Google is developing an operating system of its own, based on the company's Chrome browser and intended primarily for use in low-cost Netbooks. Now I'll tell you why I think Google is doing it.
Like any other commercial enterprise, Google is trying to make money. No secret there. But Google doesn't make money the way other computer software companies do.
Microsoft, for example, makes money mostly by selling software (and a few hardware products) to computer users. There are two sides to this plan. Microsoft wants to make computers more valuable, so buyers will spend more of their income on computers; and it wants to increase the share it receives of that budget.
What makes Google unusual is that it wants a share of a different budget: the time people spend in front of their computers. Google makes money by displaying ads on a small part of the display while people view Internet content on the rest. Not all the time, of course, but the opportunity is there, and Google's multibillion-dollar revenue shows how well this strategy can work.
Turning the Chrome browser into the Chrome OS is technically straightforward, though of course it'll take a lot of work. A browser already has most of the key elements of any OS: application programming interfaces (APIs) to allow application software to display content and accept user input, store and retrieve data from mass storage, communicate over the Internet, and so on. Google will have to add a driver model and some other things that don't exist in a browser, but it can learn from how these things are done in existing operating systems, and possibly even borrow much of the code directly from Linux; there's no need to reinvent the wheel.
Existing operating systems such as Windows support a far wider variety of programming languages and provide far more services than Chrome OS will, but Chrome will probably be plenty good enough for Netbooks. (Personally, I don't think Netbooks are good for much, and many Netbook buyers seem to agree as shown by the huge volume of refurbished systems now available from remarketers like Woot.com.)
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So, Google is after your time, not your money. It can try to get more of your time in the same ways Microsoft tries to get more of your money. Will the Chrome OS increase the time people spend in front of the computer? No, quite the opposite. There will inevitably be less to do on a Chrome OS computer than on a Mac or Windows machine. Buying a Chrome-based Netbook means giving up the chance to run most Windows games, Apple's iLife suite, and other popular software.
But for Google, the key is this: once you've got a Chrome system, Google's in charge of ALL the time you spend with it.
I don't think that's good enough, and it looks like Google feels the same way; the company intends to implement the whole Chrome OS environment within the Chrome browser so Linux, Mac and Windows users can also run Chrome applications. This plan is necessary, since Google can't very well hope to muscle aside the incumbents, but it means that Netbook buyers will have no reason to prefer a Chrome-based machine.
Or will they? Linux may be free, but Google can undercut that price if it's willing to cut OEMs in on its ad revenue. In this way, Google could bring to market a subsidized pricing model we usually associate only with 3G-equipped notebooks. Google won't have nearly as much money to throw around as the cell phone operators do--maybe just a few unpredictable dollars per month averaged across all Chrome OS users vs. the reliable $60/month subscription fees associated with 3G cards--but that could still add up. Even a $20 subsidy could amount to 10 percent of the sale price of a cheap Netbook, which could tip the balance in favor of Chrome.
Like I said, it seems to me that Netbooks aren't the ideal platform for this strategy. The Google model can't work as well on a small screen, since users will be reluctant to share what little space they have with Google's ads. But they'll work well enough, and Google has no realistic chance to place Chrome on mainstream notebook and desktop systems except in the same narrow markets where Linux sells today. (And not all of those; for example, Chrome has no shot at the engineering workstation market, where Linux is popular.)
So I'm sure we'll see some number of Chrome OS-based machines on the market in 2010, and then we'll see what happens. My guess is that Chrome will do about as well as Linux has done in the Netbook business: not well. A lot of people will try it, possibly enticed by those lightly subsidized prices and the usual interest in novel computing platforms (the information-technology equivalent of the Coolidge effect, which perhaps could be known as the Glaskowsky effect.)
And then most of those people will return those machines, or give them to their ungrateful children, or just toss them onto a shelf to gather dust, and they won't buy more of the same--at least not until Google spends a few more years building Chrome OS into a fully competitive product, which I'm sure it will do. Google's big enough, and it knows there's a business here. It just won't be ready to take full advantage of the opportunity just yet.