Google's On2 Acquisition: Part of its Open Web Video Standards Effort?

Google's announcement yesterday that it is acquiring video compression company On2 Technologies for $106.5 million may appear to be just another acquisition in a buyer's market, but there is a strong chance that it could dramatically affect video standards online. Because of the enormous share of online video viewing that Google's YouTube commands, the company can swing a bigger stick in setting online video standards than many people realize, and the company has already been frustrated by the refusal of leading browser makers to agree on a central, shared codec to mutually support.

Ars Technica suggests that the On2 acquisition will have a big impact on web video standards, and The Register comes right out and speculates that Google will quickly open source On2's video compression codecs. I lean toward the latter scenario.

Google has fought a losing battle to forward a video tag for HTML 5, the next generation of HTML. As The Register points out, part of the problem comes from disagreement among browser makers:

"When it comes to built-in video compression, Apple Safari uses H.264. Firefox and Opera use the open and license-free Ogg Theora. Google Chrome uses both. And Microsoft's Internet Explorer uses, well, nothing, continuing to rely on plug-ins like Adobe Flash and its own Silverlight for video. All of which makes for tough going when the browser makers sit down to discuss an HTML5 video tag (or - in the case of Microsoft - when they don't sit down)."

Adobe is very fond of pointing out that over 80 percent of video viewed online is powered by Flash, and Microsoft is very focused on advancing its Silverlight video technology. Apple staunchly favors H.264. Why can't the browser makers agree on one, open standard? Part of the reason is that controlling online video standards can become big business, and greatly influence the various players' share of the browser market. According to an April 2009 survey by the Pew Research Center's Internet & American Life Project, the share of online adults who watch videos on video-sharing sites has nearly doubled since 2006, and the growth is still strong.

If powerful players such as Adobe and Google open source key online video technologies, they have the potential to grow their shares of and influence over videos viewed online. Adobe is already waking up to this, and recently open sourced two key components of its Flash video platform. The Register makes the good point that: "On2's VP3 codec is the actual basis for Ogg Theora. In 2001, On2 open sourced VP3 under an irrevocable free license through an agreement with The Xiph.org Foundation."

On2's current video codecs are VP6, VP7 and VP8. Will Google open source these as push them as standards? Ars Technica notes this: "Should VP8 be open sourced, it would likely quickly gain the support of Mozilla and Opera, tilting the web video balance towards open standards."

Google could ratchet that pressure up by weaving VP8 into YouTube. If VP8 became essential to having the richest, most extensible experience on YouTube, and only Google's Chrome browser supported it, how quickly do you think the other browser makers would support it--especially open source browser makers?

In addition to all of this, Matt Asay notes that the On2 acquisition may simply be an inexpensive way for Google to get around video compression patent suits, if it open sources On2's technology. I'm betting that Google has bigger plans for its On2 technology than many people realize, and that we will see the On2 codecs open sourced.