Google's (GOOGL 1.42%) (GOOG 1.43%) shares rose yesterday following news that the company is in advanced talks to make a $1 billion purchase of Twitch, a live-streaming online video service that caters primarily to the video gaming community. With over 45 million monthly active users -- who tend to watch for hours on end -- Twitch would bring Google's YouTube segment the sort of highly engaged viewer base that advertisers will pay dearly to reach.
Founded in 2011 and accounting for as much as 44% of all U.S. live-streaming traffic in a given week, Twitch represents a logical next-step in Google's ongoing efforts to curate -- and monetize -- online-born content on its YouTube platform.
It also represents a significant missed opportunity for Microsoft, whose attempts to woo Twitch -- and align the service more closely with its flagship Xbox video game console -- apparently fell on deaf ears.
Watch the video below as Motley Fool tech analyst Lyons George discusses why Microsoft (MSFT 0.46%) comes out on bottom (and why a company other than Google could come out on top) if this 10-figure story sticks.
A full transcript follows the video.
Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.
Lyons George: Hi, I'm Lyons George with The Motley Fool, here to talk about one company that's coming out on top, and one that's not, in Google's most recent 10-figure bet.
This weekend's news cycle was heavy with the development that Google's YouTube division is in talks to acquire Twitch, a live-streaming video service that caters to -- and by the way, is extremely popular with -- the global video gaming community.
With just over 45 million monthly unique visitors, Twitch may not be the biggest player in its space in terms of user base, and when it comes to streaming, Netflix (NFLX -0.08%) still reigns king in that arena.
What makes this a smart choice on Google's part is less the size of the community than the strength of that community's engagement. Whereas people come to YouTube for about five to 10 minutes' worth of entertainment, Twitch users frequently watch for hours on end, making them a much more attractive group to advertise to.
You can bet that, if the deal goes through, YouTube will be brutally efficient in turning that engagement into dollars and cents.
Left out in the cold, however, will most likely be the most prominent of Twitch's former suitors, Microsoft. According to sources very familiar with the matter, Microsoft has made serious, repeated advances at Twitch in the recent past, only to find itself rebuffed.
While neither company has commented on the nature of these talks, it's widely believed that Microsoft's intentions would have been to orient the service around its Xbox platform, thereby making it partisan in a gaming community that champions platform neutrality -- so there's the loser.
Who's the hidden winner here?
Well, other than Google, Take-Two Interactive (TTWO -0.46%) -- the video game developer with the foresight to invest in Twitch, back in September. While the exact numbers aren't public, some analysts are saying that if the $1 billion price tag sticks here, Take-Two should recognize a significant one-time gain off the deal.
If you're interested in keeping up with this deal, or all the other deals happening in the Valley, be sure to visit Fool.com for up-to-the-minute tech coverage. I'm Lyons George with The Motley Fool. Thanks for watching, and Fool on!
