Now that the initial shock from Amazon’s purchase of Twitch is starting to wear off, the synergies between the two companies are becoming more obvious.
Over the past three years, Twitch has become the ESPN of the video game industry, where viewers go to watch live footage of videogames. The company’s streaming technology could strengthen a number of other Amazon services and Twitch should be able to make full use of Amazon’s web infrastructure.
Even at a cost of nearly $1 billion — making it Amazon’s largest acquisition in its history — Wall Street appears to like the deal today, with investors pushing Amazon’s stock up $8.31, or 2.5 percent, to $342.33 a share.
But the acquisition also accomplishes one more thing that may not be so obvious: Amazon gets its hands on something Google evidently wanted, but couldn’t have.
Over the past week, there’s been a handful of examples of how the race between Amazon and Google is heating up. For years, the two companies have not necessarily been seen as direct competitors, but now as Google increasingly pushes into commerce, and Amazon’s ambitions go way beyond the shopping cart, the two mega-tech companies are increasingly butting heads.
In May, Google had reportedly beat out Microsoft and others to reach a deal to buy Twitch, but three months later, Amazon swoops in to make the acquisition. Google’s offer apparently fell apart due to antitrust concerns (because of its ownership of YouTube), and the two companies could not agree on a break-up fee, Forbes reports.
But Twitch is only the most recent example in which Google and Amazon have made dueling headlines:
- Google is partnering with local retailers in select markets to launch same-day delivery. Google Shopping Express is expected to generate revenues from ads — not product sales.
- Amazon recently launched mobile wallet on the Fire Phone and a mobile payments service for brick and mortar stores that mimics Google services already in market.
- Amazon is expected to launch a new ad platform that will replace Google’s sponsored links on its site with its own ads, reports The WSJ. It also may make that service available to third-party web sites, which would compete directly with Google AdWords or services from Microsoft.
- While Google’s advertising platform has always been considered valuable because it knows what consumers are searching for; Amazon’s data is considered just as valuable, if not more, because it knows what people are buying.
- Amazon uses Google’s Android operating system to as the basis for its Kindle devices, but then launches a competing set of services, including its own app marketplace, that take away potential revenue from Google.
- This morning, another example: Google announces it is acquiring Zync to bolster its cloud offerings, and said Zync will no longer be using Amazon’s cloud-computing infrastructure, and will instead switch to the Google Cloud Platform, reports Zdnet.
The future of the two companies are starting to look very similar.
Amazon’s traditional business model has always focused on e-commerce, and selling products at slightly increased prices and pocketing the difference. As a major discounter, these margins have always been thin, a complaint voiced from investors on a regular basis. Another revenue stream that could be much more lucrative is one that is based on monetizing product search, a model proven by Google.
Meanwhile, Google is increasingly pouring resources into shopping, which will allow it to collect data about what consumers are interested in buying, which could match Amazon’s strengths as a retailer. Google has made some inroads in this category because of one argument: It bills itself as a friend to brick and mortar stores since it does not actually sell merchandise. In comparison, Amazon will have to fight its reputation for being a competitor.
These examples only begin to demonstrate just how much the Google and Amazon are on a collision course, but look for more announcements in the near future as the competition heats up.