UPDATED: Could Google purchase Valve?

A rather strange rumor has popped up on the web this morning. The Inquirer’s Charlie Demerjian claims to have it on good authority that Google is just about to announce a buyout of Valve.

As Charlie points out, you don’t have to think very hard about Google’s potential motives for a deal like that. Valve owns what’s likely the biggest game distribution service out there—Steam—and it has deals with third-party game studios and publishers from Activision and EA to id Software and Rockstar Games. Slap a Google logo and pin a few ads on Steam, and Google could make (even more) millions.

With that said, Charlie doesn’t justify the deal from Valve’s perspective beyond saying, "It’s a good thing for Valve." Is it really? Valve has become rather big lately, and like many independent game developers, it may want to retain the status quo. Would Gabe Newell really want Eric Schmidt peering over his shoulder to check on Half-Life 2: Episode 3‘s progress? That seems doubtful, especially considering how well Valve is doing on its own.

Some sort of deal—not necessarily a full-out merger—might make sense, though. We’ve heard plenty of talk about Google’s plans to kick off an in-game advertising scheme, and Valve could be the perfect business partner for such a venture. (Thanks to TR reader Tom for the link.)

Update: Valve’s Doug Lombardi has told the MTV Multiplayer blog the Inq’s story is a "complete fabrication." Lombardi went on to specify that Google is in fact not buying Valve.

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