Last year, Google surprised online video publishers with some stunning news: the company, which now generates over a quarter trillion dollars with advertising every year, effectively admitted that it isn’t very good at selling ads for its own smart TV platform, Google TV.
The issue at heart: Google has long required publishers to share a percentage of their ad inventory to be on Google TV. It’s a common industry practice. Companies like Roku or Vizio routinely sell a subset of the ad spots you see when you watch videos from third-party publishers on their smart TVs, and they pocket the money as compensation for operating their smart TV platforms.
But Google changed course on its own deals with publishers out of the blue and gave previously requested ad spots back to them, I was able to confirm with three sources with knowledge of those changes. The company is now just asking for a cut of their ad revenue — a tacit admission that these companies are better at selling their own advertising.
The policy change is just the latest example of something that has plagued Google for a long time: after growing Google TV into a major smart TV platform, Google has struggled to monetize it. The company has been spending hundreds of millions of dollars on Google TV every year, but it has yet to break even on those efforts, I’ve been told by two sources with knowledge of the issue. And with costs exploding, the company now finds itself at a crossroads, forced to decide how much it is willing to pay to stay relevant in the smart TV space.
Google TV grew fast, but monetization is lacking
Google’s current smart TV efforts reach back all the way to 2014, when it launched Android TV as a way to bring Android to the living room. Those efforts were supercharged in 2020, when it unified Chromecast and Android TV under the Google TV banner, complete with a new TV UI that put a bigger emphasis on content discovery. The plan, I’ve been told, was to follow the company’s mobile playbook: invest in scale first and then ramp up monetization.
Google’s TV team has arguably succeeded with the first part of that mission. The company announced a milestone of 270 million monthly active smart TVs and TV-connected devices last September; one source in the know told me that it has likely surpassed the 300 million mark since then.
However, many of those devices are in overseas markets that are much more difficult to monetize, and a good chunk are running what’s known as the Android TV operator tier — a version of Android’s smart TV software that can be heavily customized by pay TV operators and often leaves little, if any, room for Google to make any money.
That’s why it’s so important for Google to have a foothold in the North American smart TV market, where it has partnered with companies like Sony, TCL, and Hisense to run Google TV on their TV sets. However, doing so comes with significant costs — and it is only getting more expensive, thanks to some aggressive moves from Google’s archrival Amazon.
Last year, Amazon announced it would begin selling Hisense-made Fire TVs at Costco. Left out of the announcement was the fact that these TVs would be replacing Hisense-made TVs running Google TV.
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