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Google's YouTube Gaming Could Give Amazon's a Run for Its Money

By Chris Kuiper, CFA – Sep 9, 2015 at 7:06AM

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Google's latest YouTube venture does some things better than, but will that be enough to get gamers to switch?

Google (GOOGL -7.68%) recently launched its own home-brewed video game streaming platform on YouTube, appropriately called YouTube Gaming. The move was a direct shot at incumbent, which is owned by (AMZN -2.02%). Initial impressions show YouTube Gaming is impressive in its features and performance, but will it be enough to lure away Twitch broadcasters and viewers?

YouTube gaming is looking good
While YouTube Gaming is still new, there are already a number of features that appear to be better than what Twitch offers. Perhaps the most-welcomed feature is the ability to "rewind" a live broadcast. Users especially like this idea for tournaments, so they can be assured not to miss any of the action, and if they start late, they can easily jump through the breaks and commentary, much like a regular sports game.

The second improvement is the performance of the video player itself. Twitch runs on Adobe Flash, which uses a lot of bandwidth and has the reputation of stuttering and crashing, whereas Google uses HTML5. While YouTube had problems streaming the gaming tournament known as The International in 2014, it brought its A-game against Twitch this past year, with nearly flawless performance of high-definition 1080p resolution and 60 frames per second.

Finally, YouTube Gaming offers a slick interface that organizes content by game and what is trending. It's basically YouTube, but with a wrapper that allows for better organization of content. YouTube also offers broadcasters comprehensive analytics, such as the average view duration, viewers' engagement with videos, the demographics of viewers, and what sites they're coming from.

Chicken-or-egg paradox
Early feedback makes it appear that Google's service is just as good as, if not better than, Twitch, but are these features enough to entice broadcasters and viewers to switch? Google will face the same problem as any other network or media platform -- viewers want to go where the best broadcasters are, and the best broadcasters want to go where the viewers and subscribers are.

Currently, Twitch is dominating in terms of sheer numbers. In 2013, tech-news site The Verge called Twitch "an omnipresent monopoly." That status hasn't changed in the past two years, as Twitch has over 100 million unique viewers per month (for comparison, Yelp has 85 million) and hosts 1.5 million broadcasters. And while Twitch had millions of viewers tuning into The International, YouTube had only a few hundred thousand at most.

What will most likely be the biggest factor will be the money -- which platform will offer the best ad-sharing and revenue-sharing deals to broadcasters. Twitch already has a leg up as it offers a partnership program with popular broadcasters, sharing the revenue of paying subscribers. But YouTube could have some leverage, as many of the broadcasters already use YouTube to archive their gaming footage, making money off YouTube ads in the traditional sense as well. If YouTube can offer a more attractive bundling of revenue for streaming and archived videos, making it a one-stop shop, it could be tempting for broadcasters to switch over.

Competition is good
People who follow these companies may remember that back in May 2014 Google reportedly had a preliminary deal to purchase Twitch for $1 billion, but the deal apparently fell through and Amazon scooped it up. While buying Twitch seemed like a great idea at the time, it's now looking even better that Google is going it alone.

It could also be good for Twitch and Amazon as well. Every monopoly quickly gives competitors incentive to build a competing product, which in turn forces the incumbent to improve or evolve. It also isn't a zero-sum game, as the e-sport pie is already exploding and expected to grow even more over the next few years.

The e-sport industry is already worth an estimated $194 million per year and is expected to double by 2017, according to research firm Newzoo. Last year, some 205 million people watched or played e-sports, while the NFL reportedly has a global fan base of just 151 million.

It's too early to tell whether gamers will jump ship from Twitch to YouTube, and both services are still fairly small for behemoths Google and Amazon. What is more clear is that e-sport isn't going away anytime soon.

Chris Kuiper has no position in any stocks mentioned. The Motley Fool owns and recommends and Google (A shares). The Motley Fool recommends Adobe Systems and Yelp. We Fools may not 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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