Can Schmidt Make Money from Google Chrome OS?

Google CEO Eric Schmidt doesn’t rule out ad-supported and subscription services for applications built on Chrome OS, the search engine giant’s forthcoming operating system. The CEO handled several questions about Chrome OS, designed for cloud computing, during the second quarter earnings conference call. Chrome OS is an alternative to Windows and Apple operating systems.

Google’s Chrome Operating System, the forthcoming Linux-based platform for netbooks, will be released under an open-source license in 2010, but does chief executive Eric Schmidt realise Google won’t make money from it?
“We do not plan to charge for it, in an open-source form,” Schmidt told financial analysts during the second-quarter earnings conference call July 16. “There may be other ways we can make money from it.”

Show us the business model?

The issue may not seem too pressing, since Google just reported a 19 percent profit growth for Q2, over same quarter a year ago.
But he’s clearly thinking about it. Schmidt indicated that while Google hasn’t figured out exactly how Chrome OS will make money, some form of ad-supported services or subscription-based micropayments are two options for Google, the bulk of whose $20 billion (£12.25 billion) in annual revenues comes from search advertising.

He also said “people” are experimenting with serving ads within applications as a way to make money. However, he did not tie those comments specifically to Chrome OS, adding that such an infrastructure for ad-supported software services and micropayments has yet to be built.

The Google-Microsoft exchange

The lunge and parry exercise between analysts and Schmidt highlighted just how serious Google followers are about Chrome OS, which Google unveiled on 7 July as a lightweight, speedy alternative to Microsoft’s Windows OS and platforms from Apple and Linux distributors.

It has since been assessed by developers, and commentators. Predictably, it has been dismissed by Microsoft’s Steve Ballmer and compared to other efforts such as Microsoft Gazelle.

Google is also feeling pressure from below in the search engine market, where Microsoft’s Bing product is garnering positive reviews (read ours) from many people who are using it to see how it stacks up versus Google, and has been reported with strong growth.

Schmidt has dismissed Bing, and most observers believe it is no threat for now.

The analyst call focused on Chrome OS, and questions came thick and fast, about how Google will distribute it and make money from it. Eventually even the normally unflappable Schmidt was exasperated. When asked whether Google planned to forge a business model around royalties, as independent software vendors build application on top of chrome OS, Schmidt brusquely said “Too specific a question. We don’t know yet.”