Amazon Acquires Twitch
Amazon continues to explore ways to grow its digital portfolio with its acquisition of Twitch – the world’s leading streaming video platform and community for gamers. This acquisition is just one of the many pieces of the puzzle in the ongoing battle between two tech giants, Google and Amazon.
Google (YouTube) was originally slated to acquire Twitch, but negotiations fell through. Wasting no time, Amazon seized the opportunity to take this chunk of the digital landscape away from its top competitor, for a cool $970 million in cash. Amazon’s decision to buy goes beyond it just getting its hands on something Google couldn’t, Twitch opens up an array of different highly profitable opportunities for Amazon to pursue.
At first glance, this acquisition looks like a move for Amazon to bolster its streaming footprint by combining it with Prime Instant Video and Fire TV to take on YouTube, Netflix, and set-top boxes. Although the set-top box market is cluttered, Amazon set itself up to stand out amongst the other competitors by incorporating gaming capabilities along with its previous investment in its own in-house gaming studio. Amazon eventually could take on GameStop by utilizing Twitch as a one stop shop for all things gaming by allowing users to review content and simply make the purchase with one-click ordering.
Outside of streaming and video games, there are still more profitable avenues Amazon can capitalize on with this acquisition. Twitch brings with it a young demographic (18-35) of 55 million monthly unique visitors, of which 58% spend more than 20 hours per week on site. Amazon is aligning itself with a young engaging audience, which could be extremely profitable when coupled with its rich source of 1st party customer data.
Recently, Amazon announced it would soon be releasing Amazon Sponsored Links, which is similar to Google’s highly profitable AdWords. Amazon may have a long way to go to match AdWords but it has leverage over Google when it comes to its knowledge of customer preference/behavior along with its ever-growing inventory, which Google does not have access to.
One thing that always worries members of a community is ad overload (e.g. Instagram). Amazon will have to find a sweet spot to capitalize on this rich source of data and ad inventory without interrupting the user experience. With Amazon Prime, it could leverage its two-day shipping to intrigue gamers to sign up for Prime, along with removing ads from the user experience.
Amazon has many different ways to turn Twitch into a lucrative acquisition, especially through advertising. Combine an audience that spends a lot of time on site with its customer database and Amazon could turn Twitch into a gold mine. With the future launch of Sponsored Links and countless hours of video inventory, Amazon has set itself up nicely to compete with Google and has opened up many opportunities for advertisers.