What does Amazon hope to gain from Twitch?
- 25 August 2014
- From the section Technology
An oft-quoted cliche has it that today "gaming is bigger than Hollywood".
That is still nonsense, of course, when it comes to mass cultural appeal. But in terms of sheer revenue, it's increasingly hard to argue with.
And the almost-$1bn (£600m) acquisition of a three-year old brand, specialising in players' own gameplay video, surely gives that proposition even more succour.
Twitch undoubtedly boasts very firm underpinnings. Since it was spun off from its general-purpose video counterpart Justin.tv, this "YouTube of streaming gameplay" has become little short of a phenomenon.
Rising swiftly through the ranks of the web, today it is way more than simply a website; it is a platform in its own right, a home for thousands of live and on-demand videos uploaded by one million users-cum-broadcasters.
They are devoured by around 55 million others who flock there not just to watch and admire fellow gamers, but also to hone their own gaming craft thanks to the multitude of video "playthrough" tutorials.
But it is Twitch's growth trajectory over the past couple of years which particularly impresses. It was given a massive boost by both Sony and Microsoft's decision to bake the service into their latest gaming consoles, allowing gamers to upload real-time videos of their gaming sessions.
As a result, Twitch traffic is beginning to swamp the internet. At peak times here in the US, only Google, Apple and Netflix command more internet bandwidth.
And in an era where a user's attention is only a tap or mouse-click away from being diverted, Twitch boasts sky-high engagement - of 100 minutes per user each day, and over 15 billion minutes of video watched every month.
Impressive numbers in a genre which represents a potential goldmine for advertisers to exploit. So it's easy to see its acquisition appeal.
On the face of it, Amazon does not seem to be the most likely buyer. But the one-time e-tailer is reaching its tentacles into many different fields and sports a rapidly-growing media empire, incorporating both hardware - like its set-top box Fire TV - and services like Amazon Prime Video, which give it valuable experience in the field of video streaming.
Commenting on the deal, Twitch chief executive Emmett Shear acknowledged as much, saying that being part of Amazon would allow them "to create tools and services much faster than we could have independently".
And Amazon itself has made no secret of its desire to specifically build its own presence both in gaming - with its own gaming studio- and digital advertising.
On this reading the deal makes sense: the research firm eMarketer projects Amazon's revenues in global digital this year will surpass the $1bn (£603m) mark - but it is still just a tiny fraction of the $140bn market.
Buying Twitch gives it a foothold in a growing market, with a young demographic - not to mention a competitive advantage over arch-rival Google, whose YouTube Live has not been able to compete.
Interestingly, all eyes were on Google to buy Twitch just a few months ago to plug the gap in its live-streaming arsenal, but the rumoured deal fell through, reportedly after concerns that it would not pass muster with US antitrust regulators.
But is the deal overvalued? At $17.60, the cost per user is far less than the Seattle-based giant has paid for its other high-profile acquisitions, such as shoe retailer Zappos.
The above notwithstanding, there are still potholes for Amazon to navigate in the road ahead. As a young company, Twitch has already proven itself no stranger to controversy - not least amongst its own youthful and vocal community.
Earlier this month, the site caused outrage when it imposed a clumsy and inaccurate audio filtering system to identify users' copyright violations of music they had uploaded with their videos.
And in other notable PR faux pas, site administrators were deemed to have unfairly censored posts and banned users for comments they didn't agree with.
As it contemplates its new possession, Amazon will have to decide just how far it will maintain Twitch as a standalone offering or integrate it more directly into the corporate fold.
Its core challenge will be to grow the brand whilst at the same time maintaining the loyalty of its core audience, which has grown up with the site as a freewheeling gaming community.
Users themselves have already expressed anxiety about how it might change complexion in corporate hands.
But for the Silicon Valley venture capitalists - who have collectively seeded the company with a mere $35m - a $970m cash sale is one play they presumably had few hesitations in making.