On2 writes codecs and software that optimize internet video. On2's specialty is shrinking the size of video files while boosting quality levels. A new study from media analysis firm Ipsos MediaCT finds that Americans are watching more television and movies via Internet streaming than ever before --and the numbers have exploded in just the last six months*. Google owns YouTube, and as Google is moving to convert Youtube's video catalog to High Definition.

On2 also makes software that optimizes cellphone video. Google provides Android handsets, and has users with iPhones, Blackberries and Windows Mobile devices that download considerable content.The acquisition is being debated and commented on in internet blogs and forums: some believe if control of On2 technology is important to Google, the company should brace for an avalanche of counter-offers.

Under the terms of the agreement, each outstanding share of On2 common stock will be converted into $0.60 worth of Google class A common stock in a stock-for-stock transaction. 0n2 shareholders aren't very happy with the deal: The Times Union reports that The New York City law firm Levi & Korsinsky LLP is looking to bring a class action lawsuit against the On2 board of directors on behalf of shareholders, who argue On2 stock had traded at 65 cents per share as recently as May.

On2 once had a market cap in excess of $1 billion, after it went public on the American Stock Exchange in 1999 following a merger with Applied Capital Funding (which was already listed at the time). Before its entry on the public market, The Duck Corporation had raised $6.5M in venture capital funding from Edelson Technology Partners and Citigroup Ventures.

*Ipsos MediaCT collected data for the study during April 2009 via online interviews as part of the company's ongoing Motion study, conducted quarterly.