Why acquiring Twitch would have made sense for Google

Market Realist

Must-know: Amazon buys Twitch to take on Netflix and Google (Part 3 of 6)

(Continued from Part 2)

Google and Twitch were in advanced stages of acquisition talk

In the previous parts of this series, we discussed why Twitch agreed to sell itself to Amazon (AMZN). But Twitch was an attractive acquisition target for many companies.

According to a report from the Wall Street Journal, Google (GOOG)(GOOGL) and Yahoo (YHOO) were also interested in buying Twitch. In fact, the report mentions that acquisition talks between Google and Twitch were in advanced stages before this deal was called off, as Google was concerned about the antitrust issues that could have arisen after the announcement of the acquisition.

Twitch would have complemented Google’s YouTube business perfectly

It would have made perfect sense for Google to acquire Twitch because it would have complemented its YouTube business.

According to a report from eMarketer and as the chart above shows, YouTube’s net U.S. video ad revenues accounted for 21% of total U.S. video ad revenues in 2013. This number could increase to 23% by 2015. More importantly, the overall U.S. video ad market could grow fast, at 41% this year. Twitch would have given Google the opportunity to leverage the fast growth expected of the video ad market and make YouTube an even stronger business.

Google could have used Twitch’s technology to broadcast live video games through YouTube. This would have given YouTube higher ad rates, as video games tend to carry higher engagement levels. A Twitch acquisition would not only have benefited Google’s investors but also helped exchange-traded funds (or ETFs) like the DJ Internet Index Fund (FDN), which has high exposure to Google.

Continue to Part 4

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