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Amazon is buying videogame streaming site Twitch for more than $1 billion to edge past Netflix and Youtube in a race for younger viewers, according to a source.
Google had been in talks to acquire the company, but that deal died, according to the source. Amazon then entered the picture and completed what is one of its biggest acquisitions to date, this person said.
For the uninitiated, Twitch is a platform for making and talking about videos of videogame play. About a million users a month record themselves playing videogames, while the rest — pegged at 50 million unique viewers in July — watch and comment on the videos. In January, Twitch reported that 58 percent of its viewers spent more than 20 hours per week on the site. It originated as an offshoot of a general-purpose live video site, Justin.tv, but in time surpassed its original home; earlier this month, Twitch said Justin.tv would shut down.
Amazon’s past video efforts have been more like Netflix than Twitch, with a library of streaming movies, TV shows and original series that have thus far failed to mount much of a challenge to Netflix. Bringing the videogame streaming site into the fold arms it with a totally new vertical of YouTube-style user-generated content, since anyone is able to broadcast his or her games to Twitch for free.
One big question: Will Amazon let Twitch operate as a standalone business as Facebook did with Instagram and as Google, according to a source, had contemplated doing with Twitch? Or will Amazon try to integrate it into its current video business in some way?
Either way, the Seattle-based online retailer likely has its eyes on the site’s video advertising potential, since it mostly attracts young men, who are an attractive but hard-to-reach shopper demographic. Amazon has been laying the foundation for a large video ad business, partnering with a technology partner earlier this year to start showing ads in front of a small selection of videos on its site. But user generated content, like the type that dominates Twitch, has historically been harder to monetize than highly-produced video. That means Amazon investors shouldn’t expect a significant return on investment anytime soon.
Currently, a small percentage of popular Twitch broadcasters are invited to a “partner” program that lets them share in the revenue from advertisements that run against their videos. Twitch also allows some partners to charge for paid subscriptions, something Amazon knows something about; its revenue-driving $100/year Prime delivery subscriptions include streaming access to a chunk of its video content for free.
A larger percentage of Twitch broadcasters also unofficially ask for donations and subscriptions via PayPal.
Another big question for Amazon will be if and how it intends to moderate the new onslaught of user-generated content. Twitch recently came under fire for abruptly announcing that it would mute portions of certain videos that have copyrighted music playing in the background.
To date, Twitch had raised $35 million in venture funding, including a $20 million round last September.
The Information first reported news of the acquisition talks earlier on Monday.
Jason Del Rey contributed reporting.
This article originally appeared on Recode.net.
