Overall verdict on the VP8 video format
Overall, VP8 appears to be significantly weaker than H.264 compression-wise. The primary weaknesses mentioned above are the lack of proper adaptive quantization, lack of B-frames, lack of an 8×8 transform, and non-adaptive loop filter. With this in mind, I expect VP8 to be more comparable to VC-1 or H.264 Baseline Profile than with H.264. Of course, this is still significantly better than Theora, and in my tests it beats Dirac quite handily as well.
Supposedly Google is open to improving the bitstream format — but this seems to conflict with the fact that they got so many different companies to announce VP8 support. The more software that supports a file format, the harder it is to change said format, so I’m dubious of any claim that we will be able to spend the next 6-12 months revising VP8. In short, it seems to have been released too early: it would have been better off to have an initial period during which revisions could be submitted and then a big announcement later when it’s completed.
Update: it seems that Google is not open to changing the spec: it is apparently “final”, complete with all its flaws.
Also a good read is: Flash, Google, VP8, and the future of internet video
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