Android video could benefit from Google's On2 acquisition

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Android video could benefit from Google's On2 acquisition

Google has acquired video compression firm On2, looking to improve the quality of its YouTube and video search applications, and it cou

By CAROLINE GABRIEL

Published: 6 August, 2009

READ MORE: M&A | Google | Android

Google has acquired video compression firm On2, looking to improve the quality of its YouTube and video search applications, and it could enhance the video capabilities of Android, which have been criticized by multimedia-heavy customers like Sony Ericsson.

The search giant will pay $106.5m for On2 Technologies, with the smaller company's investors getting 60 cents in Google stock for each of their shares, a 57% premium on On2's closing price on Tuesday on the American Stock Exchange. The purchase is expected to close in Q4.

With On2, Google gains the Hantro system for embedded video on mobile devices, plus

On2 TrueMobile System, which sends video over wireless networks (EDGE, 3G and 4G) using the VP7 technology. Its software compresses video on over two billion PCs and mobile products, and is used by companies such as Adobe, Nokia, Sun, Samsung and Sony. As well as the VPx video codecs, it also owns the Flix range - Pro, a web development platform, Publisher, a series of browser plug-ins, Engine, a server transcoding platform and DirectShow SDK, a library for video content creation. These products may find their way into Google systems but could also be sidelined.

The most immediate motivation will be to reduce the cost of running Google's YouTube by reducing its hefty bandwidth costs, and also to increase its quality. But there is also likely to be an upside for Android. It is not clear how Nokia's relationship might be affected, given the rising competition between Google and the Finnish handset giant. In some area's, On2's codecs are losing ground to H.264 so Nokia could decide to throw its weight mainly behind that technology.

The new acquisition, assuming it is approved, fits clearly into Google's core compentency in web infrastructure technology and could bolster any of its platforms, including the new Chrome OS. "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, VP of product management at Google.

Of course, the software firm often looks to do more than just enhance its products, and tries to influence standards and the whole direction of the web sector as well. So, along with the potential to use On2 to help Android leapfrog RIM and Apple in mobile video delivery, Google could also decide to open source the codecs and grasp the steering wheel in one of the most important trends in mobile web services, the delivery of rich media. It could position On2 against Adobe Flash, Microsoft Silverlight, Apple Quicktime and other rich media systems that are finding their way onto mobile devices and hoping to become de facto standards. Robin Wauters of TechCrunch said Google could open source On2's VP7 and VP8 video compression codecs as alternatives to the increasingly popular but closed H.264 codecs.

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