Six Pixels of Separation - The Blog
August 26, 201411:36 PM

A Twitch In Time

Admit it, you had no idea what Twitch was until Amazon bought it for one billion dollars, right?

And suddenly, I'm watching two guys do something in Minecraft, and I have no idea what they're doing because they're speaking Norwegian (and, I wouldn't have even known what language they were speaking, if it weren't for Google Translate). People are into it. I can't even follow the chat box on the right side of the screen, because it's moving too fast. That's it, I am officially out of loop. I have suddenly traipsed into the world of the uncool... those who simply don't know what's happening. It's hard to feel like this when digital marketing is everything that I do. It is my being. Helping brands and individuals better navigate and understand how all of this connected technology can make us better at business. Then, something like this happens. On a rare occasion, I will blog or speak about the power of gaming, and it's shifting landscape from game consoles to mobile devices and cloud-based platforms. Like everything else, the video game industry is as exposed to disruption as the most traditional of industries.

What, exactly, did Amazon buy?

Twitch is another fascinating corner of the Internet. We all know that video games are a multi-billion dollar industry that has rivaled the movie and music business for some time, but who knew that people watching video games online is also a billion-dollar business? Like you, I come from the era when we played video games. In the past half-decade, massive online communities have been created for people who like to sit back and simply watch others play and comment on their games. It's millions of people spending billions of minutes every month. That's what Twitch does. Twitch is live videos (think YouTube) of people playing video games. Twitch viewers usually see the screen of the person (or people) playing the game along with a Skype-like video of the player's face alongside a chat window to facilitate communication with the player. And Twitch is the eight-hundred pound gorilla of the video game watching and streaming community.

So, again, why did Amazon do this?    

There were murmurs that Google was trying to acquire the popular game streaming service a few weeks back. Then, it was announced yesterday that Amazon had won the bid for close to one billion dollars. Amazon has a history of acquiring different kinds of businesses. Some may not be able to see the direct correlation between what the world's largest online retailer is hunting for, but deals like this make perfect sense. All you have to do is go back in time. If you were selling anything prior to the Internet, the only way to let people know that you existed was through advertising and word of mouth. At the time, advertising helped brands to scale and word of mouth was important, but it was very tribal (meaning the ability for it to truly extend was laborious and complex from a geographical standpoint). Brands were never in any position to really buy the networks or the publishers. That's really what's going on here.

Step one: create content.

Step one for brands like Amazon and Netflix was to create original content, that could be used on their platform to add an aspect of originality. Amazon has devices (Kindles, tablets, Fire phones, Amazon Fire TV and more to come). Amazon has Amazon Web Services (cloud computing and servers to stores and deliver content). Amazon is building channels to push this content through (think about the movies, TV and music that you can stream or buy via Amazon). How does Amazon move further up the food chain?

Step two: buy the network. These big businesses need to report big numbers to Wall Street. Buying one new TV show, creating one new channel of distribution is not the same as buying the entire network. That's what Amazon is doing with Twitch. It's not buying a show. It's not buying a channel. It's buying the whole network. Yes, this would be like Kmart buying ABC.

What this doesn't mean.

Amazon isn't stupid. They're not going to suddenly turn Twitch into one, big affiliate link to bolster their own video game sales, but they are going to have a currently popular network to use. They will use this to augment their ever-growing media empire (Amazon Media is expected to rocket past a billion dollars in revenue this year with hints of massive growth to come on the media front), and they will use it as another asset of growth, if you consider these three staggering stats about Twitch:

  1. In one week of April, Twitch accounted for close to 44% of live video streaming traffic by volume.
  2. In February, Twitch was the fourth in peak Internet traffic in the U.S. (after Netflix, Google and Apple). Yes, it was bigger than Hulu, Amazon and Facebook.
  3. In one week in August, Twitch's viewership rivaled some cable networks during prime-time. 

Is it worth a billion?

That is the billion dollar question. Is it smart for Amazon to buy networks that have this kind of usage, attention and potential to still grow? It's hard to argue with that rationale... and it's something that many marketers who are toiling around with content marketing need to consider as well. Once the content gets good and gets credible, how do you start moving up-stream to owning the entire network. Maybe - in the not-too-distant future - brands won't be thinking about building newsrooms, as much as they will be thinking about building a true brand network.

Don't be too surprised, it's a strategy Disney has been working on for decades.

By Mitch Joel

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