Google announced early Tuesday that its acquisition of video sharing site YouTube has closed. The mostly stock deal was initially priced at $1.65 billion, although at Monday's closing price of $481.03 per Google share, YouTube walked away with $1.775 billion.

The hefty profit for YouTube investors lies in the calculation of Google's stock value, which was taken as an average over 30 trading days ending on November 9, 2006. 12.5 percent of the stock will be placed in escrow for one year, Google said, in order to secure certain indemnification obligations.

"We are excited to have closed the acquisition in order to begin collaborating to offer the best in quality and depth of content, user experience and new business opportunities for our partners," Google CEO Eric Schmidt said in a statement.

"YouTube and Google will together provide innovative and exciting services for our users that will add a new dimension to on-line media entertainment. We look forward to working with content creators and owners large and small to harness the power of the internet to promote, distribute and monetize their content."

YouTube CEO Chad Hurley said the company will roll out a number of new features in the coming months "to benefit the creativity and participation of our community."

However, the acquisition won't come without difficulties. In a recent filing with the Securities and Exchange Commission, Google admitted the YouTube acquisition may lead to additional liabilities.

"In addition, our planned acquisition of YouTube may also subject us to additional copyright claims upon the closing of the transaction," Google continued. The company warned that any action could cause a loss of revenue.

YouTube has been a popular target for copyright infringement lawsuits, and from the Mountain View, Calif. search company's comments, Google Video is not immune to the same problems. Both allow unmoderated posting of videos, which often includes copyrighted material.