Oct.11 - Google Inc., the leading Web search engine, agreed to purchase top video-sharing website YouTube for 1.65 billion U.S. dollars in stock, media reports said Tuesday.

 

YouTube's co-founders Chad Hurley and Steve Chen and their 65 employees will join the company, and the company will continue to operate independently with its headquarters in San Bruno, California, Google said Monday in a statement.

 

YouTube soared to an Internet icon after its launch from a garage in Feburary 2005. The company claims that more than 100 million videos are watched daily by visitors to the free website, which features a content ranging from silly home videos to snippets of Hollywood films, television shows and concerts.

 

The deal, expected to close before the end of the year, combines two of the most popular Internet brands: Google, synonymous with Web search and rapid innovation, and YouTube, a leader in the new generation of user-participation Web sites.

 

In anticipation of the acquisition, investors pushed shares of Google up 8.50 dollars, or 2 percent, on Nasdaq on Monday to a closing price of 429.00 dollars -- a level not seen since late April. In extended hours trade, Google climbed to 431.55 dollars.

 

The stock had already gained about 2 percent on Friday when reports emerged that a deal might be in the works. In two trading days, Google has added around 6 billion dollars in market capitalization.

 

For Google, the acquisition of YouTube, the company's largest, would thrust the Web search leader quickly into the emerging market for video advertising, where it has only a tiny foothold compared with Yahoo Inc. and various Web start-ups.

 

Analysts said the acquisition will build on Google's strategy to add more content to attract advertisers.

 

"YouTube is phenomenally valuable in terms of traffic and in the Internet sector this is important just like location is important in real estate," Reuters quoted Sasa Zorovic, an analyst at Oppenheimer, as saying.

 

Just a few hours before the deal, Universal Music Group and Sony BMG said they had signed distribution deals with YouTube, following a similar agreement with Warner Music Group last month. Google also said on Monday that it had signed similar deals with Warner and Sony BMG.

 

Some cynics have questioned YouTube's staying power because of copyright concerns.