So ON2 did not spend many man hours on this all these years? Less than a third year student doing it part time? Oh well, google overpaid...

I seriously doubt that they have had remotely the number of skilled man-hours as the most popular open source codecs. The source code would back that assertion up, if they're doing things like simply groveling through 2^16 combinations of things looking for the best.

Either they weren't skilled or they didn't have time; I favor the latter theory. Feel free to advocate for the former if you like. But you can't have it both ways, because the results were clearly not well-skilled people spending lots of time on the problem. One or the other is not true.

On2 does not have the resources of Google and the entire internet at their disposal. Even the x264 developer pointed out that the VP8 spec was clearly unfinished.

Sorry, ON2 is a codec company that prior to being bought by google was in the business of selling their codecs, VP8 included. Now, either they were good at it, then it was OK to pay that price and we would have a good codec. Or they were not and it needs google's resourses and "the entire internet" to fix that, but then google overpaid. Which one is it?

It's a good codec. But as you can see, the specification was clearly not finished. So On2 sold a codec package that wasn't very polished. Doesn't mean it wasn't worth the money. It just means that polish needs to be applied, and now that it's open, it will.