Earlier today Google announced that it had acquired On2 Technologies in a stock deal worth approximately $106 million. There’s little true information about how Google intends to use On2 in the release. Here’s the Google quote:

“Today video is an essential part of the web experience, and we believe high-quality video compression technology should be a part of the web platform,” said Sundar Pichai, Vice President, Product Management, Google. “We are committed to innovation in video quality on the web, and we believe that On2’s team and technology will help us further that goal.”

On2 essentially offers customers video compression technology. There are both PC (YouTube) and mobile implications here. There are others with more technical insights than I on these issues, so here are a few blurbs from them:

NewTeeVee:

Just about everyone that powers online video or has their own Flash player, including Adobe, continues to pay On2 licensing fees for its VP6 video codec. However, in the last couple of years, the industry has largely chosen H.264 as VP6’s successor. Though H.264’s selling point is its high quality, a big part of the reason people moved away from VP6 was those On2 licensing fees. “It was like dealing with Tony Soprano every year,” said a source today. “If you were a day late…It was archaic licensing. It was just a nightmare.”

Still, VP6 is already installed on computers everywhere, and with Google managing its licensing (or even dropping it), the format could come back into power. The open-source video compression format of choice, OGG Theora, which is being pushed by Mozilla, has not won industrywide confidence, so it could be that Google is trying to substitute another contender. Google, with its Chrome browser, is one of the leaders of the new HTML 5 standard, which handles video natively and could eventually eliminate the need for Flash and Silverlight-type plug-ins.

GigaOM:

I would pay special attention to what Google does with On2 on Android, because there is an opportunity for it to outshine rivals such as RIM and Apple. Just look at On2’s mobile video arsenal: It owns technologies for embedded video for mobile platforms (Hantro) and On2 TrueMobile System, a mobile video system designed to send video across the networks — including 2.5G, Edge, 3G and 4G networks — using On2’s VP7 technology.

TechCrunch:

Some of its codec designs are known as VP3, VP4, VP5, TrueMotion VP6, TrueMotion VP7 and VP8. Its customers include Adobe, Skype, Nokia, Infineon, Sun Microsystems, Mediatek, Sony, Brightcove, and Move Networks. On2, formerly known as The Duck Corporation, is headquartered in Clifton Park, NY . . .

If would be great if Google decides to open-source On2’s VP7 and VP8 video codecs and free them up as the worldwide video codec standards, thus becoming alternatives to the proprietary and licenced H264 codecs. On2 has always claimed VP7 is better quality than H264 at the same bitrate.

Also noteworthy: Google could use the VP8 codec for YouTube in HTML5 mode, basically forcing its many users to upgrade to HTML5-compliant browsers instead of using Flash formats.

If you just can’t get enough of this sort of analysis and video-format speak, there’s more on Techmeme.

Google’s TV Ads platform is getting some help from a company called Visible World, which offers demographic and geotargeted advertising across different media types. According to an article in the Wall Street Journal this morning:

Google Inc. is teaming up with Visible World Inc., a well-known New York technology company that uses software to create multiple versions of a given ad, in its push to offer TV advertisers more targeting options.

Google will combine the technology with its Google TV Ads, an automated auction-based system for buying TV ads by choosing which shows best fit the advertised product or service. The idea of such “addressable advertising” is to send a TV ad promoting a sale on minivans to a household with children, for example, and the same basic ad with a promo for a sports sedan to a childless household.

The combination will allow agencies and brands to make different versions of the same campaign to target different audiences by income, household composition, location and so on. In offline TV, Google works with EchoStar and cable operator Astound. Google TV Ads also appear online.

The cable TV industry is working on its own “addressable TV” initiative called Project Canoe. And NBC is using a Microsoft ad platform called Admira (based on its Navic acquisition) for addressable TV. There are other companies (e.g. SpotRunner) operating in the segment as well.

The effort and objective (more precise and dynamic audience targeting) is very similar to what Yahoo has been developing with the APT platform for display advertising online.

Across the TV industry there are various efforts going on to bring more targeting into TV advertising. The readers of this blog know about Google’s TV advertising initiative. But SpotRunner and various others (e.g. Project Canoe) have been working to bring “addressable advertising,” the kind of targeting that exists online (demographic, geo, even behavioral), to television. According to the Wall Street Journal, NBC has now adopted Microsoft technology to do something similar:

The technology NBC is deploying will add a layer of demographic information as well as automated ad buying. It analyzes anonymous set-top box data from satellite and cable systems, adds in data obtained from other companies, including consumers’ purchasing habits and locations, and updates daily, says Chet Kanojia, founder of Navic Networks, the TV ad technology company Microsoft acquired last year.

