It was announced today that Google has purchased ON2, a video compression codec creator. Pundits around the web are wondering why Google would do this, and why the chose to buy for $100 million, rather than license. (ON2 was formerly valued north of $1 billion.) I saw one article wondering if it’s to speed up YouTube. I think that these people are missing the mark, and/or failing to do basic research.
A quick look at what ON2 offers brings to focus the fact that they have hardware compression technologies. This is the first piece of the puzzle. A quick look further down the page reveals some of their clients. Of note are Intel and Adobe. Now, what would Intel want to license compression codecs for? Remember their VIIV platform? A hardware platform focused on multimedia? And look at the Adobe client, and a highlight on Flash. I think Google wanted more than just codecs. I think they wanted ON2′s existing agreements and contracts. I think they want to leverage both the IP AND the existing agreements and contracts to develop and promote a hardware platform for YouTube.
Update: Looks like Larry Dignan at ZDnet agrees with me. ZDnet
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