Google steps in to help the evolution of video

Natalie Apostolou
06 Aug 2009

Google is taking on the ubiquity of video technology giants such as Adobe, Microsoft and RealNetworks with the acquisition of video compression developer On2 for $106.5 million.

In an announcement, Google VP product management Sundar Pichai said that Google believed high-quality video compression technology should be a part of the web platform.

“We are committed to innovation in video quality on the web, and we believe that On2's team and technology will help us further that goal,” he said.

Analysts claim that the disruptive acquisition will see Google move the On2 technology to open source in a bid to make it the defacto video compression standard. On2 also creates software that helps make high-definition video playback possible on mobile devices.

As Silicon Alley Insidersuggests, the open source move would force Adobe to build the technology into Flash, and Microsoft to put it into Silverlight, in order to stave off the threat of a free Google plug-in making their technology obsolete.

SAI also points out that Google could possibly control the future development of the world's top web video technology. On2 clients include Adobe, Nokia and Infineon.

The deal is still subject to approval by NYSE listed On2 Technology stockholders and review by relevant regulatory authorities, including the SEC. Google expects the transaction to close during Q4.

Google refused to outline specific product plans until deal closure and reiterated its commitment “to innovation in video quality on the web.”

Under the deal On2 shares will be converted into 60 cents worth of Google stock. Shares in On2 surged more than 50% to 59 cents after the deal was announced Wednesday.

On2 is due to release its Q2 results on Thursday. In May the company reported a revenue slide of 10% to $4 million. The company has been cutting costs to save cash, which as of March 31 totaled $3.2 million, down 24% from a year earlier.

Meanwhile, Google has finalized the sale of its Google radio assets, an online radio ad buying service, to digital media management and software firm WideOrbit. The sale was flagged last month but has now been confirmed by both parties. The employees of Google Radio are moving will also move over to WideOrbit.

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