InfoTech: Google's neat little purchase

Everyone denies it, but the word on the street was that YouTube sold out to Google because it was drowning in bandwidth bills. And certainly any business that delivers any form of content by streaming knows that opening a streamed channel is like opening a drain down which bandwidth pours.

YouTube is still growing at an astonishing rate - albeit a rate that appears, if column inches are to go by, to be far behind Facebook and Twitter.

Facebook has lots of pictures on it and some videos but they don't get the number of plays that many YouTube vids get.

And, YouTube doesn't even carry GoogleAds on the video pages so its revenue stream to pay those bandwidth charges isn't immediately apparent - although it has recently added infuriating ads that pop up over the video.

So, then, bandwidth charges must still be an issue.

And so to the small purchase Google announced yesterday. It has bought, for USD106 million a company called On2 Technologies.

At present, YouTube uses Adobe Flash as its delivery mechanism: if you can find out how to do it (it's not difficult) you can save a copy of a YouTube video to your hard drive and then replay it using a Flash player. On2 owns the compression that makes Flash video work. It's called a "codec" and there are dozens of types. You know three types very well: WAV (for Windows), iTunes (for Apple users) and MP3 (for the rest of us).

However, it is in the field of web-streaming compression that there seems to be some serious money to be saved.

ON2 has lots of other clever little codecs in addition. There's all sorts of speculation as to which of them might be the killer app that turns Google into a software leader or puts its output onto devices that it presently can't reach.

But our bet is on the fact that by dumping licensing fees for using Flash and reducing the file sizes even by a couple of percent so cutting bandwidth demand, Google will save the purchase price in pretty short order.