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McAdams On: Android TV

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.

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“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