Following Credit Suisse's $900 price target for Google one nagging question remains: Where--and how--is Google going to generate large TV advertising revenue?
If you recall Credit Suisse analyst Heath Terry slapped a big price target on Google and made some assumptions for 2010. One of them was a base case that Google would have TV advertising revenue of $416 million in 2010, up from nothing today. The bullish case called for $1 billion in TV ad revenue with the bear case being $130 million.
All day, I was wondering how Google would get there. Its deal with Echostar isn't going to cut it. And TV partners are wary of Google anyway.
However, Tech Crunch's Erick Schonfeld has a working theory. Google will take its Android software to the set-top box, get a bunch of developers on board and give us the future of television. As to be expected, few are commenting on the record about this plan. And Google is doing its denial without denying routine (it likes these rumors).
Color me skeptical. Here's why:
Android is unproven. There are high hopes for an Android announcement that so far is a nice press release, a developer kit and a partner roster that is a bit noncommittal about the whole thing. If Android were launched by any company other than Google it would be classified as vaporware already. Before Android makes it into a handset, we're leaping toward the set-top box.
Set-top boxes are difficult to get into. There are two primary makers of set-top boxes--Cisco and Motorola. Any effort for an open platform has to go through them. And then there's Microsoft, which has spent billions over the years and is just now getting some traction. Sure, the ability for consumers to buy their own set-top boxes (Googlebox) is a plus, but the set-top box sure is getting crowded. On the bright side, Cisco has Web 2.0 religion and Motorola is an Android partner.
Partners matter. In the land of the set-top box, Google will run into the same problem it has in mobile--entrenched players that tell you what you put on their network. Google can have the best set-top software on the planet, but it needs Comcast, Time Warner, Verizon, AT&T and Cablevision to play along.
Maybe we don't want our set-top boxes to be all Webified. Schonfeld argues quite well that the set-top box is a computer that doesn't do much. What if it could? Schonfeld argues that a TV screen polluted with widgets, weather, sports scores and stock quotes could be a better experience. Well, I can have all of that now with Verizon FiOS TV via Microsoft's widgets. I've hit the widget button maybe twice for giggles. TV is a different experience and more often than not I want all the boxes, TVs and technology to disappear in the background. Even the news scroll has become annoying. Some of us just want to watch the game in peace--without better targeted ads, widgets and other clutter.