Once again proving the equity power of teenagers playing videogames, Google (NASDAQ: GOOG) will pay about $1 billion to acquire San Francisco-based online programming platform Twitch.
The deal, speculated about for months and confirmed via anonymous sourcing by VentureBeat, was executed by Google's YouTube division. The purchase will deliver the world's biggest online video platform acumen it doesn't yet have--the wherewithal to regularly stream live programming and the ability to create a subscription-based programming business.
Twitch has built an audience of around 50 million monthly active users by enabling PC, Xbox and PlayStation gamers to show off their talents in real time. Twitch also distributes recorded programming from CBS Interactive's GameSpot, Joystiq and Destructoid. According to technology company Sandvine, which measures broadband usage, Twitch represented 1.35 percent of all Internet traffic in March.
As noted by Variety, which first reported YouTube's dalliances with Twitch over the spring, YouTube's own attempts to introduce live streaming of events have enjoyed limited success. YouTube delivers more than 6 billion hours of video per month to 1 billion users worldwide, but most of those videos are previously produced and uploaded.
With Twitch, YouTube could extend live streaming to a number of areas, including multichannel network partners like Machinima which also focus on the male-targeted gaming segment.
And in addition to advertising, Twitch generates revenue through premium subscription fees paid by 300,000 members. YouTube, which generates almost all of its revenue from advertising, is looking to diversify its revenue streams.
Twitch was founded in June 2011 by Justin Kan and Emmet Shear, who had already established success with Justin.tv, one of the first sites to host live streaming.
The company has raised around $35 million from investors including Bessemer Venture Partners, Alsop Louie Partners, WestSummit Capital, Take-Two Interactive Software, Thrive Capital and Draper Associates.
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