• Silicon Alley Insider, Wednesday, August 5, 2009 1:08 PM

Google this morning announced the relatively small (for Google, anyway) acquisition agreement of Web video software firm On2 Technologies for $106.5 million. The deal is expected to close in the fourth quarter.

Silicon Alley Insider's Dan Frommer thinks this could have massive implications for the Web video industry. "If the deal goes through, and Google does what we think it will-open-source On2's tech and push it everywhere-Google won't just control the world's top Web video site, YouTube, but the technology behind the industry, too."

Frommer thinks that by taking control of and open-sourcing On2's new video compression technology, Google will be able to quickly shift Web video technology into its favor. It won't happen overnight, but eventually, he says, the likes of Adobe will have to build the technology into Flash, and Microsoft will have to build it into Silverlight. He adds that the acquisition should enable Google to get royalty-free tools in the hands of thousands more developers to build video software for Android and Chrome OS.

Frommer says the only thing standing in Google's way is On2's board, which now has the fiduciary responsibility to hear other offers.

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