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Google's Long, Tough Microsoft-Like Road For Chrome

With Google's announcement of a Chrome-based PC operating system, you could almost hear the cheers from pundits hot for something to gnash for months, people who hate Microsoft, and the Google true-believers. It's an announcement that goes hand-in-hand with the word that the beta tag is now dropped from Google Apps. However, those who think that Microsoft's days are numbered in the short-run should realize that in a way, Google is about to become Microsoft, trying to move from position of strength to challenge a powerful incumbent, as have many others. That's a task much harder than it even sounds, particularly when you don't have an internal unified front.

To understand where Google is going, you have to see where it came from. There is no money in the browser business -- too much free software from too many providers. Why did Google get into it in the first place? To chase after Microsoft:

  • There is certainly some degree of personal and corporate ego in play. Microsoft is the dominant player in PC software and people who run companies are highly competitive.
  • Google and Microsoft are similar in some fundamental ways. Both are dominant in their areas and both have a weakness of too much revenue concentrated in a small area of their offerings: about 80 percent of Microsoft's money comes from Windows and Office and fully 97 percent of Google revenues are from search advertising.
  • Each company knows it needs to diversify. Each is jealous of the other's successful niche and so has been trying to displace the rival.
But there is a key difference. Microsoft has been much better at getting into new areas of business. Even its online services business last fiscal year (ending June 30, 2008) had revenue of $3.21 billion. Yes, it had a net loss of $1.23 billion, but what would Google's loss have been if it publicly reported revenue and expenses by segment? Probably enormous, as a lot of development has to go into software products.

Because people don't see the clear comparison, they don't react as they do when a Microsoft business unit loses a bundle. Even though significant portions of Google's resources can be concentrated as needed, the company must internally assign costs of R&D, marketing, sales, support, and other unavoidable expenses. Those sums are likely significant for the company's non-search ventures: Apps, enterprise appliances, Android, talk, books, and maps, to name a literal few. Non-search revenues last year were only $653.87 million; it's hard to see how any of thsoe product lines could come close to breaking even, let alone making money.

As my colleague Michael Hickins argues, if Google wants to be in the OS business, getting something other than Android will be important, as it has the reputation of having a clumsy UI that is not particularly attractive to users. But outside of the perceived juiciness of a Google v. Microsoft story with its potential for big conflict, what are the practical reasons for getting into an OS that is likely designed for netbooks? It must be for controlling information and, as almost always with Google, the potential presentation of advertising. There's precious little margin for operating system costs -- look at the furor that surrounded Microsoft's wanting to increase the price of Windows 7.

That means that a Chrome operating system has to be yet another giveaway, perhaps with some as yet unseen revenue stream. Even if using the "freemium" model, where there might be a paid upgrade, or at least advertising, Google would require a big uptake to start making any money at all. Success is far from being a given.

In terms of competitiveness, Chrome is not coming into this from a strong position even as a browser. Early on, it seemed to take market share, but that early bump quickly flattened:

Chrome still has a respectable 0.7% to 1% of the browser market, depending on the time of day, according to tracking service Net Applications. But that's down from last week, when its share ranged from 1% to 1.7%, depending on the time of day.
A better part of a year later, things haven't picked up for the browser:
Internet Explorer's one major market-share competitor, Firefox 3.0, saw its portion level off slightly to 27.73 percent in July, while the other "majors" â€" including the various versions of Safari, Firefox 2.0 and Chrome â€" all occupied between 0.04 percent and 2 percent of the market.
Over time, Chrome has been incapable of wooing a big audience. Why will an operating system based on it gain enough of a foothold in the face of competition from Windows, various forms of Linux, Symbian, Intel's Wind River offerings, and even Android, to be successful under any objective measure. The more I look at Google, the more unfocused the company seems to be as a whole, and the more desperate to find a way out of its colossal dependence on advertising revenue. This reads like the equivalent of Microsoft's continued push into the search market. Even with the greatest determination and massive resources at your command, you can still fall flat on your face.

As an aside, my congratulations to MediaPost, which must win the award for best headline on the topic: "OMG! Google Launches OS: Welcome To The Thunder Chrome". Does this mean that Google wants to win the OS wars and become the official Chrome Dome?

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