Google has announced that it has agreed to purchase YouTube for $1.65 billion in stock marking the company's largest acquisition in its eight-year history.

As we reported Monday the blogosphere has been speculating for months about how to price YouTube, which so far has failed to monetise the traffic to the site, which is estimated at 32 million visitors each month.

Google is expected to use the social networking site to earn up to £800,000 each month serving its own advertising next to videos as they play, thus garnering revenue.

The deal was reportedly developed in less than a week, and is a massive sum for a company with just 67 employees that was founded only 19 months ago.

"The YouTube team has built an exciting and powerful media platform that complements Google's mission to organize the world's information and make it universally accessible and useful", Google CEO Eric Schmidt said in a statement.

"By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users and to create new opportunities for our partners", remarked YouTube CEO and co-founder Chad Hurley.

YouTube, launched in February 2005, has grown quickly into one of the most popular websites on the internet.

It has 100 million videos viewed every day and an estimated 20 million individual visitors each month.

The acquisition is expected to close before the end of the year.

It's been a busy day for YouTube, the company also announced it has signed agreements with Universal Music, Sony BMG, and CBS for their content to be included in YouTube users’ created content.

The deals come after an initial agreement with Warner Music, who signed up its content last month.

YouTube has been nominated for best website in this year's Pocket-lint.co.uk Technology Awards 2006