Google has laid speculation to rest -- it is buying YouTube for $1.65 billion in a stock transaction.

YouTube operates a wildly popular Web site showing original videos in a range of quality from amateurish to professional. It will continue to operate independently after the Google acquisition "to preserve its successful brand and passionate community," Google said Monday when it announced the deal, which is expected to close in the fourth quarter. The number of Google shares to be issued will be based on the 30-day average closing price two trading days before the deal is completed, Google said.

Although YouTube Chief Executive Officer and co-founder Chad Hurley had previously insisted that YouTube wasn't for sale, that view changed because Google will allow YouTube to operate independently, he said during the conference call.

Bringing YouTube into the ever-growing Google empire will mean that users have a "better, more comprehensive experience" when they upload, watch and share videos, Google said. It will also provide more opportunities for professional content owners to get their work out to a wider audience, Google and YouTube executives said in a conference call Monday afternoon..

The two have similar corporate values in that they are both committed to users first and also to innovation, Google CEO Eric Schmidt said. "Together, we are natural partners to offer a compelling media entertainment service," he said.

The deal is "an exciting next step" for Google, he said, adding that the company expects other deals that are related to providing video over the Internet. YouTube has "built a remarkable team" that is "a perfect example of the kind of people we like to work with," he said in the conference call. YouTube's business is "extraordinary," not just in terms of its business success, but also in its vision of serving users, Schmidt said.

YouTube will benefit from Google's global reach and technology know-how, Hurley said. "We're excited by this announcement and thrilled to join forces with the Google team," he said. The acquisition will boost YouTube's new video content platform, which is expected to launch in the next month, he said. The deal is also expected to help advertisers by allowing both more video ads on the sites operates by the merged company, executives said in a comment echoed by analysts after the conference call.

The IDG News Service is a Network World affiliate.

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