Will Amazon's Nearly $1B Acquisition End Up a 'Zombie'?

Ten years ago, Amazon ponied up nearly a billion dollars to acquire Twitch, a video streaming startup popular among gamers that insiders now worry may become a "zombie brand" for the retail giant, per the Wall Street Journal. Both current and ex-employees tell the paper that the platform is still unprofitable, a decade after the acquisition, and independent data shows that engagement is lagging, as is the growth of new users. Plus, those who do pay big bucks to use Twitch, which still draws in millions of daily users, are tightening their money clips when it comes to subscriptions and donating to content creators, the Journal notes.

Part of the issue is that Twitch is expensive to run, thanks to so many livestreams going on at once; the company has also had to pump money into content moderation tools. Sources also tell the Journal that it's a hard sell to advertisers to support long-form live video. This news comes nearly seven months after Twitch laid off upward of 500 staffers, with company CEO Dan Clancy telling workers in a memo at the time that the platform "is still meaningfully larger than it needs to be given the size of our business," even after previous cost cuts. Clancy himself has come under criticism for jet-setting around the world, ostensibly for work, while all of this cost-cutting is taking place.

Still, Needham analyst Laura Martin earlier this month told Barron's that Amazon could be sitting on a $46 billion "hidden gem" in Twitch, with Martin upgrading Amazon's stock price target from $205 to $210 "based on the upside we calculate from Twitch." She notes that investors shouldn't count Twitch out, as it draws a broader group of users—especially young males—and advertisers to Amazon. Fortune notes that the platform has also expanded beyond video games, including with footage of popular Gen Z comedians and political commentators. Martin notes that Twitch made just $72 million in revenue in 2014, the year Amazon acquired it. In 2023, that figure jumped to $3 billion. (More Amazon stories.)