Google – A twitch upon the thread.

Sony and Microsoft need to head Google off at the pass.

• Google is absent from gaming which in my opinion is the single most important Digital Life service in terms of the time that users spend with their devices.
• However, it now looks as if Google is finally starting to move on this space as YouTube looks set to acquire Twitch for $1bn (Variety).
• Twitch is a YouTube-like website where gamers can upload or even broadcast their gaming experiences to share and chat with other gamers.
• The service already has 45m users and the users here are more valuable than usual as they are highly engaged and their interests are very specific.
• This makes them more receptive to the right kind of advertising and hence the price that advertisers will pay to market to them will be higher.
• The beauty of Twitch is that it is platform agnostic meaning that gamers from both PlayStation and Xbox can share videos of the same game and chat to each other.
• Xbox Live and PlayStation Network are unable to do this which leaves space for Twitch to exist.
• On top of acquiring Twitch, Google is thought to be preparing its own console for the market based on Android which will obviously lead it into gaming on mobile devices.
• Gaming is an important piece of the ecosystems of both Microsoft and Sony (Sony in particular) and neither of them can afford to have Google swoop in and offer something over the top of both of them.
• Hence they need to:
  • Either one of them buy Twitch from under Google’s nose and keep it independent
  • Or come to an agreement where there is enough functionality and interoperability between XBox Live and PlayStation Network to render Twitch obsolete.
• Either of these two strategies would have the effect of relegating Google’s coming console to an also ran meaningfully reducing its threat in my opinion.
• This would also have the effect of lessening the impact of a Google gaming system for its own ecosystem as both Sony and Microsoft are currently miles ahead in that regard.
• Google has very deep pockets and is more than happy to experiment until it gets its services right.
• Hence as the challengers in the Digital Ecosystem, neither Microsoft nor Sony can ignore this twitch upon the thread that is telling them that Google is coming.
• My fear is that these two are so busy fighting each other that they have not seen the big shark coming.