Orange is in talks to acquire a 49 per cent stake in YouTube rival and second largest video-sharing site in the world Dailymotion for €58.8 million.

The deal values Dailymotion at around €120 million, about half of what some analysts had pegged it to be worth, and includes the right for Orange to move towards full ownership from 2013, Reuters reports. As part of the deal, Dailymotion’s value will be capped at €200 million.

The move is part of Orange’s new content strategy, in which the company is looking to reduce money spent on buying content, and instead increase content distribution through partnerships with established brands.

"Dailymotion is one of the rare successes of the French Internet and we are rethinking our content strategy so this deal fits together well. Dailymotion is the only real alternative to YouTube in the world," France Telecom chief executive Stephane Richard said.

According to comScore, Dailymotion had around 95 million unique visitors in December, short of YouTube’s 144 million, but only generated about €18 million in revenue for 2010.

"We want to find a business model that will make Dailymotion profitable, not just allow it to attract visitors," Richard added.