Google generates most of its revenues from advertising, but intends to diversify its revenue streams with offerings such as Google Apps, which have just (surprise, surprise) come out of beta and whose momentum the new OS aims to boost (along with Google Mail and Google Docs usage) in one of the only markets that is still showing some health: netbooks.
In a recent report on netbooks, we identified two main sequential trends in the netbook market.
The first is a shrinking netbook/laptop divide, with the average netbook price shooting up to $400.
After a strong start in this market segment, Linux is now increasingly being distanced by Windows, although its performance is still outstanding compared to its overall performance in the desktop market. Google Chrome OS could potentially enable it to regain some of its lost ground.
The second trend is a reaction to the first, a back-to-basics backlash with ambition to deliver netbooks that are not only cheaper ($200 on average) but also designed as appliances/mobile Internet devices (MIDs) rather than would-be laptops. In this market Google Android, which is also Linux-based, is making good progress.
In response, Microsoft needs not only to push Windows 7 forwards but also to boost its Windows Mobile offering.
Either free (as many expect) or low cost, the new Google OS will challenge Microsoft\'s ability to maintain profit margins. It will also challenge Windows from a user experience perspective, which is key to Linux-based netbook uptake.
The objective is for it to "start up ["&brkbar;] in a few seconds", to provide a "minimal" user interface that "stay[s] out of your way" and to be secure "so that users don\'t have to deal with viruses, malware and security updates".
It could also be the starting point for a more integrated experience across Google applications/services and we expect it, like Android, to be linked to an online store of web applications not just to make it easier to consume these applications but also to prove that they can meet most needs.
Google dismisses OSs "designed in an era where there was no web." The expectation behind its own OS is that "most of the user experience takes place on the web". The key word here is "most".
With technologies such as Gears (that predates the Chrome browser and is embedded in it), and the Native Client plug-in and O3D API technologies that followed, Google is also working at enabling online applications to run offline. It needs to points this out more aggressively.
The proof of the Google Chrome OS pudding will be in its eating. When the Google Chrome browser was released, we warned "don\'t fall for the hype; Google Chrome still has everything to prove." A few months later, despite Google claiming 30 million regular users, the browser has not made much impact.
Similarly we do not expect Google Chrome OS to take over the world - it is a bit late for that.