The combination of YouTube's user generated content and Hulu's professional content could deliver strong synergies for Google Inc. (NASDAQ: GOOG), Barclays Capital said.

Google, Yahoo! Inc. (NASDAQ: YHOO) and Microsoft Corp. (NASDAQ: MSFT) are in early discussion to buy the video-streaming service Hulu, according to Los Angeles Times.

While there are many questions surrounding the proposed deal, we believe the combination of YouTube’s user generated content and Hulu’s professional content could deliver strong synergies for Google and better position it to capture a greater share of the online video and branded advertising market, said Anthony DiClemente, an analyst at Barclays Capital.

Additionally, DiClemente believes a Hulu acquisition could help improve Google’s relationships with content owners and further its Google TV offering.

However, DiClemente believes regulatory risk would be high for Google given the current environment. The FTC is investigating Google on antitrust concerns and he would imagine this potential acquisition would immediately go under Federal review.

While Hulu and YouTube focus on different user experiences and the online video market remains highly fragmented, combined Hulu and Google’s domestic video share as measured by videos viewed would be 42 percent -- as of May, Google’s videos viewed is at 38 percent; Hulu videos viewed at 3.5 percent -- and Hulu currently has a 29 percent share of total video ads (comScore).

Online video is the fastest growing ad format online; DiClemente expects it to grow 45 percent to $2 billion this year. Aside from regulatory risk, content licensing agreements would be his other primary concern.

Disney and NewsCorp recently renewed their licensing contracts with Hulu (as did NBC Universal, by default as a condition of Comcast’s acquisition) and DiClemente believes these contracts would be transferrable in the event of a sale, eliminating this risk.

DiClemente noted that Hulu expects to spend $300 million-plus for content this year on $500 million in revenue. But, he does not believe this combination would be a major threat to Netflix Inc. (NASDAQ: NFLX) as YouTube/Hulu would be mostly ad supported versus Netflix’s subscription model, which enables Netflix’s diverse content offering.

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