Google's New Tube

From YouTube to you watching the tube, Google (Nasdaq: GOOG  ) wants to tap into your inner couch potato. The online advertising leader is teaming up with DISH Network parent EchoStar (Nasdaq: DISH  ) to launch an automated system for selling video ads throughout EchoStar's 125 national satellite programming networks.

Google's success with its AdWords Web-based sponsorship program is indisputable. The company continues to pad its lead in contextual marketing over distant rivals like Yahoo! (Nasdaq: YHOO  ) and Microsoft (Nasdaq: MSFT  ) . The real challenge here will be whether its platform for serving small text and graphical ads can be ported over to serve a smaller pool of advertisers with big video-ad distributing needs.

Google goes old school, again
This isn't the first time that Google has tapped traditional media for growth. It's already tried to extend its Midas touch to print advertising, and last year's acquisition of dMarc should help big Goo get its foot in the studio door of radio advertising.

If there's a billboard collecting dust on Route 66, or a flier flapping on your windshield after a quick stop at a suburban strip mall, just wait. It won't be long before Google has a hand there, too.

This doesn't mean that Google considers the Internet market to be saturated. Consumers are leaning on cyberspace more and more with every passing year. However, if Google's claim to fiscal fame is its growing relationships with small and large advertisers, doesn't it make sense to stretch out the marketing canvas as wide as possible?

Google has already been testing its TV ad-serving prowess through a smaller cable provider, delivering spots to 23,000 Bay Area homes served by Astound Broadband. With 13.1 million subscribers, DISH will be a significantly larger canvas, but it's just what Google needs to take its platform to the next level.

See, it's not just about dishing out ads promoting the highest bidders. Television advertising needs to evolve, just as Internet marketing has come of age. In the 1990s, the "one banner size fits all" approach was crying out for change. Ads could target specific sites -- the way television ads hit specific networks and shows -- but the spots weren't relevant to specific users.

In contrast, paid search works because search engines know exactly what you're looking for. A few cookies later, relevant ads can follow you just about anywhere. It'll take time for television advertising to become that viewer-specific, but not that much time; companies like TiVo (Nasdaq: TIVO  ) are already making the most of viewer research available to them.

Google has company
Naturally, Google's not the only one looking to turn its Web-based targeting strengths toward brokering TV ads. A coalition of primetime's biggest sponsors is teaming up with eBay (Nasdaq: EBAY  ) to create the e-Media Exchange. Internet auctions have always been eBay's bread and butter, so why not set up an electronic marketplace for advertisers? It makes perfect sense.

On a smaller scale, privately held Spot Runner is already targeting first-time advertisers. The company personalizes existing ads for as little as $500, then draws up airtime schedules based on sponsor budgets and needs.

Companies like Google, TiVo, eBay, and even Spot Runner may seem to be doing their own thing, but it won't be long before one starts to color outside the lines. Broadcasters may be initially worried to find that Internet companies are the new gatekeepers, but even the networks stand to collect the bounties of a more efficient future.

This won't change overnight. Even DISH will only grant Google access to a portion of its advertising inventory. Just as Google is putting its ad-selling eggs in many different baskets, EchoStar isn't ready to hand over the keys entirely. Google will have to prove itself.

Google won't mind. As always in the TV business, you've gotta pay your dues if you want to be a star.

Yahoo! and TiVo are Motley Fool Stock Advisor newsletter picks. Microsoft is an Inside Value recommendation. You don't have to wait for an "if you act now" television ad to come on if you want to check out either newsletter for free for the next 30 days. Just click the links and kick the tires.

Longtime Fool contributor Rick Munarriz is a huge fan of Google. It would be his home page if not for Fool.com taking up that piece of real estate. He does own shares in TiVo. Rick is also part of theRule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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