heavily subscribed channel – leading the charge.
Looking ahead, Amazon are going to face a dilemma when Twitch’s rapid user growth plateaus. Will they risk isolating the core user base by using the Twitch brand to build out a platform that goes beyond gaming, or remain loyal to the community responsible for its success thus far, many of whom like it so much precisely because it’s dedicated to their hobby. But regardless of what happens further down the road, there’s no denying that the huge part of the market which YouTube has traditionally dominated just became a lot more interesting.