Google fired another shell at Microsoft's fundamental business model on Thursday, when it released the code behind its Google Chrome OS. When it lands, Microsoft's business model may be blown from the water.
But it's missing the point to compare the Chrome OS with Microsoft's operating systems. The Chrome OS isn't an operating system at all. It's an advertising medium.
And although its evolution may take years to advance, I think we can look forward to Google using the Chrome OS to drive into entirely new markets (even YouTube-branded TVs!), barring government intervention.
It's hard not to characterize Chrome OS as anything but a foundation. The early version of the Google Chrome OS that executives showed off at its Mountain View headquarters was minimalist, clean, straightforward, and very, very fast. It lacked the modern bells and whistles of Windows 7, and deliberately so.
Although what Google presented showed obvious differences from the "leaked" version of the Chrome OS that allegedly showed up weeks ago, Sundar Pichai, vice president of product management at Google, did make one key point: internally, Google engineers joke that the Google Chrome (browser) is the Chrome OS. Not much of a joke, maybe, but the direction is clear: Google has produced a free, easy-to-use, efficient browser that pushes users to the Web, and Google's ads, as quickly as possible.
As a Google spokesman put it: "[Chrome OS] is just a platform for the Web."
That's it. Google executives have made clear that an operating system is still relevant and necessary; they just don't feel that it's the central focus of the PC. Heck, they even tossed it onto the Internet with just an Creative Commons 3.0 Attribution license.
Under Google's Chrome OS business model, the operating system isn't a revenue-generating product. It's barely a commodity. It's not even a service, as Microsoft's Office Web apps try to be. Under Google, the OS is a medium, like television, radio or the Internet. That's a revolutionary idea, and one that may shake the software industry to its core.
And if there's one company that knows how to make money off of the Internet, it's Google.
"Users love free; that's the primary…driver," said Shalini Govil-Pai, lead product manager and strategist for Google's YouTube at a recent panel discussion at the Streaming Media West show in San Jose. "Advertising is what Google does best, and YouTube does best, and that has been our focus so far."
If this sounds somewhat familiar, it should: Apple, the other tech giant with both a browser and an operating system to its name, has patented a means of embedding ads in the operating system, even threatening to lock down components until the user acknowledges it.
To my knowledge, Microsoft doesn't have an answer to Google Chrome OS. No, not Windows XP or Windows 7 Starter. As of last quarter, that's $4.09 billion in Microsoft Windows revenue staring down the barrel of the Chrome OS gun. And by making Chrome OS open source, Google is encouraging its partners to manufacture bullets.
But Microsoft may also have its own backup plan: the courts. And wouldn't that be ironic? Next: Is Tying a Browser to the OS Legal?
In 1994, the Department of Justice sued Microsoft, claiming that tying the Internet Explorer browser to the operating system was illegal. In part, that's because the dominant market share that Microsoft held with Windows created a lever that U.S. District Court Judge Thomas Penfield Jackson, in his findings of fact, said could be used unfairly to coerce OEMs to bundle IE.
But Google doesn't hold a dominant share in browsers, or in operating systems, obviously. When I asked Pichai about the antitrust implications of bundling a browser with an operating system, he pooh-poohed the idea.
"We don't have 95 percent market share in the OS market," Pichai said. "What we are doing is open source. If a competitor wants to bring a competing product to market under a different name, they can."
And that, at least on the surface, is a marvelous escape clause. In the 2004 appellate ruling to the Microsoft case, a collection of states had asked for just that:
"Microsoft ... disclose and license all source code for all Browser software [and that the license] grant a royalty-free, non-exclusive perpetual right on a non-discriminatory basis to make, use, modify and distribute without limitation products implementing or derived from Microsoft's source code . . ." (The phrasing is the court's.)
But the appeals court also strikes a faint note of warning, which seems relevant even though the software landscape has changed significantly in just four years.
"Massachusetts' statement that the open-source IE provision 'is predicated ... [upon] the connection between the illegal acts and the harm visited upon [Netscape] Navigator'," the court said, "highlights precisely why the district court was right to reject that provision: The remedy in this case must be addressed to the harm to competition, not the harm visited upon a competitor." (Emphasis mine.)
The same appeals court also refused to address the issue of Web services, which both courts felt went so far afield from the central issue of bundling the Web browser with the operating system that it wasn't worth their collective time.
But consider: like Google's Android phone operating system, Web services are part and parcel of the Google Chrome OS. Both in the app tabs and in the drop-down menu of apps Gmail appears first. Calendar, Google Docs, and Picasa all appear prominently. All data is automatically backed up to the cloud, features which require a third-party service in Windows. And Windows 7 doesn't bundle an email application, either.
I've always personally felt that the antitrust agencies understood the process of how a software company could develop an operating system, then a browser, and then Web services. But I'm not sure they're comfortable pursuing the case in the opposite direction: from the Wild West of the Web into the orderly confines of the PC – or in Google's case, the netbook.
Defining the platform
Google executives described a Chrome OS netbook as a companion device, one that would sit alongside a more full-featured notebook or desktop (presumably powered by Windows). Google executives didn't rule out pushing the Chrome OS into more of a premium environment, but emphasized that the OS was designed to create a simple and "delightful" Web experience.
How? By restricting OEMs to certain specified components, including quick flash memory-based solid-state disc drives, or SSDs. Google executives probably want to avoid running into the same problems that have affected Linux, where the number of components supported by hardware drivers lags Windows.
In doing so, however, Google is defining the platform just as it did with Android phones. In this case, I don't feel that there's any antitrust element at all: those OEMs are free to work with component vendors and develop Chrome OS-compatible drivers, thus allowing them to choose what components they want. It's not going to be easy, though.
In thinking this through, however, I couldn't help but wonder if Google might be taking this Chrome OS project in some unexpected directions.
Here's some food for thought: a netbook is just a redesign away from a net-top. Net-tops, like the Eee Box EB1501, are part of a growing trend toward mounting them on the back of the TV. Samsung and Google rival Yahoo are putting Internet-enabled widgets into place on HDTVs. Why isn't Google in this space? With Chrome OS, it could be.
Set-top box companies like Sezmi are marketing set-top boxes that combine live TV, video-on-demand services, and Web video. Google could certainly provide at least two pieces of that puzzle, and license the third.
It's purely speculation at this point, but why couldn't we see a derivative of the Chrome OS designed to be integrated into a TV set-top that Google co-defines with its partners? And there's already the perfect name: the YouTube. Could a Google co-branded TV or set-top be far off?
Video represents a new and potentially vast source of revenue for Microsoft. Speaking at the Streaming Media West show, Marc Whitten, the general manager of Microsoft's Xbox Live, predicted that its "Project Natal" camera could be used to gather rather subtle bits of user interactivity with TVs: which users laughed, and when; how many users were watching a program at one time, and who yelled at the TV during an episode of "Jeopardy". Google doesn't have anything remotely comparable. But can Microsoft also make this vision a reality, and then use this data to best advantage? That remains to be seen.
Google hungers for data. It feeds on it. Consumers may be willing to provide their data to Google, in return for the tight integration with the Web services they most frequently use. It will be interesting to see how far Google will go, and how far it will be permitted to.
