Here's Why Amazon Just Paid $1 Billion For Twitch - A Site Where You Watch People Play Video Games

Amazon announced Monday it is buying Twitch, a video-streaming site for video gamers, for $US970 million in cash.

Google was reported to have acquired the site last month for a whopping $US1 billion, but early on Monday, The Information reported that someone “close to the transaction” said the site was also in talks with Amazon.

What makes Twitch such a huge business?

What The Heck Is It?

Twitch ceo emmett shearDavid Paul Morris/GettyTwitch CEO Emmett Shear.

Twitch launched in 2011 as a branch of Justin.tv, a popular video-streaming site. Twitch was focused on video-game-related content.

People can create their own channels, where they upload footage of themselves playing video games while sometimes providing audio commentary over the footage. In some cases, people host video-game podcasts and shows.

The site is also where many e-sports competitions are broadcast live.

Users get their own channel pages, which include a built-in chat room for the players and the viewers to interact.

How Big Is It?

Twitch is huge. In an April report, it accounted for more than 40% of live-streaming traffic by volume in the U.S., according to online video analytics site Qwilt. That made it the No. 1 live-streaming platform by a large margin.

In February, Twitch was fourth in peak internet traffic in the U.S. after Netflix, Google, and Apple, respectively. At 1.8%, it was bigger than Hulu, Amazon, and Facebook in peak traffic.

And that’s only in the U.S. According to Qwilt, Twitch ranks in the top five video-entertainment sites across the globe. That’s huge for a site that’s only related to video gaming.

Twitch is now so big that Justin.tv shut down Aug. 5, saying that Twitch was now the focus of its resources, according to CNET.

Why Is It So Big?

According to its own report, in 2013, 58% of Twitch users spent more than 20 hours a week watching videos on the site.

Twitch has its own iOS and Android apps and has been integrated with Xbox and PlayStation consoles. PC gamers can also upload footage to Twitch.

Even Amazon’s Fire TV has a Twitch app.

On the PlayStation 4, for example, sharing some gameplay action to Twitch is as easy as pressing a share button.

People love watching other people play games and commenting on them.

Felix Kjellberg, the Swedish YouTube star behind the channel PewDiePie, makes about $4 million a year in ad sales doing just that.

Much like other video sites, Twitch offers a partner program for its users. And Twitch users can stream footage on the site for as long as they want, even 24 hours a day.

E-sports is another huge moneymaker for Twitch. People flock to Twitch to watch live streaming of their favourite video game tournaments, such as “League of Legends” and “StarCraft.”

Some Cool Things Happening On Twitch

In February, Twitch crowdsourced more than 150,000 people to play an online game of “Pokemon.” To make the players move, people entered voice commands in the chat room.

And this month, Twitch users went from playing “Pokemon” themselves to watching a fish play “Pokemon.” More than 220,000 users are tuning in to watch a fish named Grayson Hopper play the Game Boy game.

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

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