Internet search giant Google on Monday snapped up red-hot video-sharing website YouTube for $1.65 billion in an all-stock deal.
Video "is the next step in the evolution of the Internet," Google CEO Eric Schmidt told news reporters in a conference call.
YouTube, which launched in 2005, has grown overnight into the Internet's most popular place to watch videos, showing 100 million daily. Yet, along the way it became a hotbed for copyright infringement, with many contributors posting videos of TV shows or using copyrighted songs in homegrown productions.
YouTube, in clearing the way for a deal, announced an alliance with record label Universal Music -- one of the site's harshest critics -- that called for a filtering system that would automatically weed out videos with its songs.
By aligning with Google, YouTube now has the resources to build an even stronger filtering system that would please all content owners, said Chad Hurley, 29, one of YouTube's co-founders.
Google said YouTube will remain independent, with a separate website. Google will continue to run its own Google Video site, which also features homemade videos and professional content from networks and movie studios.
Where visitors will see change is in Google searches: Videos from YouTube will begin appearing in search results.
The addition of YouTube videos brings "a humongous amount of content that will be searchable" on Google, says John Battelle, who runs the Searchblog website. That makes Google that much more valuable, he says, because it can profit with more advertising from YouTube videos.
Google reported $6.1 billion in revenue last year, virtually all from little text-based ads that appear near search results. It's been on a tear this year, trying to expand into video advertising and creating recent alliances with MTV Networks and MySpace.
Now, says Scott Kessler, an analyst at research firm Standard & Poor's, Google is "far and away the leader in video advertising."
Investors applauded Google's deal. Shares in the company rose $2.75 in after-hours trading after closing at $429, up $8.50 a share, in regular trading.
In less than a year, YouTube in San Bruno, Calif., quickly became a social phenomenon as a way for users to easily share -- and discuss -- homegrown videos. It has seen a 2,500% increase in its audience base, according to measurement firm ComScore Media Metrix.
The site had 72 million visitors in August, up from just 2.8 million visitors a year before. It's now the Internet's 14th-most-visited site. Google is No. 3 after Yahoo and MSN.
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