Google is set to buy video compression technology vendor On2 Technologies in a move that looks likely to bolster Google's video capabilities.

On2 offers video compression technologies used in Adobe Flash Player, VoIP, mobile video and embedded devices. On2 has more than 2 billion installations of its On2 Video VPx codecs, and its customers include AOL, Skype, Nokia, XM Satellite Radio, Sun Microsystems and Sony.

On2 will provide Google with a "high-quality video compression technology," said Sundar Pichai, vice president of product management of Google. "We are committed to innovation in video quality on the web, and we believe that On2's team and technology will help us further that goal."

The $106.5(£63) million deal shows Google's interest in pushing forward video technologies on a variety of mobile devices and through set-top boxes, said Gartner analyst Andrew Frank. The acquisition gives Google access to video compression software without paying licensing fees for MPEG's H.264 standard.

The acquisition allows Google to move forward with video projects without any "bottlenecks," Frank said.

The deal "reinforces the idea that Google is very serious about video," he added. "Video in the living room and video on the go are going to be major thrusts for Google in the future."

The stock-only transaction, which is subject to On2 stockholder approval, regulatory clearances and other closing conditions, is expected to close in the fourth quarter of 2009.