Ten months ago, Larry Page said that Google would do for TV what they did for the Web.  While most observers don't seem to realize it, last night Google delivered on Page's promise.

The new Google Video Store was released Monday night, and the early reaction is decidedly negative.  Not enough content, too hard to search, burdened with DRM, no support for tagging, etc.

These folks have it all wrong.

As with Google's other blockbuster innovations (AdWords, AdSense, Gmail, Maps), Google has delivered a platform that will enable users to build Google's business, not only in video but in all kinds of premium content.

This is new.  There are no competitors in the market that Google just created.

Google does things differently, and there's usually a genius in their approach.  While Apple's iTunes is closed and hierarchical, Google Video is open and distributed.  Apple's iTunes negotiates a few blanket agreements with big content providers, then forces users into Apple-only hardware.  Google Video welcomes all content providers, large and small, lets them decide how much to charge and what level of DRM to employ, and leaves it up to the marketplace to determine the winners.

Google's core business, AdWords, is a simple and elegant auction system for search advertising that created a market where none existed before.  With AdWords, Google didn't start out with thousands of advertisers, but the advertisers found Google because the market just works.  Likewise, Google is priming the video pump with some decent content, but content providers and content consumers will find each other in Google's new video marketplace -- and Google will keep 30% of each transaction.

But while that 30% may cover bandwidth and administrative costs it's unlikely to be as profitable as AdWords, since it's a lot more expensive to serve a 30-minute video than a four-line text ad.  So once Google has scaled its content, watch for the real monetizing move -- video advertising is where the big money is to be made.

When the dust settles, we'll see that this one release is actually quite a dramatic product that will open an entirely new revenue stream:

1. Google delivered a revolutionary player with a better user experience than Windows Media Player or Apple Quicktime
2. Google created a video marketplace where content owners not only set the price, but can also customize several levels of copy protection
3. Google has instantly democratized DRM so it works for everybody, not just the big guys -- the independent short-film producer needs copy protection just as much as Disney in order to profit from her work
4. DRM is linked to you, not your machine, so the content you buy is now portable to any machines you own now or in the future, so you're more likely to invest in new content
   
5. A simple, unobtrusive micropayment system -- you can buy content with two clicks of the mouse without leaving the page you're on -- imagine the power of this platform when extended to other content like books or premium databases

There's still a lot of work still to be done with video.  It needs to be playable in the living room on the TV, it needs better metadata and search tools, and it needs to be easier and faster to contribute new content to the marketplace.

These are all solvable problems.  The important thing for the Google investor to realize is that Google has just created a new market where none existed before.  And this market is as big or bigger than the search advertising market that made Google a $140 billion enterprise in the first place.

no mention of the long tail?

The ability to capture and edit video is so cheap now. Distribution was the last problem and it's just been solved.

There are millions of amateur to personal video producers out there. Google has just invented a way to monetize their content.