21 May 2014 | Team Tamar

Plot Twitch: Youtube set for $1 billion purchase

TwitchReports this weekend suggested Youtube are on the verge of acquiring online game streaming site Twitch. Estimated at a staggering $1 billion, the deal would be similar to Google’s purchase of Youtube in 2006. So what is Twitch, and where does such valuation come from?

45 million monthly users..and Pokemons!

Established in 2011 as Twitch.tv, Twitch is a live game streaming website, which means users can record their own sessions or watch others play live. Whilst this may sound dull on appearance, it is a very effective way to interact with fellow gamers, as well as a great platform for tutorials.

It is currently estimated that Twitch has 45 million monthly users, and around 12 billion minutes of live streaming are being watched on the site every month. In fact, a recent study claims that around 1.35% of all US internet traffic comes from Twitch, a staggering figure up from 0.46% 6 months ago.

Twitch came to attention recently when an online game of Game Boy classic Pokemon Red was played by 150,000 players at once (see video below). Completed by March, the ‘social experiment’ was a great success, generating so much attention players have now moved on to completing Pokemon Crystal.

Revenue

Twitch generates revenue from several channels. As well as regular on site advertising banners, the site allows video advertising like Youtube.

In addition, Twitch provides several levels of monthly subscriptions, from the standard $4.99 membership to the recently introduced ‘Turbo’ subscription, at $8.99 a month. Hence, unlike free services like WhatsApp recently purchased for significant amounts of money without clear, regular sources of revenue,¬†Twitch seems a solid business model.

Finally, its recent integration to both Xbox One and Playstation 4 means that Twitch will be able to attract users from all new generation video gaming consoles.

Competitors

As the world’s leading game streaming platform online, Twitch would be a great addition to Youtube. As well as providing significant revenue, the deal would eliminate Youtube’s main competitors for gaming videos, which is arguably the second most popular source of traffic on Youtube after music videos.

Whilst the $1 billion figure seems excessive, it’s in line with the other recent purchases by major digital giants such as Google and Facebook..

Team Tamar