Services & Software

What does Google see in On2's video tech?

Google is ponying up $106.5 million for video compression technology. Does it just want it to make YouTube cheaper to run, or does it have something grander in mind?

So what, exactly, is Google planning to do with On2 Technologies' video software?

The search giant isn't saying. The planned $106.5 million transaction isn't going to make too much of a dent in Google's coffers, but the transaction comes during a hot debate about which future technologies will power Web video. CNET News' Stephen Shankland and Tom Krazit pondered the implications of the deal, and here's what they thought:

Shankland: When I heard about the acquisition, I immediately wondered if the move could tidy up the mess that is that Web video or clutter it up even more.

On2 offers video compression technology that's used, among other notable places, in Adobe's Flash software and the Hulu video site. The company licenses various "codecs"--the software used to encode video so it's compact enough to squeeze down a narrow Internet pipe, then to expand it at the other end. It's a major technical challenge--one that's getting more important people to spend more time watching online video and more companies to attempt to profit from that.

Krazit: Well, it all depends on what they do with it, right? Google's being coy about this particular acquisition, but there really are only two reasons to do this: open-source the codec and throw a third wrench into the HTML 5 video tag standards debate, or bake it into existing technologies like YouTube--in hopes of getting that business to start making money--or mobile software.

At the moment, my bet is on the YouTube-mobile option: does Google really want to risk holding up HTML 5 adoption any further, regardless of the hint they dropped in the press release that "video compression technology should be a part of the Web platform"?

Shankland: Those alternatives aren't mutually exclusive. Google might just be buying trying to lower its costs by sidestepping YouTube's current streaming technology, which uses Adobe Systems' Flash software. Dan Rayburn, executive vice president at, says Google doesn't have to pay Adobe fees to use Flash at YouTube. But Laura Martin, an analyst with Soleil-Media Metrics, believes that using On2 technology could trim YouTube's network bandwidth costs.

In the long run, though, getting On2's technology accepted as a built-in Web video standard could help both YouTube and Google's grander ambitions for the Web.

Google controls Chrome, of course, but getting the other 97 percent of the browser world to move will be harder. When it comes to building support for Web video straight into the Web, rather than using a plug-in such as Flash or Microsoft's Silverlight, Apple's Safari uses H.264 while Mozilla and Opera use a license-free alternative called Ogg Theora. Chrome will support both, but Internet Explorer doesn't have any support at all.

Right now, that video variety has been a thorny issue for the effort to hammer out HTML 5, the next incarnation of the Hypertext Markup Language that's used to describe Web pages. Even though the video tag looks like a big part of HTML 5, specification author (and Google employee) Ian Hickson so far isn't naming a codec.

Krazit: "Thorny issue" seems like an understatement. Why would injecting a third standard (that not everyone believes is necessarily a superior option) make sense, at this point? I suppose that there's a Clintonian "third way" argument to be applied here, in that if Apple and Mozilla are lining up on opposite sides of the debate over H.264 versus Ogg Theora, a freely available version that has clear patent ownership collected in one place might solve some of the sticking points on either side. Still, we'd be once again dependent on Google's "Dude, you can totally trust us. We're Google!" argument that it won't later subvert the standard with patent claims.

Not to mention the fact that Microsoft and its Internet Explorer are still unlikely to play ball, no matter what Google proposes.

Shankland: Well, one way Google could win over Mozilla at least is by releasing the codec as open-source software. That may or may not be possible, depending on what On2 has had to license, but Google apparently isn't happy enough with Ogg Theora's quality to bring it to YouTube, according to Hickson.

But I wouldn't rule out Microsoft quite so fast, even though I'm sure that it would like to get as much royalty revenue as possible through Silverlight video streaming and its own video codecs. Google has an affinity for open-source licenses such as Apache that permit use of code in proprietary software. That could reduce the philosophical barriers to Microsoft. And if Google can offer a high-quality codec in the HTML 5 standardization effort, maybe making On2's codec into open-source software could help coax the Internet Explorer team on board.

Let's not forget that HTML 5 is under the auspices of the World Wide Web Consortium (W3C), and they don't like standards encumbered by royalty constraints.

Also, if I were writing standards, I'd favor codecs such as On2's that also work on mobile devices. The iPhone doesn't support Flash, and I'm sure that Google wants YouTube on as many handsets as possible.

Krazit: Google's trying to pull off a lot these days, when it comes to making the Web the future platform for developers. It's a huge proponent of the HTML 5 push, devoting an entire day of Google I/O in May to explaining why this move is so important, and preaching to developers about how open standards and browser-based development are the wave of the future.

But you'd think that at some point, the company would start thinking of ways to differentiate its own products against the rest. Chrome and the forthcoming Chrome OS are ostensibly being developed with the hope that they will gain traction in the market. How will they do that, however, if they are just cookie-cutter versions of the same standards-based technologies on which everybody else jumps?

One way would be through offering excellent video performance that isn't widely available to the rest of the world, i.e., keeping VP8 and future On2 codec derivatives either in-house or available for a fee. Is Google going to open-source everything it ever develops under the strategy that anything that gets people on the Web ultimately comes back to its bottom line? Surely, that can't scale.

Shankland: No, Google won't open-source everything--and stop calling me Shirley. The company loves improving the Web as a foundation for applications, an effort that needles companies such as Microsoft or Apple that have their own developer ecosystems to nuture. But when it comes to the applications themselves--Gmail and Google Docs, for example--Google isn't so into sharing.

So I guess that some of this On2 situation comes down to the extent to which the video codec work is an end or merely a means to an end, like Chrome.

Krazit: Google isn't saying, at least for now. There's little doubt that online video is a crucial component of the future Web (CBS' David Poltrack is telling television critics this week that big money is coming to online video), and something will need to assume a role as the future technology enabler of Web video.

In the end, however, it must be nice to be able to make $100 million bets with relative ease. Nothing could come of On2's technology, and Google would hardly be worse off than it was a day ago.

Updated 1:24 p.m. PDT with new information about Flash licensing and YouTube expenses.