NY CITY, – (StockNewsDesk) – 07/26/2014 — Google has finalized its purchase of Twitch, a website to watch live streaming of people playing video games. The deal has been rumored for months and looks to be finalized around $1 billion. Twitch was started in 2011 and has seven million daily visitors, with around 1 million of them uploading content.
In addition to Twitch’s dominance of this small but rapidly growing market segment, Twitch also has technical chops that may appeal to Google. On a modest budget, Twitch has developed an impressive, complex system designed to handle the massive traffic generated by live streaming such data heavy content.
Some have suggested that these data centers, in addition to Twitch’s devoted user base, is a motivation for Google. Another simple appeal is that in a world where the cost of live content only continues to rise, Twitch has exclusive contracts with many such events, including Comic Con, E3, and other gaming conventions.
Google is looking to expand its offering of live content, as it commands the most generous advertising dollars. The appeal of this type of content is that it must be consumed live, so there is no worry about users fast forwarding through commercials. Since the advent of the DVR, the same type of premium is put on other live content such as sports, awards shows, or election coverage.
A few years ago, it would have seemed ludicrous that video games would become a spectator sport. In fact, when Twitch started, it was met with derision by many Silicon Valley insiders, who could not fathom that this could be a big thing. Of course, the history of technology is littered with examples of success stories that started off with small niches before becoming popular.
Twitch was an offshoot of Justin.TV, Yale graduate and Silicon Valley entrepreneur, Justin Kan’s startup that allowed people to live stream whatever they wanted online. Sometimes it was something momentous, like a wedding for family members abroad who could not attend, other times it was something mundane, like someone doing laundry and preparing a meal.
However, Kan noticed that video game streaming was a booming niche within his site. The audience was growing, and would have the patience to sit for hours. He decided to pivot away from the Justin.TV concept to focus on a site whose specialty would be streaming solely video games. Obviously, this recent purchase by Google validates the concept, that a real market and opportunity lays beneath this subculture.
Within a few short years, video game competitions have grown from a tiny subculture to being covered on sports channels like ESPN. The the recent DOTA World Championships in Seattle filled an arena with over 50,000 people, outdrawing established sports like soccer, baseball, hockey. Additionally, the total prize purse for DOTA was over 0 million. In the US, video gaming as a sport is a relativel new concept, but in Asian countries, like Japan or Korea, top video game players are as popular and well compensated as their top Olympic and professional athletes.
Basically, Twitch is positioned perfectly for this massively growing trend, and Google is rewarding Kan’s foresight. Live streaming games have become routine for gamers, with many building up massive audiences. Popular games can spawn off entire websites and forums devoted to them and dissecting their gameplay.
Youtube also has massive amounts of uploaded game playing on its website, but this is one of the few categories in which Twitch dominates Youtube. Despite this, the two companies have never really been competitor In fact, both companies have cooperated in the past, with Youtube hel to ing drive traff to witch. This successful cooperation planted the seeds that an acquisition would be a good fit for both partners.
Although this is a big deal for Twitch, and even for Youtube, overall a deal, this size is a drop in the bucket Google,ogle and it has no material impact on the stock price.
Here is a six month daily chart of Google:
The six month chart is a bit worrying for the bulls, as it approaches its all time highs set earlier in the year. There is the possibility of a double top formation.
Here is a three year weekly chart:
This chart also shows the incredible ascent of Google, as well as the possible double top formation. Someone bearish on Google could also find a low risk entry with a stop loss near the old highs.