Digital Trends

Sometimes rumors do come true: Google announced it is acquiring online video powerhouse YouTube for $1.65 billion.

Last week's speculation is this week's fact: Google has just announced it plans to purchase the popular online video site YouTube for $1.65 billion.

According to Google, YouTube will continue to operate independently under its own brand to preserve its identity and maintain the loyalty of its user community, while the two companies aim to provide a "better, more comprehensive" way for users to find, watch, and share online videos. The acquisition is also expected to open up new opportunities for mainstream content providers—e.g., music labels, television networks, movie studios, and game developers—to distribute material to the online audience.

"Our community has played a vital role in changing the way that people consume media, creating a new clip culture. By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users and to create new opportunities for our partners," said Chad Hurley, YouTube's CEO and Co-Founder in a statement. "I'm confident that with this partnership we'll have the flexibility and resources needed to pursue our goal of building the next-generation platform for serving media worldwide."

Rumors of Google acquiring YouTube were met with speculation by members of the financial community (including rogue financier Mark Cuban, who claimed anyone buying YouTube would be a "moron"). Industry analysts noted that a good deal of YouTube's content is uploaded to the site in violation of copyright laws and that the only real reason the company hadn't been sued into oblivion was that it didn't have any attractive coffers to raid. Not so with Google, which has around $10 billion in liquid assets, some of which may be an appealing target for distributors and copyright holders upset with their content going up on YouTube without permission. Just last month, Universal Music CEO painted a virtual bullseye on YouTube's back by stating the company owned Universal "millions of dollars" in copyright damages, and promising the company would deal with YouTube shortly: apparently, that plan was to ink a deal with YouTube, as Universal today signed on to YouTube's forthcoming content identification architecture as a way to control unauthorized distribution of Universal material via YouTube.

But for now: Google and YouTube are sitting in the same tree. The deal also marks the first time a real-world price tag has been successfully placed on one of the new generation of sites thriving on user-generated content. If the trend shown by acquisitions of social networking sites in the last couple years holds, the asking prices may only go up from here.