Google is all about advertising--and its Motorola acquisition is all about patents? Yeah, right. A closer analysis shows that Motorola's share of essential patents has fallen as technology has advanced from GSM over WCDMA to LTE. The acquisition of Motorola's patent portfolio is protecting the past a lot more than the future. But what is Google really about? Being a patent pool or being the premier monetizer of advertising? Why accept the farfetched answer when the real one could be all too near? Besides the obvious closer integration between Android and Motorola, Motorola's leadership in cable TV set-top boxes is providing an opportunity to revolutionize television and the way we consume advertising.
Motorola has a more than 30 percent market share of cable TV set-top boxes (STB) and is particularly strong in high-end digital STBs. Google's foray into the television space with Google TV has been less than a stellar success. Logitech, Google's STB partner, announced that it had negative sales with Google TV in the most recent quarter; i.e., more units were returned that sold. Despite this spectacular failure to get customer adoption, Eric Schmidt, Google's executive chairman, announced during his MacTaggart Lecture at the Edinburgh International Television Festival that Google TV would come to Europe in 2012. We can just hope that it will be Google TV 2.0 and not its current incarnation. Maybe having its own STB manufacturer in house might help.
With the Motorola acquisition, nobody has a better shot at solving this problem than Google. The company will be in the majority of affluent households, monitoring everything that people consume digitally. They will be able to tell how people are consuming television, the Internet, and mobile--combined and separately. In short, it's a data miner's dream come true. Motorola's deep understanding of STBs and Google's capabilities in the online adverting market should help the combined company to create a considerably better solution with Google TV versions down the line. In addition, what is helping Google is the transformation of how we watch television. The advent of the all-IP telecom universe is playing directly into Google's strong suit of analyzing and delivering the right information to an IP connected device. It is further aided by the de-emphasis of linear television in favor of video on demand and delayed viewing. The point of consumption has moved from the stand-alone living room TV set with its barebones connectivity to a multitude of devices, such as the computer, tablet, mobile handset and, yes, the television set that is always connected to the IP cloud. Usage behavior is also changing. Many surveys show that younger people especially are multitasking while watching television shows. With the major drivers--technology, content packaging, consumption pattern, and consumer behavior--shifting towards interactive TV, Google seems to be on the right side of history. Even if Google TV fails, the acquisition of Motorola will give Google access to consumers' viewing patterns and correlate them with their internet and mobile consumption patterns. This in turn will help Google to improve their internet and mobile advertising juggernaut. But is it going to be enough to justify a $12.5 billion investment?
The key question remains: Is watching television an inherently active or passive endeavor? No other medium can enthrall us like television. It sucks us into the story and grabs our attention like nothing else. This has important implications regarding what other services are and to what degree they are at all complimentary (if at all). Over the last fifty-odd years, interactive television has struggled to say the least--starting with Winky Dink and You in 1953. The core problem was and still is that viewers could not be properly motivated to interact or interact in the right way. The interactivity lost the tug of war between the engaging program and the technology enabling the interactivity. People were either so engrossed by the program that they did not want to be interactive, or they were so bored by what they saw that they turned off the TV before they could or would want to be interactive. The bet that companies like Google are making is that with the Internet, they are able to get people to interact more with the television set and the data sources and programming capabilities attached to it, which in turn it could use to improve the advertising delivery mechanism. The key challenge for Google is how to create television programs that combine the engaging with the interactive so that Google can disrupt the current business model and create value for itself, probably at the expense of the current stakeholders. It is unlikely that the current stakeholders will make the rope with which they would be hanged.
Roger Entner is the Founder and Analyst at Recon Analytics. Recon Analytics specializes in fact-based research and the analysis of disparate data sources to provide unprecedented insights into the world of telecommunications.