Amazon takes on YouTube with Twitch acquisition

Amazon is looking to expand its video ad business and take on YouTube with the purchase of video streaming site Twitch for $970m (£585m). 

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Twitch allows users to broadcast and watch people play videogames and has developed technology that lets millions of people stream video of live events such as games tournaments and music concerts. In July, it had 55 million unique viewers watching more than 55 billion minutes of content from 1 million broadcasters including individual gamers, media outlets and e-sport organisations.

Amazon has made a push into gaming, increasing staff at its gaming studios and launching its own titles. Its Fire TV set-top box also works as a games console.

Jeff Bezos, Amazon’s chief executive, says the acquisition will help his company learn more about gaming and build new services from the gaming community.

The acquisition will also help boost Amazon’s ad revenues. Twitch generates revenues via subscriptions and ad revenues and has a young male audience that particularly appeals to advertisers.

Amazon launched its video streaming site in 2006 but initially focused on subscription revenues, offering users of its Prime service access to TV shows and movies without ads. That put it more in competition with services such as Netflix.

However, Amazon has expanded its video ad business in the past few months. It has started showing pre-roll ads against pilot episodes of its original programming and is offering access to older shows for free if viewers are willing to watch ads throughout.

It has also introduced an ad-supported service that shows content from networks including Vevo and Maker Studios.

EMarketer estimates that Amazon made $835m in ad revenues globally in 2013 with the majority of that coming from search ads. Its ad revenues are expected to top $1bn this year.

In comparison, YouTube’s ad revenues reached $5.6bn last year, according to the research firm.

YouTube-owner Google had reportedly also been in talks to buy Twitch, as had Yahoo. Twitch boss Emmett Shear says Twitch will retain its independence following the acquisition.

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