Google (GOOG) is in the information business and they have moved that business forward today in a deal with TiVo (TIVO) to analyze the way people are watching and not watching television. The goal of the pact will be to show advertisers more accurate information on how many are actually watching television live or have pre-recorded and are skipping through the commercials. The obvious market leader in search advertising, Google has recently taken a special interest other forms of advertising including mobile advertising with the acquisition of AdMob and television advertising with data licensing deals with Nielsen and now TiVo.
TiVo was the first digital video recording (DVR) technology to allow users to record live television for viewing at a later time. The consequence of this is that recorded programs were often watched and ads were fast forwarded through. Of course, it did not take long for advertisers to realize that often they were paying for spots to reach fewer viewers. As DVRs were just hitting the scene early in the decade, many feared this would doom television's most robust source of revenue, advertising. However, that fear has proven to be at least somewhat overblown as television advertising is still vital to the industry, and the recession has taken a bigger bite out of advertising budgets than the proliferation of DVRs.
In fact, a fascinating study from researches at Boston College suggests that viewers are actually paying closer attention when fast forwarding. Think about it, when watching a program live people often lose interest during commercial breaks and may leave the room or do something else to occupy their time. Whereas a viewer actively fast forwarding is watching the screen with their thumb on the play button. Thus, a brand icon flashed on the screen for only a fraction of a second can have an effect on the target audience.
Google will provide a better data set for advertisers to work with, and they will undoubtedly start to plan their advertising campaigns around the ways that most people are watching the content. Sporting events like the Super Bowl will always be a great way to advertise in a real-time live format, as most viewers will be watching the game live. Popular sitcoms may be fertile grounds for fast forwarding targeted advertisements because of their likely higher rate of recording.
This deal and Google's other efforts to move into the television advertising space are an interesting move, and the data they are collecting should make the marketplace a little more efficient. Google has made a mint out of collecting and analyzing data, and while they are not the only company doing this, they are undoubtedly the largest and most well capitalized. Ockham's methodology has a Fairly Valued rating on both GOOG and TIVO at their current valuations.