There’s been plenty of speculation lately about what will happen to TiVo (TIVO), the Silicon Valley company that popularized the digital video recorder but has found financial success elusive. Will it go under? Get bought by Yahoo (YHOO), Microsoft (MSFT) or Apple Computer (AAPL)? Now that Apple’s about to launch its own iTV device, the pressure’s on. So this isn’t a prediction, it’s a suggestion:
Google (GOOG) should buy TiVo now. The timing couldn’t be better.
It might not be obvious why search giant Google would want a company whose hard-drive-equipped boxes allow viewers to pause broadcasts, skip commercials, record shows and discover related video content. A closer look, though, will make you wonder why Google hasn’t bought TiVo already.
TiVo, after all, is in the business of organizing the world’s TV experience. Before its devices arrived, recording shows was a head-splitting hassle. Through its simple interface, TiVo has allowed viewers to spend less time fruitlessly searching through outdated listings, and more time discovering content that interests them. TiVo has meanwhile forced the advertising community to rethink how it delivers its product – rather than try to force people to watch ads, why not deliver ads that are actually useful? (You’ll be forgiven for mistaking my description of TiVo for a description of Google.)
These days TiVo can tell, by watching the habits of its viewers, which shows are getting recorded. It knows which commercials are skipped, and which ones are watched repeatedly. It knows whether viewers who like “24” also like “Lost” or “Heroes;” and it has the best insight into how viewers watch shows once they’re recorded. (All-day marathon session? One at a time?) Even better, millions of TiVo users seem to trust the company to collect this data. They’ve gotten used to it. Meanwhile, TiVo has begun efforts to sell some of its data to advertisers, but so far that doesn’t seem to be having a huge impact on its bottom line.
If TiVo’s viewer data were leveraged correctly, I wouldn’t be surprised if it were easily worth billions of dollars. But to whom? To a suitor who cares about video, and whose revenues are already based on disrupting old models for building audiences and selling advertising. That suitor would be Google.
Right now, TiVo’s market value is just over $500 million, or about a third of what Google paid for YouTube. Google could plunk down $1 billion for TiVo and still get a bargain. Then Google could begin selling TiVo boxes for $100 each and offering the top-notch TiVo subscription service for free; with such a strategy it could quickly grab market share from copycat rivals.
TiVo’s treasure trove of viewer data would immediately enhance the value of Google’s ad network and its YouTube acquisition; Google could even use TiVo boxes as a medium for distributing YouTube content beyond the PC. As the icing on the cake, Google executives wouldn’t even have to travel far to strike up a conversation with the TiVo brass. The two companies are headquartered 8 miles away from each other in Silicon Valley.