To add on top of that, Google TV was instantly plagued with blockades by the major broadcast networks, forcing them to do many workarounds (much like Boxee when they tried force Hulu on their set-top box via a built-in browser hack), and ultimately causing the overall user experience of Google TV owners to be one of the most subpar amongst the set-top box universe.
The Pricing Game
Another big piece which contributed to the failure was the price. Not only were expectations of customers not met (for $299, it better be darn good), but the stressed economy has made early adoption rates drop significantly in addition to creating a much more critical consumer.
An Overly Business-Focused Approach
One hard bat to swing is adapting to the Internet's undeniable feeling of having everything delivered for "free." Forcing any kind of half-thought-out business model will instantly be rejected by the majority of Internet users who have become accustomed to only paying for things they perceive to valuable; in this day in age, it's heavily weighted towards convenience (hence the recent successes of Netflix and gaming distribution platforms such as Valve's Steam network).
Tomorrow's TV should be exciting users, treating them like real people and not "consuming machines." It seems many companies and content holders seem to have forgotten the most important reason and what made TV so awesome to begin with - enjoying great content with people you love.