• Financial Times, Thursday, December 7, 2006 11:01 AM

In the first such deal since its acquisition of YouTube, Google is lecensing out its video, email, search and targeting tools for British TV company BSkyB to offer its broadband users. The companies plan to use the broadband subscriber data to determine which TV ads to show them. They actually plan to replace revolving 30-second spots with targeted commercials stored on the hard drives of BskyB set-top boxes.

"This is a really, really big deal for us," said Eric Schmidt, Google's chairman and chief executive "If it works, it will become our most lucrative deal from the get-go."

Indeed, it could transform the way TV is bought and sold. By storing commercials on user boxes and attaching keywords to them, Google can use BskyB customer Web search data to determine which TV ads would be most relevant to them.

Financial terms weren't discussed, but Sky will most likely walk away with the lion's share of the revenue. Murdoch and co. will contribute engineering resources toward creating the new boxes, while Google will commit to the cost of data storage. Schmidt said the move was possible because of Britain's faster speeds and excess bandwidth capacity.

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