Speculation Sizzles Over Google’s On2 Buy

Google will be acquiring video compression technology provider On2 Technologies in a stock deal valued at US$106.5 million. The deal, which requires On2 shareholder and regulatory approval, is expected to close in Q4.

Google did not respond to the E-Commerce Times’ request for an interview in time for publication.

It does not appear that Google is offering any details on the acquisition beyond those provided in its announcement of the deal, in any case.

“We’ll update everybody when we’re able to share more information,” said Jeremy Doig, engineering director – video, and Mike Jazayeri, group product manager, in a blog post. “In the meantime, nothing will change for On2 Technologies’ current and prospective customers.”

That cheery sign-off did nothing to stem the rampant speculation as to Google’s plans for the On2 technology.

Competitive Play?

If nothing else, the acquisition will allow Google to control video storage costs — costs that will surely skyrocket as YouTube moves to high def, Ken Saunders, principal of Search Engine Experts, told the E-Commerce Times.

“On2’s software also optimizes video for mobile — that too will become more and more important to Google as more users demand video for their handsets,” he said.

The On2 acquisition could also be a competitive play against Hulu, Saunders suggested, which is based on On2 technology and is grabbing users for longer periods of time. YouTube, by contrast, is still largely the go-to domain for short viral videos.

“Adding on2 will allow YouTube to process longer videos more efficiently,” noted Saunders.

Open Source

News of the deal has spurred speculation that Google may intend to open source the On2 technology.

There’s a good rationale for that move, said David Naffis, principal with Intridea.

Between its Android and Chrome OS products, Google needs a standard format for mobile videos, he told the E-Commerce Times.

“On2’s encoders allow users to encode for various mobile devices,” he said.

An industry push to develop a video tag for the HTML 5 standard hasn’t been resolved either, Search Engine Experts’ Saunders pointed out.

“If Google releases the technology into the open source realm, it will force other competing platforms — such as Apple — to adopt the technology as well,” he said.

It may also give Chrome OS a leg up — at least initially, until other browsers follow suit, added Saunders.

No Idea

In truth, the market has no idea what Google intends — even starting with the premise that it wants to save on video storage costs, maintained Dan Rayburn, a principal analyst in Frost & Sullivan’s digital media practice.

“Everyone is making statements and guessing — but in truth we have no idea what Google intends,” he told the E-Commerce Times.

Rayburn skewered some of the widespread myths surrounding the deal in a blog post.

One bet Rayburn is willing to make, though, is that the deal will not kill Adobe Flash — a competing platform.

“This is not going to disrupt the industry,” he insisted. “The deal hasn’t even closed yet — and when it does, Google still has to do the integration. There are still too many unknowns — and potential product uses for the technology — for people to be jumping to these conclusions.”

Also, Rayburn wants to puncture the theory that just because Google acquires a company that will automatically crown it king of its space.

“One acquisition doesn’t make Google the default provider,” he said.