Looks like Twitch, the world's biggest video platform for online gamers, is going to be snapped up by a technology company after all, but it's not Google.
Enter Amazon, which has aggressively been looking to compete with Google on several fronts. Amazon surprised the gaming world on Monday when it announced in a press release that it has closed acquisition talks with the three-year-old Twitch and will purchase the start-up for $970 million in cash, excluding retention payouts. All in all, Amazon is paying Twitch up to $1.1 billion for the transaction, which is expected to close in the second half of this year.
Amazon is not exactly known for major acquisitions. The biggest it has spent so far was when it purchased online shoe retailer Zappos for $850 million in 2009. The Twitch buyout, which will give Amazon a video platform with more than 55 million viewers and 15 billion minutes of gaming content, is expected to give Amazon an edge not just in the gaming industry but in the bigger, broader video-sharing realm.
"We think that Amazon is investing here in Internet infrastructure and something more than gaming media," says Ethan Kurzweil of Bessemer Ventures Partners, which has an investment in Twitch. "What Twitch has really built here is a video-based community around any activity... You have to ask Amazon what kinds of plans they have for that kind of investment, but if you look at technical assets in the company it goes beyond the gaming vertical."
However, Twitch CEO Emmett Shear maintains that Amazon will not meddle in its affairs and will allow Twitch to retain the same brand, vision, employees and office, which is part of the reason why Twitch chose Amazon, among a number of unnamed suitors bidding for the gaming video platform.
So what happens to Google, which was supposedly in negotiations to acquire Twitch for $1 billion? Persons familiar with the matter say Google balked at the potential regulatory hurdles. The two companies reportedly could not come to an agreement when it comes to the potential breakup fee should antitrust regulators block the deal. Google already owns YouTube, the largest video platform on the Internet. With more than 1 billion users, the 55 million users added from Twitch would hardly make a dent on YouTube, but the hugely concentrated gaming platform would give YouTube another niche to dominate.
This is the perfect time for Amazon to pounce as the online retailer looks to grow its own media empire and make itself a Web force to be reckoned with. Just last week, Amazon announced that it is adding to its roster of original television shows that can be watched through the retailer's Fire TV set-top box and will be spending another $100 million more to produce more shows this quarter. The company also took another jab at Google with the introduction of Amazon Sponsored Links and Amazon CPM Ads to rival Google's AdWords and AdSense. Amazon and Google are also battling it out for dominance in the cloud storage industry.