• by Joe Mandese , January 9, 2008

First Google TV Ads. Now Google TV sets. If you had any doubts that the world's largest media company has its sites set on the world's largest medium, the buzz at this week's Consumer Electronics Show should place them on pause. I don't know whether the rumor that Google will come out with a line of television sets is any more true than the rumors that it would come out with a phone to compete with Apple's iPhone, but I do know that Google has as much interest in finding a way into television's infrastructure than it does with the phone business or the Internet. It's all in keeping with its core mission statement: to manage the world's information and to utilize superior technology to do it. There's an awful lot of information on television. You do the math.

Actually, Imran Khan, the lead Internet analyst at JPMorgan, recently did some Google math, and it certainly got my attention. In his "Nothing But Net" tone-setter report for the Internet sector in 2008, Khan computed some interesting numbers suggesting that Google has the ability to major some pretty big bets on television - or any other medium, for that matter - without even having to go to the mattress.

I frequently cite Google's awesome market cap as an indicator of its dominance of the world's largest media companies, but market capitalization is only a theoretical wedge, unless you find a way to leverage it. A more material statistic is Google's free cash flow - the money it actually has on hand to make investments or acquire companies. During 2007, a year in which it acquired YouTube and announced plans to acquire DoubleClick, Google had an estimated free cash flow of about $3.4 billion, according to Khan. During 2008, he estimates, Google will generate about $5.7 billion in free cash flow.

Google's leverage is actually much greater than that. It can make acquisitions leveraging its considerable share value, and of course, it can always borrow money. What might be on Google's shopping list? Well, clearly television. But what kind of TV assets would it make sense to buy? Google has already indicated that it is not a hardware player - per se - so I wouldn't look for it to take a big position in the electronics marketplace, be it consumer or otherwise. It's also maintained that it is not really a content player, though it always seems irresistible to think what content company Google would consider for its portfolio. And for some reason, I can't help thinking about CBS. Maybe it's just the fact that CBS digital chief Quincy Smith had previously been an investment banking guy who helped structure some of Google's seminal deals. But I don't really think Google is going to acquire a network or a studio.

TV "search" giant Gemstar-TV Guide might have made sense, if it hadn't just been acquired by Macrovision. Also, I don't believe that Google's management thinks it needs to get its hooks into current TV navigation systems to dominate that market. Instead, it should get its hooks into television's data streams. That of course, requires a couple of things, not least of which is the same access to TV "server" data that it has to Internet server data. Google gets its Internet data simply by crawling the Web. You cannot do that with TV's closed and fractionated TV operating systems. To do that, you need to get inside the boxes, or at least gain access to the data coming out of the boxes. That, of course, is what Google is managing to do by cutting deals with smaller cable operators and at least one big satellite operator, EchoStar.

For Google to be truly successful in managing the world's television information, though, it would need to have ubiquitous access to television's data streams, and it is unlikely that companies like Comcast and Time Warner would give it. In fact, those big cable operators already have their own data-mining, data-sharing and advertising sales initiative. It's called Project Canoe, and it's been pretty much under wraps, but one executive familiar with its initial "request for information" from potential technology partners explicitly prohibited Google from participating in the process. No surprise there.

So unless Google were to use its considerable leverage to acquire a Time Warner Cable, or a Comcast - which it is not likely to do - how else could it get its hooks on television's data streams? What's that, you say? Nielsen? Yeah, that'd be my bet. Sure, Nielsen does not currently have access to the real thing, the actual census-level data stream flowing from the nation's digital TV set-top boxes, but it may have something better: the proxy data that is the underlying currency for the TV advertising and programming marketplaces. And that's something like a $100 billion business. Kind of makes the Internet seem like a real piker, doesn't it?

So please tell me I'm smoking something when I look at Imran Khan's math and think that, give or take a billion dollars, and the divesting of some of Nielsen's non-strategic assets, Google could take Nielsen out with just the pocket change it has on hand? And please don't tell me that Nielsen's not for sale.