Why Twitch should boost Amazon’s business in several key ways

Google and Yahoo tried to acquire Twitch before Amazon

Talks about a Twitch acquisition have been making the rounds for a few months now. In May this year, Variety first reported that Google (GOOG)(GOOGL) reached a preliminary agreement to buy Twitch for $1 billion. Then Business Insider reported that Yahoo (YHOO) had also made an offer to buy Twitch. But these deals fell through and Amazon (AMZN) ultimately acquired Twitch for $970 million.

Twitch drives the highest live video streaming volume in the U.S.

The reason why Twitch has been an attractive acquisition for these big companies is the growth potential that it has. According to a report from Qwilt and as the chart above shows, Twitch drives the highest live video streaming volume in the U.S. Its share in this segment is about 44%. Another popular player, ESPN, ranks fifth in this segment. ESPN is owned as a joint venture between Disney (DIS) and Hearst Corporation.

Twitch could help Amazon in a number of ways

Firstly, Twitch should help Amazon drive Internet traffic and potentially boost its Prime membership program. Amazon could offer ad-free access on Twitch to its Prime members, as it’s currently doing with its original video content. Amazon offers ad-free video content to its Prime users for free.

Secondly, Twitch should help Amazon drive its video ad business. Twitch has high user engagements levels and commands high ad rates from advertisers. Plus, the video ad market has strong growth potential, which Amazon can leverage through Twitch.

Thirdly, Twitch could help Amazon drive its Fire TV set-top box business. Amazon could force Twitch gamers to start broadcasting their video games through Fire TV instead of Xbox and PlayStation.

All in all, Twitch’s acquisition for under $1 billion looks like a good bet on Amazon’s part.