Google and On2 Technologies have announced today that they have signed a deal for Google to acquire On2 in an all-stock deal valued at $106.5 million. On the surface, it's a match made in heaven. On2 is one of the leading providers of video codec software and hardware, and Google is one of the leading providers of Web-based video. The deal also has the potential to move the future of Web video codecs in the direction of open standards.
Video codecs are a big deal. They fuel the technology behind Video CDs (MPEG-1), DVDs (MPEG-2), and Blu-ray (MPEG-4), and are linked with the history of the Web, as various codecs and formats—QuickTime, Windows Media Video, Theora, H.264, DiVX, Flash, Silverlight, etc.—all compete to deliver video over networks. On2 supplies the codec (VP6) used in Flash video, the current reigning delivery system for online video.
A battle has been raging over a standards-based replacement for the proprietary Flash video, fueled by the upcoming HTML5 standard, which includes a <video> element intended to provide a simple, standard way to embed video into a webpage, much like the <img> tag did for still images. The developers of the HTML5 standard hoped to settle on a single standard codec that would serve as a baseline that all browsers would support. Some, like Apple and Google, wanted that codec to be H.264—a highly efficient codec used widely by Apple and Google for video. Some, like Mozilla and Opera, wanted to use the Ogg Theora codec—which is unencumbered by patents and is open source. (Theora is based on an old On2 codec called VP3, which the company released to the public domain.)
Google's deal to buy On2 clearly fits with Google's interest to standardize Web video. "Today video is an essential part of the web experience, and we believe high-quality video compression technology should be a part of the web platform," said Sundar Pichai, Google Vice President of Product Management, in a statement. "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."
It's not clear yet exactly how Google intends to do that. Obviously the technology that On2 would bring to the table could be used on YouTube. But it's not hard to imagine Google may also take On2's latest VP8 codec and release it as open source in a bid to create a standard Web codec. On2 says that its VP8 codec "brings bandwidth savings far beyond any other format available," and uses "significantly less data than required by leading H.264 implementations." On2 claims that VP8 can result in an average savings of 40 percent, but those claims of superiority over H.264 aren't universally supported.
If anyone has a chance of pushing a standard for Web video to be universally accepted, though, Google—armed with On2's extensive codec technology—is definitely in a great position to do so. Should VP8 be open sourced, it would likely quickly gain the support of Mozilla and Opera, tilting the Web video balance towards open standards.
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