For instance, currently a real-estate company might place an ad on a number of home-improvement shows. The Microsoft technology would show the real-estate marketer other programs that homebuyers or sellers are watching, and sell ad time during those shows, whether they are prime-time dramas or early morning cable news programs.

The Microsoft system is based on its earlier Navic acquisition and is being called Admira Marketplace. In addition to demographic targeting it will offer targeting at the national and local levels.

The key difference between Google’s TV ads system and Microsoft’s appears to be that the latter brings targeting (and presumably analytics) but isn’t an auction. As the article points out, broadcasters have been wary of bringing the auction model to TV for fear of pushing down ad rates and “commoditizing” TV advertising in the way that display ad buying has largely been commoditized by the existence of literally hundreds of online ad networks that all make similar claims and offer similar targeting.

Google’s vision until recently was that it would offer a kind of universal dashboard for media buying across platforms — online and offline. The closure of Radio and Print ads dims that vision with respect to traditional media. Microsoft appears to be pursuing a similar “cross platform” strategy and this is the first “win” in the TV space (that I’m aware of).

Regardless of who owns the platform, however, internet style targeting and ad buying is pushing far and wide into traditional media. Call it the “Googlification” of media.

It used to be common wisdom that Google never did consumer marketing. That’s changed over the past few years, with Google doing everything from billboards to radio ads to bus “wraps” to push particular Google products. Now it boldly goes into that final frontier, TV ads in the United States.

It’s a first for Google. The company has never directly advertised one of its products on television in the US, though they have been mentioned in conjunction with ads from Google partners, such as T-Mobile pushing its “G1 with Google” Android phone.

Now, Google’s using TV to promote its Chrome browser, as it has announced on its official Google Blog. The company won’t tell me how much it’s spending but stressed the amount is very small. Ads are being placed through Google’s own Google TV Ads network. That system allows advertisers to purchase remnant ad space on a variety of television networks.

Even a small buy might be reassuring to some of the traditional content owners who view Google as somehow sucking the advertising life out of their businesses. Google, which makes virtually all of its money off advertising still hardly seems to spend at all on traditional ads. A television buy might be taken as a sign by some that the Big G is looking to put back into the advertising ecosystem out of its own pocket.

Below is the ad that will be running — which, sorry to say, is pretty terrible to me. I mean, it’s cute — but if you don’t know Google Chrome is a browser, a replacement for Interent Explorer, I doubt most people will get that from this commercial.

For more, see related discussion on Techmeme.

Postscript: Adrian Palacios noted on Twitter that Google also has a large video ad now on the home page of the New York Times pushing Twitter:

YouTube is clearly evolving before our eyes — from a site that was largely about viral, user-generated content (UGC) to a premium content destination that may one day be a viable replacement for cable TV. First the news.

Google/YouTube has signed deals with more studios to expand the range of full-length TV and movies content on the site. From the NY Times today:

The agreements with the studios, which include Sony, Lions Gate, MGM and others, are significant because YouTube dominates online video. Nearly two-thirds of all video views in the United States occur on YouTube, according to the measurement firm Nielsen. Last month the site had more than 90 million visitors, 10 times as many as the next biggest site, comScore said.

These deals will bring “thousands of TV episodes and hundreds of movies” to YouTube. Call it the “Hulufication” of YouTube.

The other piece of news is that Google is introducing TVAds online:

We’re excited to announce the beta launch of Google TV Ads Online. This is a new feature of Google TV Ads that lets advertisers place commercials into the ad breaks of TV programs watched online. It works in the same way as Google TV Ads: advertisers can target specific programs and select their cost-per-thousand (CPM) bid. Based on their targets, budget and bid, ads are inserted in the same program breaks that were designed for advertising when the programs first aired. (Ads may also be shown “pre-roll”, before the program begins, or after the online presentation of the program “post-roll.”) And like Google TV ads, we provide advertisers with measurement tools that give greater insight into how their ads perform with users.

The Google post explicitly mentions YouTube as one place where these ads will run. In addition, in his remarks yesterday on the Google earnings call, CEO Eric Schmidt said in passing that micropayments would probably make their way into YouTube in the future (think movie rentals). Google also discussed three growth areas for the business beyond core search and SEM: display, apps and mobile. Display for Google is largely about driving greater brand adoption of YouTube, which has been somewhat challenging because of the UGC dominance of the site.

One of Google’s main reasons for buying YouTube was its display ad potential. DoubleClick more obviously so.

