• by Wendy Davis  @wendyndavis, October 9, 2006

Rumors swirled late last week that Google was in talks to purchase video-sharing site YouTube for $1.6 billion.

The talks were first reported by the blog TechCrunch, but haven't been officially confirmed by either company. If the deal goes through, Google would vastly increase its foothold in the burgeoning online video market. YouTube currently is the clear leader in online video, with 46 percent of all traffic to online video sites last month, according to research firm Hitwise.

Google opened a video "store" in January, which sells clips from major networks and offers clips for free streaming. But the site has failed to gain much traction. Currently, Google video commands just 11 percent of the market--trailing not only YouTube, but also MySpace (21 percent).

While Google's video offering, like YouTube's, allows users to upload their own content, there are significant differences between the services. Google sells premium content from its site--mainly via deals with TV networks, although Google also offers free videos.

YouTube currently offers all videos for free, but has run into trouble with people uploading copyrighted material. Universal Music Group, for one, has complained about copyright infringement on the site. Universal Music CEO Doug Morris complained that YouTube and MySpace owed Universal "tens of millions of dollars" for violating its copyright. In the past, NBC demanded that YouTube remove the "Saturday Night Live" skit "Lazy Sunday" from the site; more recently, NBC entered into a promotional agreement with YouTube.