It seems that Google TV has not been very popular in the marketplace so far, at least not as popular as I'm sure Google would've liked. Of course, I don't think they have anyone to blame but themselves, and perhaps part of the blame is of the networks as well, who blocked content on Google TV, out of fear of cannibalizing their business, by allowing people to use the web video instead of their regular programming.
But Google has mostly to blame themselves because of the way they designed and specced the original Google TV device, the Logitech Revue. They made it with expensive components, and probably with a greedy price, thanks to Logitech, that eventually turned it into a $300 product at launch, or 3x more than other competing alternatives.
Google obviously needs to rethink this whole project, make the user experience as intuitive as possible, make sure they have the content from day one, make it cost around $100, and also something I believe is that they need to focus a lot more on applications and especially games. Android could easily become a gaming platform, if Google was really serious about it. They could achieve this with these $100 boxes, or even with people's own smartphones by docking them for the TV.
Google TV hasn't been one of the most successful products for Google so far, but that's ok, because the Apple TV went through the same process as well. It was a failure for years for Apple, and even the Apple TV 2.0, which many people liked, only sold like 250,000 units in ts launch quarter, and I believe they've also sold only about 1 million in a year or so.
It still remains to be seen if TV's can even become "smart", at least through the way we are thinking now – by adding set top boxes to them, or putting operating systems on the TV's themselves. In the end, the TV's might just remain non-smart, and just make them smart by connecting our mobile phones to them.