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Google's Next Frontier: DirecTV Partnership

Today's news that Google is partnering with DirecTVto sell ads for cable networks could have far-reaching implications for Google and the ad business. This could be a win-win-win for Google, DirecTV, as well as advertisers, and it has the potential to shake up Madison Avenue.

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Google

Google will use its ad tools to sell inventory on 11 channels, including TV Guide, Bloomberg, Fox Business, Sleuth and Chiller. (Note, Comcast is in the midst of buying CNBC's parent company NBC Universal in a $30 billion deal)

They're diving right in — Google TV Ads will be selling inventory from throughout the day, include those key primetime spots.

For Google, it's a key step in diversifying and expanding Google's reach beyond the web — 96 percent of Google revenue came from Internet ads last quarter. DirecTV is a key partner for Google, the largest satellite provider in the US, with 18.7 million TV households, and the second largest TV distributor, behind Comcast. This deal gives Google's TV ad network access to 30 million satellite households, building on a deal it made with Dish in 2007 and another it made with NBC Universal in 2008.

The more TV ad inventory Google can offer, the more advertisers it can lure in. This deal should secure Google a critical mass of advertising to make its Google TV Ad model robust. This is a key foothold in TV as Google readies to launch its TV ad platform this fall, to allow viewers to access Internet content on their TVs.

DirecTV will benefit as Google will brings new advertisers onto the cable space: about a third of Google's TV advertisers haven't used the medium before. Google TV ads can be narrowly targeted to reach certain demographics, which should grow advertisers' return on investment and convince them to spend more.

And this could really transform the TV ad business by enabling demographic targeting on a national scale.

Marketers have been shifting ad spending away from TV to the web because its much easier to narrowly target online ads and measure their success. The growth of Google TV Ads provides more reason to look to cable.

The fact that Google TV Ads is a self-service, automated model, should also ultimately save advertisers money. If this works we can expect DirecTV to roll out Google TV ads to many more channels.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.