Renting TiVo

In case you weren't paying attention, TiVo (Nasdaq: TIVO) is starting to matter again. Last night, the company struck an advertising deal with Comcast (Nasdaq: CMCSA) that will allow both companies to put fresh ads on recorded shows.

Before you start saying, "Hey, I bought a TiVo in the first place because I hate ads, pal," let's go over the recent string of events that led TiVo to become an unlikely marketer.

Until a few months ago, TiVo was content to serve its 3 million subscribers. It was taking a huge hit by providing beefy rebate checks on its DVR hardware, but it was hoping to make up the difference through subscription revenue. Even though TiVo was selling just one of every three DVR boxes, its pioneer status and patent-rich proprietary offerings made it the brand of choice.

But when DirecTV (NYSE: DTV) announced that it would start promoting a different DVR brand to new users, investors got nervous. Executives walked. TiVo's stock fell into the low single digits.

Well, the Motley Fool Stock Advisor recommendation has been bouncing back lately, especially after a new deal with Comcast that will allow the cable giant to offer its more than 20 million subscribers a TiVo-branded software service.

Last week, noting that TiVo was starting to test ads taking up a quarter of the television-viewing screen, Tim Beyers wondered whether TiVo was starting to channel Google (Nasdaq: GOOG), given the online search company's popularity in promoting relevant text ads on its pages. Tim nailed it. Yesterday morning, DirecTV announced that it was teaming up with TiVo to sell ads on the popular DVR service. Then details emerged that Comcast would be following suit by selling ads shown on TiVo when the cable provider starts selling its TiVo service come next year.

Comcast virtually confirmed Tim's theory. Just as Google is able to offer timely and relevant AdWords, the new ad-fueled TiVo will have the ability to show targeted ads even when viewers are watching shows taped in the past.

This is a brilliant move on the surface. Marketers who were afraid that TiVo was forcing them into product placements and naming rights to get noticed as the TiVo generation was blazing through commercials can now breathe easier -- but they will be exhaling right into TiVo's coffers. The key here is whether consumers will put up with the intrusive spots. It has to be done subtly enough to not send everyone scrambling to other recorders. But if this works -- and I'm guessing it will, because televised content needs this to work -- there's a new power broker on Madison Avenue.

Some recent TiVo tidbits:

• TiVo really is gearing up to ape Google.
• The software licensing deal with Comcast was a brilliant step for TiVo.
• Most of the Stock Advisor recommendations have performed far better than this one.
• Share your thoughts or pilfer those of others in our TiVo discussion board.

Longtime Fool contributor Rick Munarriz does have a TiVo, but he does not own shares in the company. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.