Google Inc. announced the acquisition of YouTube for $1.65 billion in all stock-for-stock transaction. The deal was confirmed in a Google’s press release after Michael Arrington filled up the whole homepage of his blog with Google-YouTube rumors and speculations. Both the companies have approved the deal, which would close in fourth quarter. This deal is the largest acquisition of Web 2.0 bubble.
YouTube will operate independently with their 65 employees at YouTube’s San Bruno headquarters. YouTube will preserve its successful brand and passionate community. This deal will provide new opportunities for users and content owners.

After this deal, YouTube may finally turn profitable by integrating Google’s ad platform and search engine technology but Google may face legal problems due to the copyrighted content in YouTube. Sequoia Capital, which invested around $11.5 million in two rounds and owned 30% of YouTube could take $495 million out of this deal. YouTube founders Chad, Steve and Jawed each makes about $200 million from the deal.

More details about the deal are available in a Google’s audio webcast of the conference call.

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