Aug 6, 2009

Google and On2: wolf in sheep's clothing

(from YouTube's Blog, Video Quality Goes Up, Up, Up, 21 July 2009)

Yesterday Google announced that it will be acquiring On2 Technologies in a stock-for-stock transaction, valuing at $106.5 million. On2 is one of the leading developers of video codecs: purely behind-the-scenes work that makes online video streaming possible. They hold a number of patents and have worked with Adobe, Nokia, Sony and more. Big stuff.

Google is Google. They acquired YouTube a few years ago and YT stands as the premiere delivery of online video all over the world. It makes sense that they would be working with On2, especially when the details of HTML5 have been hashed out and now Google's stepping more and more into various media delivery packages with Android and Chrome OS (whatever that's going to be).

Now there's two ways to look at this. I'd prefer to look at this optimistically because I love all-things Google. YT currently delivers 4 packages of video quality: High Definition (1280x720), High Quality (480x360), Standard Quality (320x240), and Mobile (176x144). They're wonderful. I wish my iPhone would be able to stream SD or HQ through the YT app over mobile (which is curbed to the lowest-common denominator), but I'll accept that casualty in how easy it is to download the original-quality upload to your computer. So in that case, the acquisition of On2 means that they're still evolving their codecs to deliver great quality video over lower bandwidth; helping them, helping us. They have the four qualities established now, but they recognize there's still work to be done and they've joined teams with one of the best.

But there's a pessimistic view that I haven't found many people noticing. YouTube still doesn't make money. Google's very open that they lose a lot every year (in fact, I'm thinking too open, but that's a conspiracy I have no grounds on whatsoever) in supplying the storage and bandwidth to deliver nearly 24hrs of video uploaded every minute. From the beginning they've been building their own glass ceiling to the likes of Hulu, which from their beginning have had the strongest business model comparatively (although that's apparently under argument as well). YT has tried to combat this by giving an outlet to major movie and tv studios for streaming just like Hulu. But how many of you have watched a whole film on YT and how many have watched on Hulu? No contest.

The other argument is that this has been another Double-Click acquisition in disguise. When a production studio wants to stream their content at the best quality for the lowest overhead themselves, they would independently go to On2 (WB and Sony, for example, are listed on the site's frontpage). Now it's YT. Say Hulu wants to go back into the code for their compression algorithms to improve efficiency, they'll have to do all the legwork themselves over licensing On2's research. Likewise any other video player: MySpace, Facebook, Blip, etc. Google isn't taking the monopolistic hand by absorbing all competition, just the best. And it becomes a real gray area when it's just a matter of code that anyone is free to play with (Theora, for example, is what everyone has their eye on now hoping that Google will expand and push).

But again, I love all things Google. I've been using all things Google for the past 3 years and don't plan on slowing down. But lately I've been worried that the tower they've been building upward has been using the bricks from the bottom floor. We use YT heavily at Causecast in combination with our own custom video player, and I would love to have our viewers see the best quality video come out of our pipeline.

Google, if you aren't evil and we should trust you, can you please check again on your mobile compression?