Google eyeing Twitch acquisition for $1 billion: How it will fit in to YouTube

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Apart from building new products, technology giants are busy acquiring startups and newer talent. Google is mulling over yet another acquisition this month. It is said to be in talks with Twitch, a video streaming service and the deal is expected to be sealed for over $1 billion.

What is Twitch?
Twitch is a video streaming service that lets gamers around the world connect by letting them broadcast gameplay videos, watch these braodcasts, and chat from wherever they play. Yes, it lets you watch others play a video game live, too, which has made some gamers celebrities in the Twitch circuit.  Though, it may sound odd, the concept has a vast following, and its popularity has rocketed since 2011.

Twitch is currently known to have over a million unique users broadcasting every month, and during peak hours, its traffic rivals and sometimes surpasses even Google. Twitch is a native app in both the PS4 and Xbox One consoles, both of which have sold over 12 million units so far, so Google already has a big user base to tap into.

Twitch.tv was launched in June 2011 by Justin.tv co-founders Justin Kan and Emmett Shear as a subsidiary of Justin.tv, focusing on gaming-related content. It was built only when the founders noticed that the site’s gaming channels managed to attract significantly large numbers. By 2014, Twitch grew so huge that the parent company was rebranded as Twitch Interactive, reports Techcrunch. Twitch has managed to raise $35M since it became independent.

Why is Google buying it?
The answer is simple:  YouTube. With this acquisition, Google could bring a dedicated online video gaming section to YouTube. This move will bring Twitch’s 45 million monthly users to YouTube, and give YouTube’s non-gaming audiences a chance to get involved as well. It could also attract original gaming content from existing YouTubers for Twitch platform.

Google, which bought YouTube in 2006, has been aiming to attract advertising dollars by bringing slickly produced content to a platform that once featured mostly amateur videos. And, gaming is a bright spot in that effort. Advertisers and media companies are indeed already placing big bets on the likes of PewDiePie and others creating gaming-related content in a bid for the prime but underserved audience of 18- to 34-year-olds that devour video games.

Previous reports have been hinting that gaming could take YouTube beyond just celebrities like Justin Bieber and Rihanna. For instance, 24-year old gamer Felix Kjellberg – popularly known as PewDiePie in the gaming world – has over 25 million subscribers, which is almost double compared to Rihanna’s 12.5 million subscribers and way ahead of Bieber’s 8 million subscribers. PewDiePie has made a fortune by posting videos of him playing games alongside some commentary. He gets more than 3.8 billion views on his videos, and has made millions of dollars in advertising revenue. According to a media analysis company, he is believed to make an estimated $130,000 and over $1 million a month from ad revenue.

Not as popular as PewDiePie, there are several others drawing in smaller cheques too. For instance, a player called Matthew Varrone, 20, makes somewhere between $600 and $1,000 a month in ad revenue. Varrone’s YouTube channel “Awesomefaceprod,” now has around 20,000 subscribers. In fact, these players aren’t just driven by love for the game but also hope to make a living through playing games and posting the footage on YouTube.

Eventually, Twitch could become a big money spinner for YouTube and Google. YouTube has been slow to monetize. As traditional online advertising matures, the search giant is exploring new ad models to generate revenue. Online video advertising is considered one of the most promising sources of future growth for Internet companies. And with Twitch’s massive and highly-engaged user base, YouTube will have a lot more captivated users to shill ads to.

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