The typically obscure and technical world of back-end online video processing is having its day in the press today as Google just bought ON2, the makers of the 'VP' line of codecs, one of the two leading encoding standards for web video (H.264 is the other). I realize I have already lost 90% of the audience which is why 'video encoding' is something that belongs in the back-room with the techies. Dan Frommer at Alley Insider is excited about the acquisition.
Dan Rayburn, on the other hand, thinks this is no big deal, because, after all this is just a codec and H.264 is quite well embedded in a lot of sites and devices, so a small drop in royalties or a small improvement in quality by open-sourcing VP8 is not going to drive any real adoption.
Dan R is right on all the short-term implications, but I think there is a bigger, longer-term strategic angle here.
My guess is that Google bought On2 to support new HTML 5 standard. HTML 5 has the ability to natively support video in the browser without having a plug-in like Flash or Silverlight. In the long-term, this is a good thing for the web, but obviously Microsoft (with Silverlight) and Adobe (with Flash) don't love it.
HTML 5 video right now is hindered by the fact that the default open-source video codec (Theora) is, quite frankly, lousy. It is based on VP3, an old ON2 technology that was contributed to the open-source community and is not up to par with modern codecs like VP8 or H.264.
I suspect what you will see is that Google open-sources VP8, not because this will get them an awesome controlling platform but because it will support HTML 5 video and *weaken* Microsoft's or Adobe's ability to be a platform for video.
If you parse this sentence from their announcement they are all but telegraphing this.
Because we spend a lot of time working to make the overall web experience better for users, we think that video compression technology should be a part of the web platform.
At VideoPublishing.com, we think this is overall good news. Over time, encoding and delivery will eventually fade into the background and innovation will be about managing workflow and interactivity with video, because that, ultimately is the promise of web video.
UPDATE: Some good follow-on comments by Tim Siglin here: