Google Acquires Video Compression Company for $106.5 Million
mashable.com
mashable.com
Since Apple has argued repeatedly and publicly with the MPEG-LA to liberalize their royalty rates for viewers and smaller users it's not certain they'll stick with the H.264 Camp despite their hardware commitment, their patent involvment, it's head start and its small technical advantage.
http://pulse2.com/2009/04/14/google-spending-about-2-million...
Bandwidth has to be a significant chunk of that, there is a tremendous amount of money to be saved by using more efficient video codecs. They will probably use the On2 team to invent even better codecs and open them up as well.
http://digitaldaily.allthingsd.com/20090617/credit-suisse-fa...
Claiming your codecs is better than H.264 seems to be standard operating procedure for codecs since it's currently the gold standard. (You'll know VP8 is the best when all the other codecs compare themselves to it!) But these claims are either just blatant PR BS or like On2 you make some very specific claims. If you read what they actually say it appears they think VP8 is "better" than H.264 when you also consider licensing.
Now I personally think that's very valid, as any royalty free codec that Google releases from this purchase will have a big advantage due to it's licensing, and that will make it "better" for many purposes. But it's not what codec nerds mean by "better".
Personally I agree with your point about codec improvements and think that Google should get something out fast based on what they've bought, but they should also be looking for defectors from MPEG-LA to work on a next-gen royalty free codec by pooling a bunch of patents and expertise. It seems MPEG-LA has either been mismanaged or has fallen victim to internal politics so there's been plenty of unrest over the years.
Sun had some patents it was going to use in a royalty free codec called OMS and they're already licencing VP6 for JavaFX so that's a good place to start.