Chrome OS Netbooks — Hell Yes, Google will give away computers.

I read that the beta version of Chrome OS that I tested will be altered to allow users to login from the browser instead of the blue screen that follows the boot up. This will enable logins and logouts without rebooting the computer. Whoopdie do, right? This is a far more significant development than it may seem. It suggests to me that the so-called “personal computer” will become the “public computer” and also supports the notion that Google will install free computers in heavily trafficked areas… investing heavily in this endeavor and significantly profiting from it.

Security and the “Public” Computer

The personal computer will become the public computer. Given the hardened security of Chrome OS (it repairs itself if it detects a problem and software cannot be installed), there’s virtually no threat to publicly available Chrome OS machines. I suppose the two primary threats are two-fold: online phishing scams and “cuckoo egg” machines (you heard it here first, I don’t know what else to call them).

Online phishing scams are not unique to public computers. They’re threats every web user faces and, with some minimal degree of security consciousness, can be avoided. Perhaps DNS redirects, like the one that hit Twitter the other night could compromise user data as well, e.g., if the redirect target is part of an elaborate phishing scam. But, in any event, they do not compromise a public Chrome OS computer.

A “cuckoo” egg machine, as I use the term, is something that has the look and feel of a Chrome OS machine but actually has a rogue OS installed. It’s a variation on the phishing scam but one that could be a more serious problem. Imagine a machine that boots like Chrome OS and harvests Gmail logins (which serve as user accounts on Chrome OS) and corresponding passwords. If installed in a public place, this could be a big problem… much worse than ATM hacks. Hardware manufacturers might be able to create machines incapable of running another OS. This would be a significant step in preventing the cuckoo egg attack; although, someone hell-bent on carrying out this scheme could invest in look-alike hardware.

In any event, Chrome OS will be the most hardened of all computer OSs, thus making it the best candidate for a “public computer.” Microsoft Windows machines in hotel lobbies will be replaced (and quite rapidly) with Chrome OS machines.

Yes, Google will manufacture (or outsource the manufacturing) of Chrome OS machines and will install them in public places… unfettered use will be completely free.

This is a no-brainer for Google. Keep in mind Google’s revenue equation. 97% of its revenue is generated by online advertising. Google’s revenue equation is time online generates money for Google. The more people online and the more time they spend online, the more revenue Google generates. We donate our eyes and our clicks and receive Google products for free.

Google is sitting on more than USD$20,000,000,000 (that’s 20 billion if you don’t want to count zeros) in cash. A Chrome OS computer could be manufactured for $150 or less, perhaps much less. I am writing on a netbook that sold at a discounted retail price of $200. It can run Windows 7, Ubuntu 9.10 and, yes, Chrome OS easily. Chrome OS is very light on resources. It’s basically just a Chrome browser!

Say Google installed a bank of Chrome OS public computers in an airport. Assume further that from time to time someone clicks on a Google ad. Even assuming that this happens infrequently, say once per hour, Google recoups the cost of the machine very quickly. I don’t have each figures on the average revenue generated by an individual click on a Google ad. In general, I know the range is wide because I have been an Google Adwords customer in the past and know that some keywords are cheap and others can be expensive. In any event, assume the average revenue generated by an individual click is $0.50 (could be disclosed in Google’s SEC reports). So, these are our variables… $0.50/hour generated on a machine that is manufactured for $150… in 300 hours (12.5 days!) the Chrome OS machine is profitable and the rest is pure gravy. The Chrome OS machine would generate $3,480 in revenue per year. The profit on the investment would be ($3,480-$150)/$150… 2,220% profit in one year on each Chrome OS machine that generates a single Adwords click per hour. Each Chrome OS machine basically prints money for Google!

Say my assumptions are way off.  Maybe by a factor of 24 on Adwords clicks (if for example, in the unlikely event Bing becomes popular or some shift occurs in online activity)… so, each Chrome OS machine generates $0.50 per day (obviously a gross underestimate–even a public payphone could still generate more than $0.50 per day) and we continue to assume that each machine costs $150. The machine would still be profitable after 300 days, less than a year.

What’s being left out of this equation?

Wifi/wiring/connectivity expense. Google is already giving away Wifi at airports. This is a sunken cost, in economic terms, and many facilities would adsorb the cost. This is already the case with free Wifi in many public places (coffee shops, fast food restaurants, hotels, libraries, etc.). Google could simply say that if any establishment will provide free Wifi, Google will donate Chrome OS machines.

Shipping and installation expense. Certainly this would be less than a $20 per Chrome OS machine, which hardly throws off the numbers. Also, Google could redeploy machines to maximize profits… from the library to the airport or vice versa at times.

Opportunity cost. Would these clicks occur without Google installing a Chrome OS machine? Well, yes, sometimes and no, sometimes. Maybe someone would be clicking from home instead of clicking in the coffee house. But in cases like airports and basically anywhere computers would be used and aren’t currently being used there’s enormous profit potential.

Theft/Blackmarket. Google might able to remotely disable a Chrome OS machine. Even if it couldn’t, would Google care if someone stole one and hocked it on eBay? As long as the Chrome OS machine is used and generates revenue, who cares?

Back the Original Point

The fact that Google wants to simplify the user-switch feature in Chrome OS and speed up the process suggests to me that this OS is being tweaked for public places. Why? Because Google absolutely will install or donate Chrome OS machines in very large numbers very soon.

Google needs to continue to “own” the web for this plan to succeed … but that’s true whether or not they give away the Chrome OS machines. Google needs to compete with upstarts and continue to generate revenue through online advertising.

P.S. $20,000,000,000 (Google’s cash on-hand) divided by $150 (cost per machine) is equal to 13.3 million Chrome OS machines.

No related posts.