Why Google's Billion-Dollar Bet on Twitch.tv Looks Brilliant

Three Fools take to the Internet to consider the merits of Google acquiring Twitch.tv.

May 24, 2014 at 1:30PM

Twitch

More than 45 million tune in each month to watch gameplay on twitch.tv. Credit: Twitch.tv.

Variety cites unnamed sources who say YouTube has a prelimiary agreement to acquire Twitch.tv for $1 billion in cash. Should Google's (NASDAQ:GOOGL)(NASDAQ:GOOG) investors cheer the deal? Or is the search king overpaying for what amounts to yet another video game channel?

Guest host Alison Southwick puts these questions to Fool analysts Nathan Alderman and Tim Beyers in this week's episode of 1-Up on Wall Street, The Motley Fool's Web show in which we talk about the big-money names behind your favorite movies, toys, video games, comics, and more.

Nathan calls the move "brilliant," arguing that Twitch.tv, which allows gamers to broadcast in-game action live, folds neatly into Google's strategy of acquiring content it can monetize with ads. Better yet, since Twitch.tv is available to both Xbox One and PS4 players, Google gets to cash in on next-gen console gaming without developing any new hardware of its own.

But is $1 billion too much to pay for Twitch.tv? Not when you consider growth, Nathan says. Twitch.tv more than doubled its average monthly viewership to 45 million last year. GeekWire calls the site "ESPN of video games" for how the service provides live coverage of competitive video gaming. Whereas no one except for Mark Zuckerberg knows how Facebook (NASDAQ:FB) plans to cash in on its $2 billion purchase of Oculus VR, it's easy to see Google cashing in on billions of new gaming streams flowing through YouTube.

Tim agrees, noting that his youngest son already watches homemade YouTube videos of Minecraft gameplay. Twitch.tv would merely extend and enhance his viewing experience. Google, meanwhile, could offer Twitch.tv the necessary resources to make good on plans to expand coverage to mobile gameplay.

Now it's your turn to weigh in using the comments box below. Do you see Twitch.tv adding value to YouTube? Why or why not? Click the video to watch as Alison puts Nathan and Tim on the spot, and then be sure to follow us on Twitter for more segments and regular geek news updates!

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Neither Alison Southwick nor Nathan Alderman has no position in any stocks mentioned. Tim Beyers owns shares of Google (A and C class). The Motley Fool recommends Facebook and Google (A and C shares) and owns shares of Facebook, Google (A and C class), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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