Amazon's $970 million purchase of Twitch makes so much sense now -- it's all about the cloud

Amazon raised a lot of eyebrows when it bought the mega-popular Twitch game-streaming service for $970 million in August 2014.

Why Amazon would spend so much cash for Twitch was a real head-scratcher — live game broadcasts via the Internet isn’t exactly what you would call core to Amazon’s retail business.

It was only today, walking around the Game Developers Conference, that the penny really and truly dropped for me.

Amazon’s Twitch buy was an investment in bolstering Amazon Web Services, the company’s $7-billion-plus cloud computing juggernaut.

The Game Developers Conference is the annual gathering of the game development industry, which has recently expanded to include virtual reality. Other events like E3 are the big media spectacles, but GDC is where business gets done.

Just walking around the GDC show floor, it quickly became apparent that the biggest companies in tech all see gaming as a massive opportunity.

IBM’s SoftLayer hosting subsidiary is here exhibiting, as is Google with Google Cloud Platform and Chromecast. Microsoft is here promoting its Xbox and Windows 10 businesses. Facebook is actually here twice when you count its subsidiary Oculus VR having its own separate booth.

And Amazon is here, mainly to promote AWS Lumberyard, its new service for helping developers build games and host them with the Amazon Web Services cloud. You may have heard about Lumberyard’s terms of service, which say that you can only get out of a contract in the event of a zombie apocalypse.

And right next to the Amazon Booth? A Twitch booth, boasting “Twitch Dev Success.”

See, Lumberyard and Twitch itself both offer tools to help developers include the game broadcasting service straight into their apps. It means that game developers can include new tools that let players interact directly with the strangers watching them play, and vice versa.

This is intensely desirable for developers: Twitch has 100 million users and counting, with over 7.5 billion minutes of video watched. Getting that massive community engaged with a game can mean the difference between success and failure.

With Facebook, Google, Microsoft, and the like all gunning to get developers to host their games in their clouds, Twitch could be a huge competitive advantage for Amazon Web Services — Microsoft may have the Xbox, but it doesn’t own the massive force multiplier that is Twitch’s rabid fans.

And with Amazon Web Services itself facing intense competitive pressure from Microsoft Azure, a deep integration with Twitch becomes a strategic move to attract as many developers from the lucrative games market as it can.

Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.

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