Google’s YouTube is close to securing a $1 billion buyout of live streaming service Twitch, and has been chosen as the best suitor over many competing companies such as Microsoft.
Twitch is said to believe that Google can help the company become what it wants to be — the definitive platform for watching and streaming live video gaming. The company raised $20 million from investors in 2013 and is likely to turn a profit this year. But capital isn’t enough to allow Twitch to scale its technology and infrastructure to keep pace with its growth. It had plenty of offers from venture capitalists looking to give it more money, said the person, but what it needs is a partner that can help it handle massive amounts of live and user-generated video on a global scale.
Despite not being well known beyond gaming circles, Twitch already pushes more traffic during its peak hours than titans like Facebook and Amazon. “To be quite honest, we can’t keep up with the growth,” Twitch marketing VP Matt DiPietro has stated. Microsoft and others have made serious approaches to Twitch, but YouTube was deemed the better fit. It’s unlikely that the gamer-friendly Twitch would have wanted any part of a deal that would tie the service to Xbox, as it’s embedded in Sony’s rival PlayStation console as well.
YouTube has been interested in testing the game-streaming waters by introducing an API at last year’s Game Developers Conference, but the effort never got much traction in the community — it only opened live streaming capability to all in December. Twitch, meanwhile, has huge mindshare among the video game audience, as evidenced by its role as the streaming platform for all major e-sports tournaments, giving it command over a lucrative advertising demographic. The proposed deal can be compared to Facebook’s $1 billion acquisition of Instagram back in 2012, where an established giant snapped up a fast-growing startup it saw as a potential competitive threat.