There is more to Google (NASDAQ:GOOG) TV than meets the eye.
Google is partnering with Sony (NYSE:SNE) and Intel (NASDAQ:INTC) to become the ultimate search engine inside set-top boxes and other TV-related devices. The goal is to dominate the living room as Google does the Web, according to The New York Times.
But this is not a case of Google going Hollywood or creating a counter-strategy to pulling its search engine business out of China over censorship and hacking issues. After all, who needs China’s 400 million active Internet users when you can be in prime time, chipping away at nearly $80 billion spent annually on television advertising — right?
There are some strategic points worth making that have been missed by some initial responses to Google’s latest move to take over the planet.
- Google considers television just another interactive platform where it can organize the world’s entertainment, information and communications. Google TV is recognition that television — despite its historical significance in the home as a shrine to popular culture — is evolving into just another digital screen.
- Google’s participation assures that interactive television will more rapidly go mainstream by providing a familiar way to navigate the Web options — including social media, Twitter, photos and email - that will interface with movies and more traditional television fare.
- Because the new open TV platform is supported by Google’s Android operating system for smart phones, software developers will have an opportunity to innovate new applications for otherwise nascent interactive television.
- Google’s latest television move is sure to spur Apple (NASDAQ:AAPL) to do something more aggressive with its long-suffering Apple TV, and will force the TV networks and other major content providers to fully embrace interactivity. While it may exacerbate a well publicized rift with Apple, Google TV also can be a catalyst for long overdue efforts to bring more sophisticated interactivity into the home.
- Google TV, which has not yet been officially announced, also will intensify competition on other fronts. Efforts by Comcast (NASDAQ:CMCSA) and other cable operators, telcos like Verizon (NYSE:VZ) and AT&T (NYSE:T), companies such as TiVo (NASDAQ:TIVO) and Boxee, and content distributors such as Netflix (NASDAQ:NFLX) have been lame by comparison to the interactive functionality on most mobile devices. Until now, Google’s biggest problem was finding TV-related devices sophisticated enough to accommodate complex, two-way algorithms.
- Resistance to interactivity by advertisers and program producers and distributors makes television the final frontier. As usual, consumer demand and innovation have been beating the industry to the punch. For its part, Google is just interested in ways to make its Android operating systems the dominant platform ahead of competitors racing to create smart homes.
- What Google is really after are more of the advertising dollars that are its dominant source of income. Google has been slow to gain traction as a vendor of TV ad inventory, which it sells and prices by auction. Last year it launched Google TV Ads Online through its dominant online video service, YouTube.
Targeted, addressable video advertising that establishes sustained links with customers and facilitates e-commerce is a multibillion dollar sweet spot that others are struggling to obtain. After years of planning, cable operators still are struggling to launch Canoe Ventures, a national addressable advertising initiative.
Once Google is in everything television, it can offer advertisers, broadcasters and cablers a more efficient way to pitch to and connect with consumers, and complete electronic transactions.
Then again, Google could pull the rug out from underneath the broadcast and cable networks by reducing them to glorified content aggregators. Google will give consumers the tools to search all video and commercials, which it also could barter on its own, thereby making current TV players obsolete.
That kind of takeover could occur more quickly than even television’s avant garde realizes. The viability of web browsing in the living room is a non-issue — just look at what consumers accomplish with their smart phones and other portable devices that were unheard of just a few years ago. Consumers have demonstrated they are receptive and adept at using interactivity at every level and in any venue. That could mean the Fox TV (NASDAQ:NWS) of today becomes the Google TV of tomorrow.
Disclosure: No positions