Google recently purchased video compression provider On2 Technologies for about $106.5M. As Gartner’s Andrew Frank writes, this is a “relatively small sum in the heady world of Internet valuations, for a company that’s been steadily losing money on less than $20M in annual revenue.” However, they have an interesting technology and the On2 purchase may be the clear signal of the plans Google has to enable video beyond the computer, taking it out of the home office and into the living room.
Google appears to want to be a player in the future of television. They must believe that video distribution to TVs and mobile devices will evolve to be more like the Web, Google favorite playground. So far in video, however, Google has admitted that profit from YouTube has proven more elusive than originally thought.
YouTube has been slow to get off the computer and penetrate home television, where the real money is. Working with microprocessor designer MIPS Technologies, Google has already positioned Android for set-top deployment, while also raising its involvement with addressable TV advertising with pioneer Visible World.
Andrew Frank outlines three things benefits form the On2 purchase:
First, Google gets some important embedded infrastructure through On2. It brings a wealth of online video distributor relationships who have been licensing its technology for some time, including Adobe, whose Flash platform continues to power the majority of online video Sun Microsystems, whose JavaFX platform is embedded in the infrastructure of most standard advanced television platforms.
Second, it’s important to Google’s home television goals that the public Internet continues to develop into a reliable way to deliver high-definition video to TVs in a “net-neutral” way: in other words, without cable, satellite, or IPTV telcos charging for quality of service or otherwise limiting video access to screens.
Third, as Google moves to balance control of video standards among companies that include Apple, Microsoft, and Adobe, ownership of On2 gives them leverage to ensure its platforms (Android, Chrome browser, Chrome OS, Apps and Gears) include native video capabilities that are independent of control or licensing by any of its potential competitors.
See Frank’s post for more details. We look forward to see where this goes. A player like Google can certainly make things happen.