Google Buys On2 Video Compression Company

On2 Technologies (Clifton Park, NY) and Google (Mountain, CA) just announced that Google is buying On2 for $106.5M. The purchase will be done with a stock-for-stock transaction.

Why would Google buy On2? The most obvious reason would be for use with YouTube. Their video sharing site recently added High-Quality content, and there’s been an increase in longer videos. So an increase in quality and length of content means a possible future need for video compression. (But consider some of the companies who are On2’s clients: Adobe, Skype, Nokia, Infineon, Sun, Sony, Brightcove.) There’s a great potential for revenue as well.

[via Mashable, On2 press release]