Motorola Deal Means Google Controls Digital Pipeline
On the surface, one might think Google/Motorola wants to emulate Apple's success in the SmartPhone area. Not only do you create the great software, but you design the product too, like the iPhone. That went from nothing to become Apple's cash cow. It's a very lucrative business that will do nothing but grow.
Now Google can make the phones and the software, too. Smart strategy. There's a lot of money there. But that's not where the really BIG money is.
The real money is in controlling the digital pipeline to smartphones and home TVs. These are the current "dumb pipes" that the CellCos and ISPs deliver. With the acquisition of Motorola, Google has access to the set-top hardware technology to make those dumb pipes a lot smarter. And make Google a lot richer.
Here's how I see it working.
For years, the ability to target ads perfectly to the right consumer has been the much-promised holy grail for marketers. They will spend big bucks in an effort to target their message more efficiently. Comcast and the other cable companies have failed (read Canoe) to find a way to allow custom-served ads to find their way to consumer TV.
This set-top technology was supposed to eliminate the wasted dollars inherent in broadcast advertising. But they never really delivered. So as the dust cleared, only one company has emerged as the leader in targeting ads to consumers.
It does it better than anyone. It has the technology to serve unique ads to unique targeted audiences with unbelievable efficiency. But at this point, it only does it online.
So what if Google decided to expand their online AdServe technology to be ubiquitous? To be able to reach every SmartPhone and TV?
I think they might start by giving a mandate to Motorola's engineers: Create a unique chipset that allows SmartPhones to run Googles proprietary AdServe technology natively. (Motorola makes chips too, BTW).
And while you're at it, make that chipset work inside cable broadband set-top boxes so anyone watching HDTV at home can also benefit from laser-targeted advertising. Advertising served exclusively by Google. For a price.
Here's the scenario: Five years from now, Google phones are battling Apples Nextgen iPhones for supremacy. Apple phones sell for a premium. Google phones are free, because they are ad-supported with Google's proprietary AdServe chipsets.
Simultaneously, your wall screen at home delivers ultra HD video through your ISP. (Over-the-air broadcast will die as all content gets delivered more efficiently over the Internet. Can Google handle all this content streaming? Oh yeah, they run YouTube. They know how to stream a lot of video.)
Google's AdServe technology allows your ISP to give you free access to all programming because it gets a cut of ad revenues from Google. In one fell swoop, Google controls the entire cash flow of the current broadcast TV machine: Over $150 billion (with a B) a year. They deliver it more efficiently than any other medium in the history of media. Apple would have to do a deal with Google to get a cut of the action.
Suddenly, Google gets to throw the most lavish upfront parties ever seen in the history of the ad business.
I think those upfront parties alone would be worth the price Google paid for Motorola. All because they leveraged Motorola's technology expertise to serve Google's ultimate master plan.