Amazon Buys Twitch
August 28, 2014 – by Per Christensson
It was inevitable. I just didn't think it would happen this way.
On August 26th, 2014, I received an email from my friends at Twitch saying the company had been acquired by another business. The fact that Twitch was bought out did not surprise me. But two things did – the company that acquired Twitch and the price they paid.
I thought for sure Google would buy Twitch. After all, Twitch's streaming service seemed like a perfect addition to YouTube. Many gamers already post their replays on YouTube, so being able to use the same account for Twitch streaming made a lot of sense. Plus, Google already has most of the infrastructure in place to support high-volume streaming, so it seems like the integration would have been relatively easy.
But Amazon now owns Twitch, not Google. Some have speculated that Amazon just wanted to "beat" Google with this acquisition, but I think it's is a great long-term business decision. It will give Amazon an excellent way to market to gamers and will undoubtably boost digital downloads in the future. Video game streaming is blowing up right now and more and more PC gamers are using Twitch on a regular basis. Now that the Twitch app is available for both the PS4 and Xbox One, just about anyone can stream their games online.
So how much did Amazon pay for Twitch? A measly $970 million. I expected Twitch to sell for at least $3 billion. While I'm not a investment strategist or venture capitalist, I can say without any doubt that $970 million is an awesome deal for Amazon. Twitch is in the process of transitioning from a cult following to a household name. It has huge potential, which not many people realize.
Recently, Snapchat was valued at $10 billion. This astronomical valuation is a complete joke in my opinion. However, if it is even close to accurate, Twitch's valuation should be MUCH higher than $1 billion. While the cost of running Twitch is substantially greater than Snapchat (because of the large bandwidth requirements), Twitch offers far more revenue streams than Snapchat. Twitch users are more dedicated to the service and spend more time on Twitch than the average Snapchat user. It is absurd that Snapchat has been valued at 10 times the amount of Twitch. If anything, it should be the other way around.
Of course, there are still many unknowns regarding Amazon and Twitch's partnership. Will Amazon transform Twitch in a way that will alienate the loyal subscribers or will they make it even better? How will Amazon market Twitch and will it become part of Amazon Prime? Will Amazon have enough bandwidth to run both Twitch and their ecommerce site this holiday season? Most importantly, will Google create its own streaming service to compete with Twitch?
While I don't know the answers to these questions, I'm excited to see how things play out. Watching people play video games may seem strange to some people, but it is growing like wildfire. Many people now spend more time watching eSports than traditional sports. If this trend continues – and I think it will – Twitch has a lot of room to grow. Well played, Amazon.