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Summary:

On2 shareholders finally agreed yesterday to allow the encoding company to be purchased by Google, after the search giant raised its bid by $26.5 million earlier this year. But with the acquisition now set to close this week, questions are arising as to just what Google’s […]

On2 shareholders finally agreed yesterday to allow the encoding company to be purchased by Google, after the search giant raised its bid by $26.5 million earlier this year. But with the acquisition now set to close this week, questions are arising as to just what Google’s plans for the encoding company are.

Under terms of the deal, Google will provide 0.0010 of a share of Google Class A Common Stock for each share of On2 common stock, as well as 15 cents a share in cash, bringing the total value of the deal to about $133 million. It will close after some six months of haggling since Google made an initial offer of $106.5 million in August 2009.

When the deal closes, Google will own all of On2′s video compression technology, which includes the VP6 and VP8 video codecs. At the time it was first announced, many believed that the deal could allow Google to circumvent On2 licensing fees or collect them from third parties like Adobe or Move Networks. The suggestion was also made that Google could use its control of the new VP8 to push it as the dominant codec for YouTube.

But YouTube has thrown its weight behind H.264 for encoding of its HD videos, as has much of the video industry. In fact, YouTube’s recently released HTML5 implementation is based on H.264 as opposed to the open-source Ogg Theora encoding format, which was formed out of On2′s VP3 codec. So it seems unlikely that Google plans to use its control of On2 to push others to adopt its codecs.

Google could adopt some of On2′s video encoding and transcoding technology into YouTube’s back end to speed the encoding of user-generated content that gets uploaded to the site. YouTube said last year that about 20 hours of video are uploaded to the site every minute, so having a more robust encoding solution might help the company to speed the amount of time that lags between when a video is uploaded and when it becomes available on the site.

Google could also leverage some of On2′s wireless technology in its quest to increase adoption of video on Android mobile phones. As Om pointed out last August: “[On2] owns technologies for embedded video for mobile platforms (Hantro) and On2 TrueMobile System, a mobile video system designed to send video across the networks — including 2.5G, Edge, 3G and 4G networks — using On2’s VP7 technology.”

Google is expected to close on the On2 acquisition “on or about Feb. 19,” so it probably won’t be long before we find out what the company has in mind for On2′s technology.

Related content on GigaOM Pro (subscription required): Not Your Grandfather’s Streaming Video Business

  1. Another option would be that Google open sources VP8, allowing it to become the standard for HTML5, satisfying all parties involved. If the browsers, set top boxes and mobile platforms accept VP8 (the big “if” being Apple), there would be plenty of motivation from OVPs and video sites to encode their libraries to VP8. One can imagine, in this scenario, that every OVP will essentially transcode all videos to a handful of VP8 bitrates and be able to satisfy any device and platform. This would be a huge win for audiences, publishers and platforms.

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    1. Interesting point, although I’m not sure how soon Google woudl be able to open source VP8. After all, has anyone actually used VP8?

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  2. [...] Urges Google to Kill Flash Turns out we’re not the only ones speculating about what Google might do with ON2 Technologies, the video encoding company it finally acquired [...]

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  3. [...] bought by Google. That’s a pretty huge hookup to have, especially on the eve of Google presumably releasing an open-source video codec to compete with H.264 and make HTML 5 video viable. So why did [...]

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  4. [...] bought by Google. That’s a pretty huge hookup to have, especially on the eve of Google presumably releasing an open-source video codec to compete with H.264 and make HTML 5 video viable. So why did [...]

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  5. [...] has controlled the VP8 codec ever since it finalized the acquisition of video codec maker On2 Technologies in February. When reached for comment as to its plans, a [...]

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  6. [...] embargo el desarrollo aún no está completado, pero Google compró a On2 hace unas semanas, y la adquisición provocó que la Free Software Foundation pidiese a Google que abriese ese códec [...]

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  7. [...] con dinero por delante lo primero, ya que Google compró On2 en febrero del 2010 y esta empresa tiene uno de los codecs de vídeo mas prometedores del mercado, [...]

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  8. [...] has controlled the VP8 codec ever since it finalized the acquisition of video codec maker On2 Technologies in February. When reached for comment as to its plans, a [...]

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  9. [...] has controlled the VP8 codec ever since it finalized the acquisition of video codec maker On2 Technologies in February. When reached for comment as to its plans, a [...]

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  10. [...] has controlled the VP8 codec ever since it finalized the acquisition of video codec maker On2 Technologies in February. When reached for comment as to its plans, a [...]

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