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Google’s foray into TV will radically alter the
market and possibly, the medium. It will finally commercialize set-top boxes,
propel Blu-ray penetration and reaffirm that television remains the most
effective platform for advertising.
The Google TV plan was outed last month when TheNew York Times reported Sony and Intel were in cahoots with the search giant on a project. Today, The Wall Street Journal said the
platform will be shared with developers at Google’s I/O conference in San
Francisco May 19 and 20.
Larry and Sergey know the online ad gravy train won’t last forever. Google shares
are down around 15 percent year-to-date. Broadcast stocks have gained
similarly. The broadcast TV industry took a hit last year, but still
collectively took in billions in ad revenues. The Big Four alone made $22
billion, according to Ad Age. Barring a catastrophe, they’re on their way
to $26 billion this year. Throw in TV stations, and you have a $43 billion
industry for 2010. Add cable, and it’s around $130 billion.
Google, on the other hand, exceeded the collective sales figure of the Big Four
last year with revenues of $24 billion. Google managed this not through
an army of salespeople, but with algorithms. Larry,
Sergey, et al, made $24 billion with code strings. There’s no denying their
brilliance, which is why they’re going the operating system route and putting
it into TVs.
When you’re pulling down $24 billion with code strings, its a serious incentive
for the folks who untangle them. It’s merely a matter of time
before the accidental, unintended and ineffective metrics of AdWords and
AdSense are exposed. Anyone who’s done a Google search knows how completely
useless the resulting sponsored links are.
TV has a track record. It’s pretty easy to understand when people say they saw a
product or a vehicle on TV. It’s extremely easy to track direct marketing.
Probably half the population has tried Proactiv.
Google’s other major influence is nine miles from its Mountain View
offices in Cupertino, Calif. Steve Jobs is getting ready to charge $1 million
for display ads on Apple’s iPhones and iPads. The market will bear the price
initially on the first factor that is the crack-like phenomena of Apple’s
handheld devices. But only hard data will maintain that price point over time.
Perhaps the folks at Apple’s 1 Infinite Loop broke the code. Conversely, the folks at
Google realized the potential of controlling platforms when they bought Android
Inc. a few years ago. Apple controls its slavering followers. Google is a bit
more beholden to users. Apple’s stock is up 25 percent year-to-date. It made
$43 billion in 2009--as much as all of broadcast TV is expected to generate
this year.
Oddly, Apple is what it is today due in large part to television
advertisements. Would we not see super-cool people using the super-cool
doodads on TV, lines wouldn’t form at Apple stores on release days.
Google tried to go head-to-head with the iPhone. Android phones hardly have the
same cult following. There is no iTV, however.
Google TV has line-forming potential with set-top boxes. Regulators have been
trying for years to commercialize the set-top box market, to no avail. They
forced cable operators to embed their encryption into CableCards, of which six
or seven are in use.
Neither current cable set-tops nor specialized peripherals like Roku support
full access to the Web. An Android-enabled, Intel-powered, Blu-ray playing,
HD-recording, CableCard-slotted, sleek-looking set-top box is another matter
all together.
Every player in the broadcast TV industry ought to send a geek squad to San
Francisco in mid-May. While Google’s move into TV is a good sign for the
sector, it’s not one that should be met as a competitive threat. Throw
broadcast and Google into a cage match, and broadcast will be crushed.
This is a perfect opportunity for an alliance. Comcast, the largest player in
the cable industry--is nicey, nicey with Microsoft, the not-Google up north.
Google wants to be on TV; TV would be wise to reciprocate.
....
“Google to Introduce TV Software” from The
Wall Street Journal
“Most TV Saw Ad Revenue Fall Last Year” from Ad Age
“Google and Partners Seek TV Foothold” from The
New York Times
“Google’s Android is Getting into TVs,” from TVB
Posted by Deborah McAdams at 04/30/2010 02:40:48 PM |
Hi Deborah,
Before we read too much into the impact of Google's announcement at the I/O conference next month, it's important to keep in mind where Google's program is right now. As far as I know, the only companies that have signed on to date are Intel, Sony and Logitech. There have been some rumors that Samsung might be interested in joining, but Panasonic has already said that it's not interested, and Samsung is likely not to be interested unless Google TV can run on Samsung's ARM-based processors, not just Intel's CPUs. If it's "Intel or nothing", there's not going to be a lot of interest from the consumer electronics community.
It's important not to conflate whatever Google does with television with its search business. Yes, Google is incredibly successful in search advertising, but the company hasn't gotten a lot of traction in other businesses, except for Android on smartphones, for which Google generates no direct revenue.
I'm not discounting the announcement; I just want to see it first before determining what its long-term impact is likely to be.
Posted by: Len Feldman ( Email: | Visit ) at 4/30/2010 4:17 PM
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