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Why Twitch could be the best $1 billion Google ever spends

Why Twitch could be the best $1 billion Google ever spends


Forget search, Google wants to monopolize your online video

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My Juggernaut was surrounded by enemies on all sides. In dire straits after losing most of his allies, he was being targeted for a Walrus Punch to complete the kill. But then I Omnislashed. Two dead enemies later, my digital hero was retreating to base with a sliver of health remaining, while my real-world fist was flying into the air with the same passion as you’ll soon be seeing on Wimbledon’s tennis courts. I was playing Dota 2 and wishing that the whole world could be around to appreciate my gaming triumph.

The desire to share that sort of powerful experience is at the root of the exponential growth in live game streaming over the past few years. Everything from recreational play to professional e-sports tournaments are now being broadcast live over the internet, with last year’s League of Legends season three final attracting 32 million viewers, 8.5 million of whom were watching simultaneously. That’s the equivalent of the entire population of New York City glued to a stream of mythical team-based warfare.

Twitch, the online video service that Google looks poised to acquire for $1 billion, is where this entire game-streaming revolution is happening. In buying Twitch, Google wouldn’t be getting a segment of the e-sports streaming market, it’d be getting all of it. Every big e-sports competition is streamed on Twitch. The company is now the official streaming partner for the E3 gaming expo, and recently Xbox One gamers joined their PS4 and PC brethren in being able to stream their exploits to its service.

"We can’t keep up with the growth, but that’s a good problem to have."

Twitch got its start as a subset of video sharing site, but in 2011 was spun off on its own because it was quickly outgrowing its parent website. The subsequent years have only seen that growth accelerate: the 3.2 million unique monthly users at the start of turned to 20 million in 2012 and 45 million last year. With 6 million broadcasts and over 12 billion minutes watched every month, Twitch admits that it’s gotten to the point where it "can’t keep up with the growth." Marketing VP Matt DiPietro describes this as "a good problem to have," but it’s still a problem. The most serious competitor to Twitch,, collapsed under the pressure of extraordinary demand from gamers, so Google’s intervention will be necessary for the game streaming service to continue to flourish. Plus it stands to help remedy a couple of longstanding issues for the Mountain View company as well.

YouTube is the undisputed champion of user-generated online video. Its 6 billion hours of monthly video consumption is 30 times greater than the amount Twitch is struggling to cope with. But the vast majority of that time is spent watching pre-recorded video. Google’s efforts at turning YouTube into a live-streaming destination have been fruitless so far, highlighted by the universally maligned YouTube Music Awards. Google and YouTube just aren’t cool in the eyes of the live-streaming community. They’re not the place where famed gamers stream their matches and build their reputations. Twitch is.

Combining YouTube and Twitch into one would be the ultimate synergy nuke

The combined dominance of YouTube and Twitch instantly sucks the air out of the room as far as any potential competitors are concerned: if you care about your video’s popularity, you’d be posting it to one of Google’s services. With Twitch, Google’s acquiring access to the fiercely loyal and passionate fan communities of e-sports, instantly improving its cachet among some of the internet’s most active users. As our own Paul Miller noted last year, StarCraft is more than a game to its players, it’s a lifestyle. When you’re not playing it, you’re thinking about playing it or watching others in order to pick up new insights and strategies. For Twitch, that’s resulted in an average of 106 minutes watched per user per day, or about 50 hours each month.

That sort of engaged consumer is much more valuable to advertisers than someone watching, say, the afternoon news bulletin on CNN. Catching people in the midst of their passion and emotion is the reason why the most expensive adverts in the world are broadcast during the guacamole-fueled frenzy of the Super Bowl. Gaining the confidence of Twitch’s committed audience would drive more advertisers to YouTube, leading to higher revenues and making it even more attractive for streamers to join in. It’s a virtuous circle for Google, the advertisers, and the increasing number of people who’ll be able to make a living from live broadcasts.

There’s an outside chance that seeking shelter under the Google umbrella will alienate Twitch’s most loyal and active users. Chat is an underappreciated aspect of the overall service’s appeal, with 61 percent of stream watchers participating in it. It’s also an untamed meme-birthing pool full of people with memorable usernames like poopfeast420. What happens when poopfeast is revealed to be 14-year-old Geoffrey Sanchez? Google’s awkward management of YouTube comments has people already worried about facing messages like "you must sign in to your Google+ account in order to access Twitch."

The only way to screw this up would be to get Google+ involved

Less hypothetical will be the issue of copyright. Many of the most prominent Twitch streamers — guys like Destiny, IdrA, Dragon, and Grubby — play their games against a background of unlicensed music, which would become a major point of contention should Google complete its acquisition. Small companies with limited budgets, as YouTube was before Google bought it, aren’t particularly attractive targets for copyright infringement claims. But as soon as Google and YouTube had completed their $1.65 billion deal, Viacom was taking the newly rich company to court seeking $1 billion in damages. That protracted legal spat, which started in 2007, lasted until earlier this year and could be recreated with a Twitch takeover. Then there’s the crowd-playing phenomenon of Twitch Plays Pokemon, which endeared Twitch to its community, but stands in stark contrast to Google’s cooperation with Nintendo on weeding out gameplay videos from YouTube. It's logical to expect Google's approach to copyright to prevail over Twitch's carefree attitude.

Aside from the necessary adaptations to operating as part of a large corporate entity, Twitch already works like a Google company. It provides robust infrastructure for making fun things happen on the internet and profits from its popularity by selling ads. For all of Google’s billions — a billion Android activations, a billion Gmail app installations, and a billion YouTube viewers — the core of its business is all about advertising distribution. Twitch promises to bring in more viewers, from more devices, engaging more enthusiastically with the content in front of them.

The Xbox and PlayStation streaming deals that Twitch secured last year make it incredibly valuable in extending Google’s reach into the realm of gaming. They also pretty much guaranteed that Twitch would have to sell up in order to keep pace with user demand. Twitch apparently chose Google over offers from Microsoft and others because of the immense scale and resources already available to YouTube. It’s the most practical solution and it makes perfect sense for both companies. What it doesn’t do is leave much room for competition.

The transformative potential of a Google-owned Twitch is simple: user-generated video would have a single home on the web, whether recorded in advance or streamed live. YouTube’s sole weakness would be addressed comprehensively, and streaming competitors like Ustream and Livestream would find themselves gradually squeezed out of a market dominated by an omnipresent juggernaut. e-sports are the predominant streaming attraction today, but Twitch would also give Google the precedent, arsenal, and credibility to pursue the streaming of non-gaming live events as well.