So imagine a time when the internet is fully available through the screen in the living room (it is today but not to many). YouTube and Hulu may become viable replacements for costly cable TV subscriptions or even Netflix if there’s enough quality content there. For their part, advertisers, more comfortable and familiar with premium content, will be increasingly unable to ignore YouTube’s reach — and targeting capabilities.

It’s now a cliche to point out that consumer audiences have fragmented. However, once mighty media have seen audiences dwindle over the past five or so years. Accordingly almost all traditional media are struggling, exacerbated by the recession to be sure but caused by the rise of the internet (mobile will fragment audiences further). Many advertising sales channels are trying to respond to the audience fragmentation issue with network and/or multi-platform strategies.

Call it an effort to put “Humpty Dumpty back together again.”

Google for its part had once seen itself as a kind of media dashboard, through which agencies and advertisers could efficiently buy not only search but online display and traditional media ads such as print newspapers, radio and TV. Under the pressure of the recession the print newspaper and radio ads programs have been killed. But Google TV Ads remains.

Now as the Wall Street Journal reports Google is testing a program that allows advertisers to make a single buy that runs their ads on conventional TV as well as online at YouTube and potentially across the internet on other sites.

Google’s director of television ads, Michael Steib, said in an interview that the company is working on technology that allows advertisers to buy ads across Google TV, which sells on-air commercials; YouTube; and video on other Web sites through the same interface. Google is testing the service, called Google TV Ads Online, with a small group of advertisers, he said. People familiar with the matter say the service — which would leverage Google TV’s targeting technology — is likely to be introduced in the coming months.

The company is hoping that the new service will make it easier for bigger brand advertisers to spend across both services, which are under pressure to ramp up their business despite the sour economy.

But the feature is also part of Google’s bigger vision of tying together various platforms to make it easier for advertisers to manage and measure their spending across traditional and online media

Conceptually this is the right approach and it should be desirable to marketers who want both reach and targeting. The online component would also theoretically benefit from Google’s new behavioral targeting. But mechanically it faces challenges as the WSJ explains:

For the new effort to work, YouTube needs to secure longer-form video such as TV shows and movies, for which users are often willing to tolerate longer ads. While it is in talks with major media companies, YouTube to date has only signed a small number of full-length content deals with companies such as CBS Corp.

Whether Google TV advertisers — many of whom are just experimenting with the service — will take advantage of the online video integration remains to be seen. Some TV ads may not be suited to run before or alongside online video.

My guess is that only ads of a certain duration — say 10 seconds — will be able to effectively participate in the program. Alternatively, advertisers could have a longer conventional TV version and a shorter online/mobile version.

Google’s TV Ads team has announced the addition of new metrics detailing time-shifted viewings of your TV ad. Here’s the formal explanation from Google’s announcement:

“[Time-shifted viewership data] … provides you with insight into how and when viewers see your ads during DVR playback of recorded content. As with all metrics in your Google TV Ads reports, time-shifted impressions reflect the viewership of your specific TV commercial, not just general program viewership.”

The new reports are free, and are live in advertiser accounts now. Google’s blog post includes a video showing how to access them.

Google has long been seeking to diversify its revenue base and ad products to attract more ad dollars and different types of advertisers. There’s a lot more money, for example, in brand advertising than in direct response. The YouTube acquisition was partly about getting more display/brand ad dollars. Google’s DoubleClick acquisition was also about targeting the online display/brand segment. In addition, the company has created a new “President, Display Ads” position. Google has also built out Radio Ads, Print Ads and TV Ads to expand the reach of its network. The new announcements today are consistent with these brand ambitions: Expanded TV Ads distribution and a new do-it-yourself display ad builder.

Taking the new display ad builder first, it offers an apparently very simple way for anyone to create an online display unit (or units plural). Of course, once created, those ad units can be served wherever AdSense may go. Here’s a short video demo:

Depending on your point of view this is either validation of AdReady or an “AdReady killer.” AdReady targets small business (SMB) advertisers who don’t have agencies to build their creative (akin to what SpotRunner, Spotzer and others are doing for video). It will be interesting to see who adopts this tool. Notwitstanding the fact that most of Google’s advertisers technically qualify as SMBs, small businesses are very difficult to acquire as advertisers. This is also AdReady’s problem with a self-service offering.

Alternatively, will larger advertisers wind up using this tool? It’s not clear. They have agencies to do this. But some number of marketers will undoubtedly take advantage of it however.

In general display and CPM advertising has been on a flat-to-downward trend online. It’s much softer than search for example in this recessionary economy.

