Why Google can succeed where Microsoft failed

Google's (Nasdaq: GOOG) $12.5 billion agreement to buy Motorola Mobility (NYSE: MMI) this week brought to mind another landmark deal--Microsoft's (Nasdaq: MSFT) $1 billion investment in Comcast (Nasdaq: CMCSA) in 1997.

While Google is banking on Motorola to help it reach viewers through both mobile devices and cable set-tops, Microsoft had hoped its Comcast investment would see its software running on millions of digital set-tops.

But Microsoft failed in its efforts to widely deploy Microsoft TV on digital set-tops from Comcast and other cable operators, as the software giant struggled to integrate its technology with legacy set-tops. And in 2009, Microsoft sold its entire stake in Comcast.

Instead of investing in a cable, satellite, or telephone company, Google is buying a top manufacturer of both cable set-tops and mobile phones. By distributing applications that can run on both Motorola mobile devices and set-tops, Google is poised to be a key player delivering content, advertising and search functions to viewers wherever they are.

It's still not clear what types of new products Google could offer through Motorola, but a look at how pay TV providers such as Verizon (NYSE: VZ) are already using Motorola hardware and Google software shows the potential.

I have two Motorola digital set-tops running Verizon's FiOS TV in my home near Syracuse, N.Y. I also have a Motorola Droid mobile phone running with several FiOS apps, including a DVR manager and an app that turns my phone into a remote control.

Today, I can run a Google search by speaking into my mobile phone. Once Google absorbs Motorola Mobility, I imagine cable subscribers would be able to use voice controls to change channels on their digital set-top, or search live TV, video-on-demand or content stored on a DVR.

Google could also help Verizon and other Motorola Mobility set-top customers launch app stores similar to Apple's (Nasdaq: AAPL) iTunes Store, and Google's Android Market. And with Comcast, Verizon and other pay TV providers looking to integrate social TV recommendations into their interactive program guides, Google could prove to be key player in delivering new advanced IPGs to cable homes.

While Google could attempt to use Motorola Mobility to put its Google TV platform into cable homes, it will be a challenge for it to convince operators that rely on interactive program guides from Rovi and other technology suppliers to make Google TV their primary guide for navigating video and interactive programming.

The deal will also help Motorola Mobility compete against Cisco (Nasdaq: CSCO), Samsung and other set-top vendors. As cable subscribers are beginning to rely less on set-tops and more on apps running on mobile phones and tablets such as Apple's iPad to navigate content, Google has both the hardware and mobile applications that can help it thrive.--Steve