By Georgina Prodhan
LONDON (Reuters) - Google's Eric Schmidt faces a wary audience of British television professionals on Friday following a major acquisition that could turn Google TV into a real competitor for TV advertising dollars.
Google's chairman will be the first person from outside the TV industry to give the Edinburgh television festival's keynote MacTaggart lecture in its 35-year history.
So far Google's relations with the TV establishment have been rocky.
"There is still a general wariness within the TV business, broadly understood, about what Google is there to do," says analyst Dan Cryan of UK media research firm IHS Screen Digest.
"The thing that really scares any TV company is the potential for Google coming into their space and selling ads to their customers."
Google has long held ambitions in the television arena, hoping to extend its online advertising business, which made $28 billion for the company last year, to the big screens that still command the lion's share of global advertising budgets.
So far, it has had little success, despite its ownership of the world's most popular online video site, YouTube.
Google TV, which allows viewers to get Web content on their television screens via a browser, was launched last October in the United States.
It was quickly blocked by three of the top U.S. broadcasters -- NBC, CBS and ABC -- as well as online video site Hulu, which is backed by major media companies, and received poor reviews.
In July, Logitech slashed the price of its Revue set-top boxes for Google TV to $99 from an initial $299.
Last week, however, Google's deal to buy Motorola Mobility for $12.5 billion handed it the world's leading set top box business which delivers content for many of the top cable TV companies in the United States.
The headline attraction of the deal was Motorola's huge portfolio of wireless patents but the set top box business and Motorola's cellphone unit may give Google useful footholds to expand into new markets.
Google has not spelled out its plans for the set top box business, and many analysts expect it to divest the unit at the first opportunity.
But some, like New York-based Nomura analyst Stuart Jeffrey, say it may use the chance to gain insights into pay-TV.
"Google describes itself as an opportunistic company. So while it may not have wanted to buy Motorola's operations, it may now assess whether retaining these assets can compensate for the risk of owning them," Jeffrey wrote in a note this week.
The acquisition has raised the hackles of U.S. cable TV companies who will now be working with a partner with whom they have clashed on issues from rationing content delivery to piracy.
Back under the leadership of Larry Page -- Google's co-founder took the reins back from Schmidt in April -- the company may be expected to make bold moves in areas like mobile and TV.
Page has already launched a social network to compete with Facebook, Google+, which has picked up more than 25 million users since it started in June, promising valuable insights to help Google target advertising more accurately.
A foothold in the living room via a set top box powered by Google's mobile operating system, Android, could provide rich data on how online purchases are driven by TV ads.
"The distance between an ad and the transaction is much smaller than before -- before, you'd go out and buy it but now you can stay in and buy it," says Paul Lee, author of a report on the television industry published this week by Deloitte.
"The ability for television to drive ecommerce is greater than ever. But understanding how that happens is very important," he says.
Owning a set top box business may allow Google to reapproach the television industry in a different way from the flawed Google TV consumer product.
"It may not materialize in you seeing Google TV via a Motorola set-top box," says Paul Erickson, analyst with Texas-based consumer-electronics research firm IMS research. "The overarching effects of this deal are going to be more subtle."
Erickson believes Google could even win over the television industry by offering a common development platform, saving content providers and television manufacturers the trouble of making multiple versions of applications for Web-connected TVs.
Schmidt, whose remit now includes reaching out to governments and other organisations, will need all his powers of persuasion to convince the Edinburgh audience that Google TV could be a partner, not a threat.
(Additional reporting by Alexei Oreskovic in San Francisco; Editing by David Cowell)