Reflections On Chrome OS From A Consumer Perspective

Google hosted something of a formal “status update” on Chrome the operating system in Mountain View on Thursday. There we discovered the company is open-sourcing the code. We also found out it’s intended as a netbook OS (for now) and that Google is working with several hardware partners to create a better netbook experience (full-sized keyboard, slightly larger screen). We also learned it’s intended to be a secondary or supplemental machine, not a primary computer.

That positioning is very important.

Google Product VP Sundar Pichai wouldn’t discuss the hardware partners involved with Chrome OS during that meeting but an earlier blog post indicates many of the usual suspects are already involved: “Acer, Adobe, ASUS, Freescale, Hewlett-Packard, Lenovo, Qualcomm, Texas Instruments, and Toshiba.”

Since Thursday there’s been a steady debate on whether Chrome will succeed or fail. Much of the discussion in the room on Thursday was fairly technical: about the “stack,” the Linux kernel, security, chips, code and so on. But I want to step back from the “specs” arena and look at the Chrome/Google netbook from a consumer perspective — because that’s where it will live or die.

Several years ago people were inhibited (me included) against buying Macs because of the dominance of Windows and related Microsoft software. The general concern went to being an outsider or incompatible, literally and figuratively, with the larger network of Windows machines out there. Several things have changed all that today — the rise of the internet among them — and Microsoft no longer has that same kind of psychological “lock” on computer purchase behavior among consumers. In fact its stepped up ad campaigns against Macs and the opening of physical retail stores both reflect that.

With Chrome netbooks, Google is entering the market at a time when people are increasingly open to buying non-Windows PCs. Mac sales obviously reflect that. By contrast, Linux and various Linux derivative operating systems (i.e., Ubuntu) have never established credibility with consumers, which is why they’ve been unable able to establish a commercial foothold. As Microsoft began to defensively focus on these cheaper, smaller computers consumers equally embraced Windows netbooks because of the familiarity of the Windows brand. Windows is now the dominant OS on netbooks accordingly.

Now with Google and Chrome there is likely to be a credible alternative to Windows-based netbooks. Putting aside the rumored tablet, Apple says it can’t build a low-cost computer that will uphold its quality standards. Google apparently said on Thursday (according to later hearsay I received) that if netbook makers want to use the Google brand — as in “with Google” on Android handsets — there will be some license fee involved. However, I’ve yet to see this confirmed anywhere.

I see Chrome (the OS) and Android as quite analogous in many respects. In fact, Google’s co-founder Sergey Brin also said that Chrome and Android will likely merge or converge at some unspecified future point. (There are a number of device makers that are putting Android on tablets and netbooks.)

The Google association or explicit Google branding will be relatively important in my mind to establish the credibility of this non-Windows, non-Mac machine with consumers. A “Google PC” or “internetbook” with the Google brand attached will attract consumers, especially students and younger users. In addition, the presentation of this as a second computer will relieve some of the pressure on Chrome to do everything a Mac or Windows box can. People will judge and consider it in a different way. Accordingly it also probably won’t be very important that there’s no (Microsoft) software on the device. (iTunes might be an issue, however.)

This brings us to arguably the most important consideration of all: price.

While Macs have been able to survive as a “premium” hardware line, the rest of the PC universe is ruled by price competition. That’s especially true among netbooks. Netbooks have been the best-selling segment of the PC market during the recession — because they’re cheaper. Contrary to perceptions that everyone is buying netbooks because they’re highly mobile, NPD Group found among consumer survey respondents that 60% of netbook buyers never took them out of the house. (Of course people might move them around the house on wireless networks, which goes to portability.)

The top-selling netbooks on Amazon all come in at under $300. In addition, most of the major US wireless carriers (and those abroad) have been subsidizing netbooks with a two-year contract. In the US, Sprint, AT&T and Verizon are all selling subsidized netbooks for $199 with a two-year service contract.

Google wouldn’t discuss pricing at the Chrome event. That’s up to the hardware partners apparently. Yet Google knows that to succeed a Google/Chrome netbook will need to come in at less than $400 at the highest end and potentially around $200 to really take off. The economics of that lower price point may be very difficult to achieve. Accordingly Google & partners may need to distribute via subsidized mobile carrier relationships to bring the price down to the point where it will really get consumers’ attention. I would speculate that Verizon, given the Google-Android relationship, is almost certainly going to do this.

Google promised these devices would start appearing before the “holiday shopping season” (read: Thanksgiving) in 2010. Of course the computer must work relatively well and not be a piece of junk. But here’s what it comes down to from a consumer perspective: If Google and its partners can build a machine that costs $300 or less, that carries the Google brand and is positioned as an “on the go” internet device not intended to replace your home computer it will probably have a winner on its hands.