Then again, didn't Google commit $900 million for a deal with MySpace?

In other words, Google is definitely serious about social networking. And, as a result, buying YouTube would be a savvy move.

First, Google has a huge Web-based platform to effectively scale YouTube. Basically, as of now, YouTube has significant costs because of bandwidth.

Next, it's a no-brainer that Google can quickly monetize YouTube with its advertising network.

There's something else that Google understands about YouTube: that is, the video site has been a search-engine-optimization machine.

How? Basically, thousands and thousands of people are posting videos on YouTube every day. Over time, this gets crawled by search engines. So, if you search a song or an interesting topic, chances are you will see a YouTube link. In other words, YouTube's users are – for free – virally spreading the company's presence across the Web.

Perhaps this is what has made it difficult for other competitors to make a dint in YouTube.

Finally, as for the lawsuits, Google obviously has enough cash to deal with any litigation.

So, for $1.6 billion, Google will get a New Age Media brand. The company will also become #1 in online video, a red hot category. Moreover, the deal should help Google move beyond text-based ads.

Of course, this is mostly speculative right now. But, in light of Google's $125 billion market cap, a deal for YouTube looks like a good bet.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.