Google on Wednesday agreed to acquire On2 Technologies in a stock deal valued at $106.5 million, sending shares of the video compression company soaring 50 percent higher in trading.

Clifton Park, New York, On2 develops codecs, or software that allows video to be compressed or decompressed, making it easier to shuttle the smaller files online. Such technology could be used to speed delivery of videos from Google-owned YouTube as well as cut bandwidth costs.

"Today video is an essential part of the web experience, and we believe high-quality video compression technology should be a part of the Web platform," Google VP Sundar Pichai said in a statement.

Mountain View, California, Google paid a 57 percent premium to acquire On2, based on the trading price of the video compression company the day before the deal’s announcement. On2 has a market capitalization of $67 million.