Following a four-year effort in the incredibly lucrative TV ad business, Google has decided to pull the plug. Traditional TV ads are out - going forward Google plans to focus exclusively on digital.
Google has now tried and failed to disrupt the traditional advertising business in print, radio and television. In part, Google's TV effort was slow to attract new advertisers and more partners to the platform.
"Video is increasingly going digital and users are now watching across numerous devices. So we've made the hard decision to close our TV Ads product over the next few months," Shishir Mehrotra, VP of product at YouTube and video at Google, wrote in a blog post. "We'll be doubling down on video solutions for our clients (like YouTube, AdWords for Video, and ad serving tools for web video publishers). We also see opportunities to help users access web content on their TV screens, through products like Google TV."
"The [satellite] and cable operators have excess unsold inventory so it was partially an experiment," said Derek Baine, senior analyst at SNL Kagan. But Google had a much bigger target than just TV ad sales - it wanted to compete with Nielsen on ratings.
Google tried to convince cable and satellite operators to license their set-top box data so it could compete with Nielsen, he said.
"They were just begging to get more data in the database. In the long run that would be a lot more valuable company than one just selling ad inventory. So I think it is a bigger deal."
While smaller TV networks were more open to giving Google a shot, most continued to rely on Nielsen as the gold standard.
"Nielsen's got a stranglehold on the industry, there's no question about that," said Baine. "It seems like there's got to be a change. All of the set-top box data exists. It's out there, it's just going to take an intermediary to get in there and aggregate it."
Google's TV ad business showed early promise with a significant inventory commitment from NBC Universal, but once it pulled out of the fledgling network in 2010 it never regained its footing. Google landed a new deal with Cox Media earlier this year, and kicked off 2012 with a client roster that also included DIRECTV, Verizon FiOS and Viamedia.
Over the course of 2011, Google reported a six-fold increase in the number of ads aired per day and said it tripled its reach across cable and satellite operators. Despite that growth, Google was still looking back on a markedly turbulent effort. The company's best years in TV ad sales had come and gone. Google's network reaches 42 million households today, but in 2009 it could reach up to 12 million more households.
One problem for Google was trying to convince big media companies not to be paranoid of its efforts.
"People are obviously paranoid of Google because they've become so big and dominant," said Baine. "Cable and satellite operators do not want Google in their set-top boxes."
Of course that's an especially unique situation for Google today now that it owns its own set-top business through its Motorola Mobility acquisition. Just one day before it bowed out of the TV ads business, Bloomberg reported that Google was moving forward with plans to sell Motorola's set-top business.