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Internet search behemoth Google Inc. said today it would buy online video leader YouTube Inc. for $1.65 billion, a deal that vaults the Internet leader to the forefront of the online video craze.
The much-anticipated deal, announced after the markets closed today, confirmed press reports last week that Google, jockeying for a bigger slice of the online video business, was set on buying the 19-month-old YouTube.
"This is the next step in the evolution of the Internet," Eric Schmidt, chief executive officer of Google, told listeners on a conference call this afternoon.
Mr. Schmidt and YouTube executives touted the potential of Google's search technology and advertising model combined with the loyal online community of YouTube, which receives 100 million video views per day.
"Right now we're in the middle of a shift in digital media entertainment," said Chad Hurley, chief executive officer and co-founder of YouTube. "Users are now in control of what they watch and when they want to watch it. They decide what rises to the top. By joining forces with Google, we'll be able to sharpen our focus on that vision."
Both companies have received corporate approvals for the deal, which they expect to close in the fourth quarter. Under the transaction, YouTube will retain its brand and continue to operate independently, officials said on the call.
Mr. Schmidt stressed that Google Video will continue to exist, noting that it will become "even more integrated with Google overall."
The acquisition comes on the heels of announcements yesterday morning that both companies are teaming up with major music labels to distribute music videos online and share in the advertising revenues.
Google inked deals with Warner Music Group Corp. and Sony BMG Music Entertainment, while YouTube teamed up with Universal Music Group, as well as Sony BMG.
YouTube also announced a partnership with CBS Corp. to air clips from popular shows like "Survivor," "CSI" and "the Late Show with Dave Letterman."
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