Google buys YouTube for $1.65 billion

Such a deal had been rumored to be in the works, but it has indeed happened:

Google announced this afternoon that it would buy YouTube, the popular video-sharing Web site, for stock that it valued at $1.65 billion.

Google beat out a number of other YouTube suitors, including Microsoft, Viacom, Yahoo and the News Corporation. By successfully negotiating the deal, Google has once again proved that it is the Internet’s dominant player.

Under the terms of the deal, YouTube will retain much of its identity and will keep its name and its office in San Bruno, Calif., more than 25 miles from Google’s headquarters in Mountain View.

Chad Hurley, YouTube’s co-founder and chief executive, has repeatedly said he would prefer for his company to remain independent. Asked about such comments in a conference call with Wall Street analysts and investors held late this afternoon, Mr. Hurley said his company did want to stay independent, adding that “by working with Google, that’s still the case.”

Steve Chen, also a YouTube co-founder, said, “It is hard for me to imagine a better fit for two companies,” both in terms of technology and company culture.

No word yet on what will happen to Google Video. It seems likely, though, that Google Video and YouTube will merge, but YouTube will retain much of its independence even as a Google owned service.

UPDATE: This from Google's 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 Google Video stays for now, but we suspect that, at some point in the future, it will merge with YouTube. It really doesn't make long term practical sense for Google to have two different video services.

As time passes YouTube will become more tightly integrated with Google, just as other sites and services that Google snapped up have (i.e. Idealab's Picasa, Pyra Labs' Blogger, or Keyhole, whose software is now Google Earth).