Google Will Own Netbook Market

Google’s new Chrome operating system is going to clean up the netbook market within five years (or as soon as HP and other vendors get out from under their OEM deals with Microsoft), leaving Microsoft with an increasingly marginalized desktop PC market for its Windows operating system. Google says it has already signed up vendors who will ship netbooks running Chrome by the end of 2010, and more are sure to come.

The market will find Chrome is a better and more compelling operating system for a number of reasons, some of which Google alluded to in its announcement of the new OS:

• Chrome will be faster, more secure and simpler for customers to deal with. The main reason for this is not that’s governed by Google, but that it’s open source. Like Linux, which is ultra-secure, Chrome will benefit from thousands of developers across the world contributing code and improving it in a stable fashion (unlike Microsoft and its hinky updates which often interrupt links with other software);
• Chrome will also be easier for application developers to work with than the proprietary, dense Microsoft operating system. Even Microsoft’s “standards-based” document file format, OpenXML, requires outside developers to plow through more than 2,000 pages of dense material if they want to create programs that operate with it;
• Finally, Chrome will significantly reduce the cost of a netbook. As Wired’s Charlie Sorrell noted, Chrome won’t cost netbook vendors a blessed dime, in contrast to Windows (the “Microsoft tax”), reducing the cost of an already-cheaper laptop alternative by some 10 percent. Not chump change.

I’ve already explained how Google is going to wipe Microsoft off the desktop thanks to applications like Wave, which benefit from HTML 5 and other standards-based protocols that allow developers to create applications that run in the Web browser as easily and elegantly as applications that reside on the hard drive. This means that computing devices no longer have to store as much data and can therefore be smaller, lighter, cheaper and less power-hungry.

From a larger perspective, this also makes Chrome-powered netbooks incredibly appealing to a huge percentage of enterprise customers using Web-based productivity software from the likes of Zoho and, yes, Google, as well as business applications running in the cloud (Salesforce.com, Successfactors, NetSuite) which are particularly attractive to businesses that aren’t members of the global Fortune 1000 club.

Russell Buckley, vice president of global alliances at AdMob, a mobile advertising network, wrote in a forum posting this morning that “as we move into the post-PC era, netbooks seem to have a meaningful future, whereas laptops and larger don’t… So this move by Google is both smart and the boldest poke in the eye of Microsoft yet.”

The upshot in terms of actual devices? According to tech author and consultant Tomi Ahonen:

• 750 million desktop PCs and 450 PC-based laptops are in use today
• Customers trade those devices out approximatey every 3.5 years, meaning the annual market size will be around 400 million PCs by the end of the decade.

Even assuming that only half of those PCs are replaced by portable computers, and that only half of those are netbooks (as opposed to laptops), we’re looking at 100 million devices that used to run Windows now running Chrome. Four years later, that number jumps to 400 million. Microsoft recovers from this how?

There are, of course, doubters, like my colleague Erik Sherman, who points out that the “Chrome [browser] as been incapable of wooing a big audience.” I suppose that’s true to a point, but its share of the browser market has actually doubled since January 2009, from 1.34 percent of the market to 2.81 percent. In North America, it’s share is 3.25 percent, which seems like small potatoes until you contrast that with Opera, a much older rival, which is languishing at levels well below one percent. Meanwhile, Microsoft’s Internet Explorer continues to spiral downwards, from 65 percent of share last July to 53 percent today. If you think IE can retain its dominant share of the browser market, you probably also believe that Bing will overtake Google in search share.

Combine Chrome with Google’s Android OS, which is emerging as a significant threat to both Nokia’s Symbian and Apple’s iPhone (forget about the moribund Windows Mobile) on the smartphone front, and you have not just the beginnings, but an irreversible tidal wave, of the end of the Microsoft PC era.