The Google Chromebook has been around for a few years now, but lately it seems to be gaining some traction in the market place. It is showing up in Best Buy and other retail outlets. It’s sales are steadily increasing. There are Chromebooks winning “Best of” categories at CES. They are being recognized and targeted by competitors, as recently as part of Microsoft’s “Scroogle” campaign they felt it necessary to address their perceived inferiority of Chromebooks. Not a big fan of these Mark Penn negative spin driven ads, but then I am not on Steve Ballmer’s Harvard buddy list. The idea behind a Chromebook is we do about ninety percent of our work on the internet why not just have a connected device with a browser? It is a new category of laptop, where technology has taken us in a slightly different direction based on innovations over the past decade. Chromebooks are coming of age and getting attention, moving beyond cute gadget to contender.
I had the chance to use a Chromebook once a year ago. It struck me as a fairly simple device. What is immediately evident is that on the home screen there is pretty much nothing. You launch your Chrome Browser and off you go. Having been a Windows guy my entire life this was a bit hard for me to overcome. Despite the fact that on a Windows machine about 90% of the icons that appear I never even clicked on. It just seemed so barren to me. Perhaps secretly I like clutter? The Chromebook is a Google Device, so not surprisingly you are directed to Google products, like Google Docs or Google Drive. If you are an Microsoft Excel fanatic this device with no hard drive is not for you. Even a PowerPoint guru would find this a hard sell. Probably the one product from Google that holds up OK is the Word Processor. Your experience with a Chromebook from an application perspective is in the cloud, but as more and more traditional desktop apps become cloud enable the appeal of a Chromebook will improve. My first glimpse into a Chromebook was kind of a “not for me” experience. But as technology proves over and over again, times change
Google has done a very effective job in attracting schools to use their platform. My children all use Google Docs and Calendar for their school homework. A large part is driven by price as a Chromebook retails for between $200-$300. I honestly do not know how schools budget outside of the fact that my taxes pay for them. But a key component on particular for schools is price. When you have a Chromebook and all the Google cloud apps you have a pretty cost-effective financial model that will be attractive to academic institutions. Technology is being introduced at very young ages in schools and as is often the case people stick with technology purchases based on what they know.
The laptop market is changing as all laptops regardless of OS have dropped in price. Because of price, functionality and usability the Google Chrome platform has become much more appealing that what competitors offered in the Windows world. Given the increasingly competitive landscape expect prices to continue downward to less than $100 in the not so distant future. The price reduction will be driven by OEM’s offering both Chrome and Windows. This will also impact Apple as they will have to reduce prices. In the end the winners will be consumers as they will have lower prices and choice. If the DOJ had understood the competitive landscape and nature of tech they would have foregone the lawsuit against Microsoft. Things move to quick in technology and what is understood one day is misunderstood the next.
One of the negative critiques of the Chromebook is that it requires connectivity to the internet in order to be of any useful use. In the short-term, sure I understand the point. Not everyone is connected via carrier network or near a Wi-Fi hotspot. Longer term I believe that will be a non issue as we will have ubiquitous connectivity where ever we are whenever we want it. From Google’s perspective that is a bet they are making and I would say it does not to appear to be a very risky bet. It is betting the obvious when you have a Royal Flush, you have to go all in. That being said until we are always connected there is a window of opportunity for the competition to steal Google’s thunder with an always connected device that has more features and functionality and works offline. First in does not always yield all the rewards, ask MySpace.
At the time of this writing some reports have Chromebooks seizing ten percent of the laptop market. Unless all ten percent came from Apple this is a pretty significant development. For the last 20 plus years ninety percent of the market has always been Microsoft Windows. This will signify in the shift in the market as there now exists another low-cost laptop choice that is able to compete. The good news for consumers is there are choices with different operating systems at different price points. This is how a market is supposed to work and the greater the competition the more pressure that will be put of pricing. How the different OS’ are bundled and priced with hardware impacts not just consumer prices but the various vendors. Apple makes money from the sale of hardware. Microsoft receives revenue from the licensing of Windows. Google does not directly profit from Chrome but uses Chrome to drive search revenue to Google, which is their primary way of making money.
Google is often criticized as a one trick pony. They only make money off of search. But where I give them credit is they keep coming up with news ways for you to access their search engine and search. They started as a url that people learned to use and search from any PC or laptop. Then mobile devices became a heavy focus. They realized they needed a browser to compliment search. Then they have now combined the browser with hardware to create a new category of laptop to drive more search. On the old growth curve ChromeBooks are steadily moving towards their inflection point. It is now up to the competition to prevent them from getting there.
Good Night and Good Luck
Hans Henrik Hoffmann January 9, 2014
Hans Hoffmann's Blog 