Online retailer Amazon will pay more than $1 billion US for Twitch Interactive, Inc., a streaming website where users watch other people play video games, the companies announced on Monday.

The move bolsters the e-seller's holdings in a growing market. Twitch generates revenue by charging users a monthly fee to watch elite gamers compete head-to-head while selling ads — similar to how a conventional sports television channel would operate.

"Broadcasting and watching gameplay is a global phenomenon and Twitch has built a platform that brings together tens of millions of people who watch billions of minutes of games each month," Amazon's founder Jeff Bezos said.

"Like Twitch, we obsess over customers and like to think differently, and we look forward to learning from them and helping them move even faster to build new services for the gaming community."

55 million users

The company has grown rapidly since being founded in June 2011. The site attracted more than 55 million viewers last month alone and is the fourth most popular website in terms of peak internet traffic in the U.S., Amazon said Monday.

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Amazon founder Jeff Bezos praised Twitch for obsessing over its customers and thinking differently on Monday. (Gus Ruelas/Reuters )

The company says its users spend an average of 100 minutes a day on the site. And even beyond subscription fees, there's money to be made in advertising to that dedicated audience.

Digital video advertising in the U.S. will reach $5.96 billion this year, according to eMarketer, up 41.9 per cent from 2013.

Amazon already has an in-house gaming studio that makes games, and its Fire TV set top box was designed to attract gamers.

Google had been in talks to buy Twitch, but no deal materialized.

Amazon's purchase is set to close in the second half of 2014.

With files from The Associated Press