Google Inc. (GOOG) agreed to acquire On2 Technologies Inc. (ONT) for $106.5 million in stock as the Internet-search company looks to buttress its video operations.

Separately, Google sold its orphaned radio ad placement technology to WideOrbit Inc., a small San Francisco company that makes software for the broadcast TV and radio industry. Financial details were not provided, but WideOrbit said it will inherit 3,600 Google customers.

The sale is the final chapter in Google's failed attempt to sell radio ads through an automated online system. Google earlier this year said it would exit the radio business in May as part of its ongoing effort to cut costs and shed underperforming businesses.

The assets were acquired thorough Google's $102 million deal for dMarc Broadcasting Inc. announced in January 2006.

Google shares recently fell about 1% to $449.45.

As for On2, the Clifton Park, N.Y., company makes video-compression technology, which allows for the quick transfer of large video files across the Web. The technology represents a key asset as online-video viewership continues to surge.

Google has one of the most-visited video sites - YouTube. In addition, On2 has software that helps make high-definition video playback possible on mobile devices.

On2's clients include Adobe Systems Inc. (ADBE), Nokia Corp. (NOK) and Infineon Technologies AG (IFNNY).

Google will likely be able to place On2's software into the infrastructure of YouTube to improve the user experience, said Andrew Frank, an analyst with research firm Gartner. The technology could also make its way into Google's Android mobile operating system and its Chrome operating system for PCs.

Owning an important piece of Web infrastructure such as video compression gives Google more leverage in keeping the channels through which video and other Web content flow to users unrestricted.

"By owning the infrastructure, Google kind of keeps the road open to a day when Internet distribution of video is ubiquitous across all platforms," said Frank. "Google has a long-term interest in making sure that the future of video distribution across any platform is open."

In a blog post, Google said it was not in a position to discuss specific product plans until after the deal closes.

Each share of On2 will be converted into 60 cents in Google stock. On2 shares closed Tuesday at 38 cents and the stock's 52-week high is 65 cents a share.

On2 shares surged nearly 50% to 58 cents recently, after the deal was announced Wednesday. The deal is set to close in the fourth quarter.

On2, set to release its second-quarter results Thursday, in May reported first-quarter revenue dropped 10% to $4 million as the company's loss narrowed. The company has been cutting costs to save cash, which as of March 31 totaled $3.2 million, down 24% from a year earlier.

-By Jerry DiColo, Dow Jones Newswires; 212-416-2155; jerry.dicolo@dowjones.com

(Scott Morrison contributed to this report.)