Google TV faces challenges

Company says division sells 98 networks

By almost any measure, Google is an extraordinary success -- except when it comes to traditional media.

After launching ambitious plays to digitize the radio and print businesses in recent years, the search giant eventually bailed on them. Now, several media executives are wondering about the company's long-term commitment to its fledgling Google TV business. "I think 2010 is a make-or-break year for Google TV," said Tracey Scheppach, senior vp/director of video innovation for SMG. "A lot of people are wondering what role it will ultimately play for Google -- big, small or not at all."

Scheppach and other media buyers said that while Google TV has always carried tremendous potential, it has seemingly failed to gain traction over the past several years, leading some to question its business model. Essentially, Google sells TV avails using data from set top boxes deployed by its partner Dish Network, as well as data from TiVo and Nielsen's Claritas. It claims to offer advertisers better targeting and down-to-the-second viewership data.

Mike Steib, Google's director, emerging platforms and TV ads, said that the company plans to remain in the TV business for the long haul. "We are endeavoring to solve big problems," said Steib. "We are getting inventory that is undervalued and making it more valuable to the owner and the buyer. Google has the stomach for this...if we're not adding value, they'd pull the plug."

Like Google's core AdWords business, inventory is sold via an auction. But according to Rob Norman, CEO of GroupM Interaction, Google TV has a hard time living up to what AdWords can do since TV is still not as data rich, nor as digital, as the Web. "What Google is good at -- the matching of actual or implied intent with relevant messaging -- is really hard [on TV]," said Norman. "As a result it's hard to get very excited about the proposition even if you are a long-tail advertiser. Only a mug writes Google off, but I don't see their efforts as transformational in the short term."

There's little doubt that the TV business could use some transformation. But Google TV may be taking that effort too far too fast by insisting on an auction model.

"I don't believe the TV marketplace is ready for that," said Scheppach, who contends that just utilizing basic set top box data to improved targeting would represent a major step forward for the business. But Steib insisted the auction model allows Google to optimize its data in a more timely fashion that's better for buyers and sellers.

Some advertisers said that after initially being excited about Google TV, interest has waned. Adam Kasper, senior vp, director of digital, Media Contacts, said that his team last tested Google TV in 2008. "It didn't perform overly well compared to TV," he said. Kasper said Google TV might also suffer from a perception hurdle: "It's essentially remnant space, and the marketplace sees it that way."

Remnant on the Web means cheap banners on long-tail sites, argued Steib. But on TV, "there is no such thing as remnant."

An obvious knock against Google is that is sells mostly inventory from Dish (which reaches 13 million homes) and nonprime-time inventory from a handful of NBC Universal cable networks. It hasn't announced a major distribution deal in over a year. "I don't think it has stalled out at all," said George Shababb, president, TNS Media research. "But unless it gets significant critical mass, I'm not sure that major advertisers are going to be interested in reaching fragments of the audience."

Steib acknowledged that such content deals take time to negotiate. Officials now claim that Google TV sells 98 networks and delivered over 100 billion impressions last year.

Though Google does not break out its revenues for Google TV, Steib claimed ad revenue has increased every quarter. His claim even received support from an unlikely source: Microsoft, which has made its own entree into the advanced TV world. The company's Admira platform also sells avails from NBCU networks using set top box data, but doesn't employ an auction. With Google TV's presence, "we see very healthy competition," said Scott Ferris, senior vp, general manager, emerging media, Microsoft. "It's a vibrant market."

Is Google TV a victim of Madison Avenue snobbery? Some argue that it cuts out the relationship/human element to negotiations. Also, big media shops thumb their nose at the business because it caters to small brands that could never before afford the medium.

Yet that's the beauty of Google TV, countered Steib. It would be a huge mistake to expect to grow the TV business by relying on the same "3,500 cable advertisers," he said. "How many iPhone ads do I see? But I never see an ad from an app developer."

Another issue, argued Craig Woerz, managing partner Media Storm, is a reluctance by traditional agencies to testing. "Agencies say they want technology to make buying more effective, but they are unwilling to take the time beyond a few tests to learn with smaller properties," he said. "The industry is completely two-faced about it."

Google TV is not the only attempt to make auction-based TV sales platforms work. Back in 2007, eBay rolled out the Online Media Exchange with the support of several major agencies and advertisers, but it shortly fizzled out due to lack of interest among sellers.