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Why YouTube may be buying Twitch

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If YouTube is really on the verge of buying video game-streaming website Twitch, there’s at least one reason behind the move that’s as old as business itself: eliminating the competition.

Little known outside the gaming world, Twitch has quietly skyrocketed, claiming 43 million monthly users just three years after it launched. Those users, Twitch says, watch an hour-and-a-half of video a day, much of it live coverage of things like video game competitions and other players working their way through new games.

As it turns out, watching people play video games is a big deal on the Web. At YouTube, which is owned by Google, some players have amassed follower bases of more than 1 million people by posting video of themselves gaming.

So when an upstart like Twitch comes along, analysts say, it makes sense for Google to act.

“For Google, this is a defensive measure as much as it is anything else,” said James McQuivey, a technology analyst with Forrester Research. “Google found early on with YouTube that play-throughs of video games were a huge traffic draw. If you don’t watch those videos, you don’t even know they exist on YouTube. But for people who watch them, that’s all they see.”

On Sunday, both the Wall Street Journal and Variety were reporting that YouTube is in talks to buy Twitch for more than $1 billion. Neither company was commenting publicly on Monday. Microsoft and Amazon are among several other companies who were reportedly trying to purchase the site.

More than just a place to stream video, Twitch has also succeeded at becoming a social network of sorts, McQuivey said. Comments are integrated into the site’s videos, letting viewers talk with each other, or even the players themselves, as they watch.

“It’s no longer just wanting to see how someone defeated the boss on Level 5,” he said. “It’s having that social experience and the comradeship of fellow gamers. Twitch has nailed that and if you’re Google, you realize that people watching stale old videos … that’s going to dry up.”

And on the Internet, traffic means money. Advertisers like live events because of the level of excitement they create and the fact that they can reach a target audience all at once, McQuivey said.

Twitch made headlines in February when a version of “Pokemon Red/Blue,” a 1990s game for Nintendo’s Game Boy, streamed on the online video platform for days, allowing more than 80,000 people to play simultaneously.

For Twitch, the appeal of an eight-figure deal (aside from the eight figures) would be gaining Google’s arguably unrivaled resources to support and expand its site. In some ways, Twitch’s massive growth in a short time has been a blessing and a curse.

Twitch generates more traffic than HBO Go in the United States and has tripled the amount of bandwidth it uses in the past year, according to Sandvine, a networking-equipment company.

“To be quite honest, we can’t keep up with the growth,” Twitch Vice President Matt DiPietro told The Verge last year. “That’s a good problem to have.”

Add Google to the mix, and that problem disappears.

“I think the whole concept started as a social experiment,” McQuivey said. “It became a commercial business so rapidly that they weren’t prepared and they didn’t have the resources … . When Google wants to care about the outcome of your business … it ends up being a really good deal.”

In this way, it’s not unlike Facebook’s recent purchase of Oculus VR, which gave that upstart maker of virtual-reality headsets access to Facebook’s vast resources and user base.

Regardless of the outcome of this deal, McQuivey says live streaming is something YouTube is going to have to figure out. Increasingly, the entertainment industry is using live TV events — from “The Sound of Music” to live voting on “The Voice” — to attract viewers who have become increasingly spoiled by the overabundance of digital media at their disposal.

“The next thing you’re going to have to get into is live-streaming your high school football game or you trying to conquer a new rail with your skateboard,” McQuivey said. “If you can get into a world where someone wants to show off that they’re better on the half-pipe than anybody else in the world, you could have a couple thousand people watching live to see if you can pull off that back flip.”