One of the reasons is that there’s an excess of supply. It’s also true that the industry has standardized around the click as the measure of value. That’s shortsighted. Clicks don’t reveal branding impacts and other latent and less tangible effects of online display advertising. Plenty of research has shown the benefits of running search and display campaigns together. (My Search & Display panel went into this in detail at SMX East.)

Perhaps Google is hoping to promote this notion of search and display working together and bring some SEM folks over to display. Yahoo, for its part, has been discussing the relationship of search and display for years. Being able to offer both to realize their combined “synergies” was one of the stated reasons why Yahoo didn’t want to sell its search business to Microsoft.

As with any Google announcement there’s always the question of who it will negatively impact — more sensationally “kill.” I’ve already cited AdReady as a potential beneficiary/victim. Whether this will affect Yahoo, the online display king, is another question. (AOL’s Platform A/Advertising.com is another that could be impacted.) The earlier entry of MySpace and Facebook into the online display market created competition and put downward pressure on CPM ad rates.

A conceptual cousin of Google Display Ads is TV Ads. TV Ads aren’t all about branding; they can have direct response elements too. But both Display Ads and TV Ads are more about branding than they are direct response.

On the latter front, Google announced a deal with Harris Corporation, which helps manage TV inventory for various media companies. This deal (from a publisher perspective, AdSense for TV) is very much like the value proposition Google offers to newspapers with Print Ads: TV companies and broadcasters (publishers) get access to additional advertiser inventory (and revenue) that they don’t have to sell. Google TV advertisers get additional distribution.

Both AdSense for Display and AdSense for TV aim to give more options and more tools to both direct response and brand-oriented advertisers. They also aim to further broaden Google’s reach — into different ad categories and advertiser budgets.

Postscript: Google Appoints DoubleClick Boss to Oversee Display Ads covers how former DoubleClick chief executive David Rosenblat has been named into the new Google position of president, display ads, a further sign of how seriously the company is taking the display ad space.

Just in — and brief because it’s the end of the day — Google and NBC Universal have reached an agreement that will see the TV ads that Google sells coming to NBCU cable channels including SciFi, Oxygen, MSNBC, CNBC and others. The full release is below:

NBCU Cable to Implement Google TV Ads Advertising Platform

Google to Bring New Advertising Clients to Television

Partnership Includes Collaboration on Custom Research Projects to Help Drive New Insights into TV Advertising

NEW YORK & MOUNTAIN VIEW, CALIF. (September 8, 2008) – As part of its continuing effort to offer innovative advertising solutions to its clients, NBC Universal (NBCU) will join forces with Google (NASDAQ: GOOG) to form a strategic multi-year advertising, research and technology partnership. The two companies will work together to develop more effective advertising metrics, attract non-traditional advertising partners to NBCU and incorporate self-service buying opportunities through the Google TV Ads™ advertising platform.

The announcement was made today by Mike Pilot, President, NBC Universal Sales and Marketing and Tim Armstrong, Google’s President of Advertising and Commerce, North America.

On the national level, NBCU will offer advertising time from several of its cable networks to Google’s TV Ads platform. Inventory from Sci Fi, Oxygen, MSNBC, CNBC, Sleuth, and Chiller will be made available to Google in the coming months, with potential to expand onto other NBCU properties in the future. With the addition of NBC Universal inventory, advertisers using the Google TV Ads platform can reach NBCU Cable’s national audience and gain access to viewership data at an unprecedented scale. With this data, advertisers can better understand what consumers are responding to and make real-time adjustments to their campaign to maximize their ROI.

“We’re extremely pleased to join forces with Google on this effort, which will help us develop better accountability and ROI metrics for our advertisers and attract an entirely new group of clients to television advertising,” said Pilot. “This is another step in our commitment to trying innovative advertising approaches and testing new technologies that can help benefit our clients.”

“The Google TV Ads platform is making television advertising more accountable and measurable and we’re pleased with our progress to date,” said Armstrong. “Our partnership with NBCU will help us bring the power of television to a broader set of advertisers as well as give our current advertisers increased reach through our system.”

On the local level, NBCU and Google have also agreed to work jointly on adapting the Google TV Ads platform for local market use.

“This is a great way to reach clients who are interested in buying television advertising but may not have previously had the resources or ability to do so,” said Frank Comerford, President, Platform Development and Commercial Operations, NBC Local Media. “A self-service ad platform will be a great complement to our existing sales efforts and help us further connect our clients to their customers.”

