Google buys little-known video technology company
By CHRIS CHURCHILL
ALBANY TIMES UNIONHALFMOON, N.Y. -- Google Inc. announced Wednesday that it has agreed to buy a small software development company in New York's Capital Region.
The Silicon Valley search-engine giant said it would pay $106.5 million for On2 Technologies Inc., best known for developing technology that makes digital video easier to store and distribute in small files.
"It's a pretty heady experience," said Matthew Frost, the company's interim chief executive and a longtime employee. "For a small technology company, being acquired by Google is one of a small number of dreams you can have."
Although some hard-core techies are familiar with On2, most people in the region probably have never heard of the company, despite its local presence.
Even Michael Wacholder conceded Wednesday he wasn't familiar with the On2 -- and he's the director of the Rensselaer Technology Park and a historian, of sorts, of the local tech scene.
But Wacholder was delighted by the purchase, describing his lack of On2 knowledge as another sign the region's high-tech economy is growing. "I just can't keep up," he said, "and I think that's a pretty good indicator of the times."
On2 was founded 1992 in New York City as The Duck Corp., a classic "Silicon Alley" start up. But the company had a one-person Capital Region office manned by Eric Ameres, a 1988 graduate of RPI.
And that upstate office grew as the company did, tapping into the region's network of software engineers. "This is a great place to find talent," Frost said.
The upstate office might have even saved the company, which went public in 1999. When the high-tech bubble burst early this decade, most of On2's New York City rivals were doomed, in part, by unmanageable expenses.
But On2 had a Capital Region outpost where costs were much lower.
"We sort of slowly migrated from New York to here," Frost said.
Today, the company has roughly 30 employees in its Halfmoon offices. It has 50 other workers scattered in countries such as Finland, Japan, India, Korea, China and others.
On2 has always been about video-compression technology -- about making large video small enough for Internet and cellular networks, among others -- and its work underlies well-known technologies such as Skype, Adobe Flash Player and video chat services.
Google, which has been aggressive about becoming more than a search engine operator, presumably bought the company to strengthen YouTube, which it owns, and help it expand video technologies in a cell-phone market it wants to enter with force.
"It just wants to control certain patents and technologies that will enable it to deliver content," said Sameet Sinha, a San Francisco-based analyst who watches Google for JMP Securities Inc.
It was unclear Wednesday just what Google intends to do with On2. A e-mail from corporate spokesman Andrew Pederson only said that Google is "looking forward to closing the deal" and working with On2 workers "to improve high-quality online video."
"Unfortunately I can't provide more information about our plans right now," Pederson said.
But Frost noted that Google is acquiring more than technology -- it's acquiring a talented pool of engineers.
Under the terms of the deal, which needs approval from On2 shareholders, the company's investors will get 60 cents in Google stock for each share they own.
Ameres, who was of the company's first employees but left On2 last year for a job at RPI, said learning of the acquisition was bittersweet.
"It's the closing of a chapter," Ameres said. "It's like watching a child go off on their own. They're married, have children and have their own family now."
That family, of course, is the Google empire.
Chris Churchill can be reached at 454-5442 or by e-mail at cchurchill@timesunion.com. Business writer Larry Rulison contributed to this story.
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