When confronted with smartphone data that shows Google (NASDAQ:GOOG) (NASDAQ:GOOGL) is absolutely blowing away the competition -- it owns over 80% of the world's OS market -- naysayers often point to the fact that Google doesn't actually make any money on the phones. But unlike its primary smartphone competitor Apple, Google doesn't need to generate revenue from the devices themselves.
Like its up-and-coming digital ad competitor Facebook (NASDAQ:FB), what Google has long understood is that the value of dominating the mobile device OS market is in the data. All those devices with Google search and other online, ad-generating sites set as defaults help the search giant amass huge amounts of data it can then use to better target its marketing partners' spots.
With that said, it seems only natural that Google would implement similar data-gathering processes from other services, like its lightning-fast Internet and cable TV alternative Fiber. Turns out it is, and this could prove to be a true game-changer not only for the television ad industry, but for Google shareholders.
It's all about the data
There's a reason Facebook was able to charge those advertisers fortunate enough to participate in its recently completed video ad testing phase $1 million each day: video ads work. The reason they work isn't simply because video garners a better response rate than banner ads, though they do.
The primary reason Facebook is able to charge so much for video ads is that it has mastered the art of amassing, analyzing, and utilizing massive amounts of user data to ensure the right ad is shown to the right person, at the right time. That's why Facebook is able to demand as much as six times more than ads on Google's YouTube property.
But make no mistake, Google is hardly a data-collection and utilization neophyte, as most any user of its search engine can attest. For example, let's say you "Google" a trip to Las Vegas to find the cheapest flight or vacation package. The next time you log on it seems half the spots you see are travel-related. That's no accident, and it's a big part of the reason so many marketers are shifting their ad dollars to digital alternatives like Google and Facebook. Online ads are extremely targeted, unlike television, and the results can be measured with laser-like accuracy.
This is going to be good
As it stands, of the nearly $600 billion expected to be spent on advertising this year, about a third will be of the digital variety. In other words, the majority of advertising dollars are still directed toward television. That's changing, but will remain the case for years to come.
Now, imagine if a provider could measure a TV viewer's usage: the shows they watch, how long they watch them, and most importantly to marketers, exactly how many times their ads were seen? That's exactly what Google Fiber is rolling out in its Kansas City market, and as one industry pundit said, it's akin to advertising's "holy grail."
Just as with digital spots, Google said its "Fiber TV ads will be digitally delivered in real time and can be matched based on geography, the type of program being shown (sports, news, etc.), or viewing history." It's that last criterion -- viewing history -- that truly differentiates Fiber from traditional TV alternatives.
Knowing which viewer is likely to be watching a particular program, and when, is a marketing goldmine. Google Fiber's marketing partners will also have control over the number of ads shown, and just as importantly, will be able to track results.
Google Fiber's efforts to turn consumers' TVs into data-gathering (and by extension, targeted advertising) mediums is still in the early stages, but the ramifications for viewers and Google investors cannot be underestimated. Taking it a step further, Google could conceivably marry its vast amounts of online search and mobile Android OS device usage data with Fiber TV viewing habits, creating an unheard of, holistic view of consumers that advertisers would drool over. The advertising rate advantage Facebook is currently enjoying could go out the window, thanks to Google Fiber.
Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.