Posted October 9, 2006 5:10 pm by with 4 comments

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After earlier speculation, Google has announced the acquisition of video entertainment site YouTube for $1.65 billion in stock.

“The YouTube team has built an exciting and powerful media platform that complements Google’s mission to organize the world’s information and make it universally accessible and useful,â€? said Eric Schmidt, Chief Executive Officer in a statement. “Our companies share similar values; we both always put our users first and are committed to innovating to improve their experience. Together, we are natural partners to offer a compelling media entertainment service to users, content owners and advertisers.â€?

According to the press release…

When the acquisition is complete, YouTube will retain its distinct brand identity, strengthening and complementing Google’s own fast-growing video business. YouTube will continue to be based in San Bruno, CA, and all YouTube employees will remain with the company. With Google’s technology, advertiser relationships and global reach, YouTube will continue to build on its success as one of the world’s most popular services for video entertainment.

So, if YouTube is to retain its distinct brand identity, what does that mean for Google Video? It’s certainly not set the world on fire and was a distant competitor to YouTube. Could we see Google transitioning the best parts of Google Video to YouTube, then shuttering Google Video?

UPDATE: Nathan Weinberg has taken notes from today’s conference call, including…

JP Morgan asks why buy when they have Google Video, why stock not cash. Eric says Google Video is doing very well, integrating inside of Google, while YouTube was clearly winning the marketplace in social networking. Drummond says it is a stock transaction to be tax-free for YouTube shareholders, and somewhat cheaper for Google. He’s glad that YouTube shareholders want to be Google shareholders.