What will Amazon do with Twitch?

What will Amazon do with Twitch?

Well that was a surprise wasn't it? We'd all pretty much written off Twitch as a Google property that was about to be folded into the copyright pandering world of Youtube, but with the search giant's worries over anti-trust issues, it backed out from a potential billion dollar deal, giving Amazon its chance to step in and make the purchase.

Of course it's no wonder that a company the size of Amazon would be interested in Twitch. It's second only to Youtube in terms of streaming dominance and it certainly holds the top spot when it comes to live streaming and specifically gaming. However what Amazon will actually do with Twitch is a much more difficult to answer question. For Google it was somewhat obvious, but why did Amazon buy it?

The first and most likely reason, was to stop someone else doing the same. Yes Google had its problems, but those could potentially have been worked out in the long term. Apple might have stepped in at some point to make an offer or perhaps Facebook could have thrown money at Twitch like it did with Oculus VR. Combining Twitch with virtual reality would have been an interesting concept, but now none of those companies will ever get a look in as Twitch is firmly under the wing of the retail giant.

Game streaming isn't necessarily something Amazon has much experience with of course, but it does have a big retail platform that it can promote through Twitch, which with its millions of viewers, is hardly a poor place to show off where game downloads can be purchased. Likewise when new hardware is released, Amazon can fill the service with ads for them and offer discounts to Twitch users, meaning the entire site could be used as one big landing page for Amazon products.

This is unlikely to happen right away, as nothing would drive Twitch fans to one of its competitors faster than a sudden slew of ads – if the audio muting hasn't done it already – but in the future, expect Amazon product adverts and potentially even product placement to feature in streams.

The retail giant will of course be selling ad space to other companies too and has in the past discussed its own interest in expanding its operations into digital advertising, which is an understandably lucrative business. Having a platform like Twitch to launch it on is hardly a bad place to start.

Amazon also dipped its toes into gaming in a big way in the past few years, having started its own gaming studio back in 2012 to produce titles for the Amazon Fire platforms and bought up the 75-man Double Helix developer earlier this year. It wouldn't be much of a surprise to see any games that come out of either game studio be featured in Twitch streams and adverts before long.

However Amazon won't just be looking to exploit Twitch to sell its other services, it can also help push Twitch streams to reach bigger audiences than ever. Making an official application for Kindle Fire tablets, Amazon Fire TV set top boxes and promoting it through the Amazon Prime service (perhaps giving those with a subscription an ad-free experience) could increase Twitch's viewer numbers dramatically.

On top of live streams though, it's Twitch incredibly dense archive of videos on demand that Amazon will be able to leverage that it is perhaps most excited about. Amazon Prime Instant Video is something that the retailer has been pushing for a while now and chances are Twitch will factor into that one way or another.

Ultimately, this Twitch purchase feels like a way for Amazon to move away from the physical world. As it stands, its main revenue comes from retail content with hardware sales giving it a nice bump. But as with every physical good, margins are low. Digital content can be sold over and over forever without any expenditure beyond the initial.

Apple knows this, which is why it's been pushing so hard for digital content over the past few years and Amazon has watched it happen. Now it's trying to emulate it. Amazon wants to sell you its own products, through its own adverts, on its own devices and bespoke platforms, through specialist subscription services it runs.

Twitch factors into that perfectly, making it a smart purchase and one that could come back to haunt the other tech giants that could have swooped in, over the next few years.