The deal, which is by far Google's largest yet, is regarded as a largely defensive one that leapfrogs Google into a leading role in the Internet's burgeoning online-video marketplace while holding its media and Web-portal rivals at bay.

Without any formal marketing in its less than two years on the Web, YouTube now streams 100 million videos daily to an audience estimated at nearly 40 million a day. The acquisition of YouTube highlights how heavily the likes of Google, Yahoo Inc. and other Internet companies are betting on video as a way to attract bigger numbers of customers and generate more advertising dollars.

Indeed, after reports of talks with YouTube surfaced last Friday, many analysts said that they believe Google's competitors will now seek to buy imitators of YouTube to keep pace.

On Monday, the boards of both Google and YouTube approved the terms of the deal, which was announced after the market closed.
Over the last two days, Google and YouTube executives have compiled an extensive list of ways to integrate the two features. There's now plans to soon incorporate YouTube videos into Google search results, and to make YouTube part of Google's AdSense advertising feature, according to Google co-founder Sergey Brin.

"When we looked at the marketplace, there was a clear winner in the social-networking side: YouTube," Google Chief Executive Eric Schmidt said during a conference call with reporters and analysts. "That's what drove us."

YouTube founder Chad Hurley, during the same call, said that it was Google's "revolutionary ad program that inspired us." Plus, he added, "we wanted to remain independent. By working with Google, that's still the case."

Details on the deal Google has agreed to let YouTube operate as a separate entity, allow it keep all its employees and to continue to work out of its offices in Silicon Valley. The deal is expected to close in the fourth quarter. Additional details were not disclosed.

Expected to benefit from the deal is Sequoia Partners, one of YouTube's original investors. It's so far invested about $11.5 million into the company, during two rounds of funding.

YouTube and Google began negotiating terms about a week ago. Talks accelerated during the weekend after YouTube reportedly received interest from some of Google's biggest competitors.