Yahoo!'s Next Frontier: Internet TV

It's easy to lose sight of Yahoo!'s role as a Web pioneer, what with the company's recent management missteps, search-market share losses to Google (GOOG), and the distraction of Microsoft's (MSFT) failed takeover bid. But in the mid-1990s, Yahoo broke ground in crawling the disparate information strewn across the young World Wide Web and organizing it neatly for consumers.

Once again, Yahoo (YHOO) hopes to blaze trails, this time in bringing Internet content to TV. At the Consumer Electronics Show in Las Vegas, the company announced a range of televisions and related products loaded with software—developed by Yahoo and Intel (INTC)—that would let users call up popular Web pages and tools right alongside programs they're watching on TV. Intel and Yahoo first demonstrated the technology, called TV Widgets, in August, but elaborated on it at CES, where they named hardware partners and a host of TV-friendly sites and other tools.

Past attempts to merge TV and the Web have fizzled, but analysts say Yahoo's efforts are fortuitous. Consumers are eager to enjoy disparate media in a single gadget or appliance. Witness the popularity of Apple's (AAPL) iPhone, which has done a better job than predecessors in bringing the Web to cell phones. TV makers have already started building broadband ports in new sets. And content producers are keen to keep audiences engaged, wherever they may be.

free, downloadable widgets

Many consumers of online social media regularly find themselves in front of the TV, laptop flipped open, responding to e-mails, updating social network profiles, or finishing work or studies. Done right, TV Widgets would help users handle multitasking with greater �lan. "This is a very intelligent chance Yahoo is taking," says Mukul Krishna, global director of digital media at research firm Frost & Sullivan. "Google and Microsoft will be looking at this very closely."

When TV Widgets goes public later this year, almost 20 different widgets will be available, from Yahoo's own weather and stock guides to applications created by a range of outside developers, including such social media sites as Twitter and NewsCorp.'s (NWS) MySpace and news outlets like The New York Times (NYT). While a suite of widgets will be preloaded into store-bought TVs, an online "Widget Gallery" will let viewers pick and choose new applications to download.

TV Widgets will be installed in a handful of broadband-capable high-definition televisions and set-top boxes made by Samsung Electronics, Sony (SNE), VIZIO, and LG Electronics, slated to ship in the spring.

Users will get scaled down versions of popular Web pages and applications rather than full-blown sites. "Vendors need to remember that TVs are not PCs, and consumers are not looking for the same type of information on a TV screen that they get when they are connected to a computer or smart phone," says Michael Gartenberg, vice president of mobile strategy at technology researcher Jupitermedia (JUPM).

Open Toolkit Invites Developers

That's the sentiment MySpace is pursuing as it develops its TV widget. "We are focused on: 'What would I want to know right now?," says Max Engel, project lead for MySpace ID. On the MySpace widget, members of the social network can perform such simple tasks as update their status and check up on the status messages of their friends—activities that would "not necessarily interrupt my viewing experience," Engel says.

The widget gallery won't just host big brands, but will constitute an open invitation: A toolkit released by Yahoo lets any content creators develop their own widgets. At launch, all widgets will be free, but according to Patrick Barry, Yahoo's vice-president of Connected TV, developers might someday be allowed to set their own prices—a model that's driven recent third-party innovation on platforms created by Facebook and Apple.

Eventually, Yahoo and Intel will court advertisers to pitch to viewers on the platform. "You'll see video-based advertising, you'll see things that look more graphical in nature, and advertising that's more interactive," says Barry. "Advertising on TV is really broken. We think this is potentially an opportunity to solve problems for consumers and for advertisers."

If all goes well, TV Widgets might solve a few problems for Yahoo, too.

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