As part of the agreement, NBC Universal will maintain its direct relationships with agencies and advertisers and can set parameters around the purchase of the available ad time. NBCU will also gain access to the large base of advertisers using Google’s AdWords™ online advertising program, many of whom are not currently television advertisers. The two companies will share in all ad revenue and explore innovative ways to expand the partnership in the future, including adapting the platform to add local inventory.

As part of their effort to help drive value for advertisers, NBCU and Google will also collaborate on a series of custom marketing and research projects using the Google TV Ads platform. Through its partnership with DISH Network, the Google TV Ads platform can report second-by-second set top box data allowing advertisers to measure viewership of their ads more precisely than ever before. The two companies will also take advantage of joint research that will help advertisers and agencies better understand their media mix and optimize their ad campaigns.

"We’re pleased that NBCU will make some of its inventory available on Google’s TV Ads platform," said Laura Desmond, CEO of Starcom MediaVest Group. "The partnership will generate real value for our clients by providing us with a more measurable–and actionable–understanding of how consumers engage with content."

About Google

Google’s innovative search technologies connect millions of people around the world with information every day. Founded in 1998 by Stanford Ph.D. students Larry Page and Sergey Brin, Google today is a top web property in all major global markets. Google’s targeted advertising program provides businesses of all sizes with measurable results, while enhancing the overall web experience for users. Google is headquartered in Silicon Valley with offices throughout the Americas, Europe and Asia. For more information, visit www.google.com.

About NBC Universal

NBC Universal is one of the world’s leading media and entertainment companies in the development, production, and marketing of entertainment, news, and information to a global audience. Formed in May 2004 through the combining of NBC and Vivendi Universal Entertainment, NBC Universal owns and operates a valuable portfolio of news and entertainment networks, a premier motion picture company, significant television production operations, a leading television stations group, and world-renowned theme parks. NBC Universal is 80% owned by General Electric and 20% owned by Vivendi.

One could liken Google to a house that keeps expanding, with new room additions every few months. Google’s house is already the largest on the block and it seems to keep getting bigger. Two related moves represent further expansion. The first is the announcement last week of the Google Media Server, which conveys content from PC to TV. The second is a move to distribute original “TV” content online via AdSense.

In the category of PC to TV, Google is not really doing anything novel. There are a range of efforts already in the market (SlingMedia, TiVo, Apple TV, Hulu, among others) to manage transfer of content from TV to PC and vice versa. The two “platforms” are quickly becoming interoperable, and the screen in the living room will eventually just be a big PC in addition to an on-demand premium content distribution channel.

Google already has moved into TV on the advertising side with TV ads, and other firms are working on bringing Internet-style precision targeting to TV advertising. We can expect a continuing push into TV ad innovation and distribution from Google and Microsoft as they seek to become all-purpose, multi-media advertising platforms.

Perhaps more provocative is Google’s move into original content distribution online through an initial deal with Seth MacFarlane, creator of TV’s “Family Guy” cartoon. As the NY Times explains:

Google will syndicate the program using its AdSense advertising system to thousands of Web sites that are predetermined to be gathering spots for Mr. MacFarlane’s target audience, typically young men. Instead of placing a static ad on a Web page, Google will place a “Cavalcade” video clip.

Advertising will be incorporated into the clips in varying ways. In some cases, there will be “preroll” ads, which ask viewers to sit through a TV-style commercial before getting to the video. Some advertisers may opt for a banner to be placed at the bottom of the video clip or a simple “brought to you by” note at the beginning.

There are two views of this move. It’s either a creative extension of Video for AdSense and related experiments, or it’s Google moving into original content creation and distribution — Google as studio or TV network. The latter interpretation will raise concern among content partners and media companies with whom Google currently does or wants to do business. This is a version of the same concern raised by major ad agencies that fear Google wants to take their clients (e.g., WPP).

Another interesting move in the same vein is YouTube’s experiment with long form content and full-length movies. This is Google as cable TV channel or exhibitor. (Sony is trying TV-internet distribution of first run films before their DVD release.)

As TV-internet content and device “convergence” increases, Google is in a very strong position to be powerful distribution mechanism for film and video content (online and potentially on TV as the internet comes to TV). YouTube is far and away the dominant online video property, and the internet is fast becoming a critical distribution mechanism to reach younger demographic groups that are increasingly viewing TV content online. (The average TV viewer is now 50 apparently.)

Before Google, Yahoo created original content but has historically been ambivalent about its initiatives in that regard. My guess is that Google doesn’t see the Seth MacFarlane deal as a move into content creation but rather distribution and video monetization, consistent with the logic of where the company has been. But others, seeing where it could go ultimately, are afraid of how far Google might like to move into studio or cable TV territory.