Why Amazon’s Deal With Twitch Makes Sense

Mobile and streaming video are priorities for both

While it may have come out of left field, analysts believe that the Amazon-Twitch acquisition deal—worth a princely sum of $970 million—sounds like a perfect match.

There's no denying that Google would have benefited from purchasing the gaming-themed video network, said Lewis Ward, IDC's consumer markets research director. But, Amazon and Twitch have complementary goals, including a push toward trying to develop for mobile and an emphasis on streaming video. 

Amazon has been looking for content to bolster Kindle Fire and Amazon Fire Phone sales, and Twitch has been hungry to tap into the mobile gaming market. "I wouldn't be surprised over time to see Twitch assets get some extra bells and whistles that run on the Kindle OS, Fire Phone and Amazon Fire TV," Ward explained.

In addition, the Seattle-based e-commerce giant has already proven to be a leader in video content with its Prime service, and demonstrated that it could stream games from the cloud with very little lag. While YouTube is the clear leader in user-generated videos online, Ward points out that Google doesn't have a massive audience for live-streamed content. He hypothesizes that Twitch may have been concerned about those issues when it decided to instead go with Amazon.

Even though Twitch gets the huge payday and millions of new eyeballs, there's huge upsides for Amazon. Simply blocking Google from purchasing Twitch prevents it from becoming the complete dominant force in online video.

It also gives Amazon its first foray into user-generated video content, and a massive presence at that, considering Twitch has more than 1 billion users. As recently as June, it had 55 million unique visitors and more than 15 billion minutes of video viewed.

Amazon's Pick-Up Is 'Almost Like an Alien Discovery'

There's another bonus to inheriting that gigantic audience: It's mostly millennial. While the Kindle Fire had done well in gaming, its main demographic is adult females—which is not exactly Twitch's young male target.

Altimeter analyst Brian Solis pointed out that the move solidifies Amazon's play to target the coveted youth that find themselves at home watching videos on YouTube and clips on Vine. "My hunch is that they're buying Twitch to pursue the younger generation, this sort of new digital audience where the second screen for every day consumers is actually the first screen," he said.

Ward also argues that since e-sports has a huge global community, it will also bolster Amazon's advertising network across the world. In addition, Twitch boasts a 90-plus percent ad completion rate compared to the industry average of less than 50 percent, per mobile ad serving and analytics company Celtra. Solis believes that those facts, with the added bonus of the amounts of data it will be able to glean from Twitch's users, could make the e-commerce outlet a dangerous force in the ad space. 

"We're going to see insight into a mysterious consumer, one that I think is counterintuitive to the traditional consumer that brands and advertisers tried to reach. It’s almost like it's an alien discovery," he said.