Google's flashy effort to stream video games is Diane Greene's move to 'level up' its Cloud business against Amazon

Greg Sandoval/Business Insider

Diane Greene, CEO of the Google Cloud Platform.

• Google's cloud division is taking its first steps into streaming games.
• This could be a big source of revenue down the road, provided Google can pull it off.
• Streaming video games is a complex engineering problem.

Google is getting get into gaming in a big way with its new streaming project, but the move appears to be as much about fighting Amazon's massive cloud as it is about Google becoming a player in the world of gaming.

The effort, announced on Monday, is being led by the Google Cloud Platform (GCP) group, which will provide the fundamental infrastructure for a new cloud-based videogame platform.

Beginning on Friday, GCP will enable a limited number of US gamers to play Ubisoft's popular "Assassin's Creed" game via their Chrome browser. Users will play directly through their Chrome browser via streaming, and Google says that very little computing power is required on the user's end.

This as an opportunity for Google to "drive traction for GCP," Morgan Stanley analyst Brian Nowak wrote in a research note on Tuesday.

"In addition to its efforts to build a Twitch competitor at YouTube and its partnership with game engine Unity, launching a cloud gaming platform could allow GOOGL to form a more direct relationship with gamers, which it could leverage to expand further into the video game value chain," Nowak wrote.

The foray into gaming by GCP has long been rumored and comes as Google is searching for new sources of income. Investors see Google as a growth company and to keep that narrative going, managers need new revenue sources ready for the day when the company's colossal ad business tops out. To that end, Google is throwing a lot of resources into developing cloud and artificial intelligence.

GCP's management, led by Diane Greene, have described the new streaming-game initiative as a test of Project Stream's technology, formerly code named Yeti (You can read more about the announcement here). Google will face steep technical hurdles in making the effort a success - as Business Insider's Dave Smith writes, this kind of thing has been tried before by others with mixed results.

But there's a big payoff if Google can pull it off by providing an opportunity to forge direct ties to gamers, which Google could mine in the future.

'A source of upside'

"We learned last week at our AMZN Disruption Symposium that AWS is currently the leading provider of cloud tools for video game development," Nowak wrote. "This represents Google's first attempt to move ahead in distribution... the company has strong engineering talent and cloud gaming has proven to be a difficult engineering problem."

Project Stream also represents a chance for GCP to continue its rapid expansion into the broader cloud market, Nowak said.

When it comes to the market leaders, GCP trails Amazon's AWS and Microsoft's Azure cloud services by a significant amount Nowak indicated.

According to the analyst's estimates, GCP has a value of $45 billion while he values AWS at $375 billion. Still, Nowak likes the direction that GCP is headed.

"Success in gaming," he wrote, "could be a source of upside."