Market for Chrome OS Netbooks: Rusty

Rumors of devices running Google’s Chrome (s goog) operating system are picking up steam, with the latest coming from DigiTimes, which reports several vendors will debut Chrome OS netbooks with ARM (s armh) processors before the end of this month. Google (s goog), too, may introduce its own branded computer, although such a device would compete with partners and likely suffer the same fate as Google’s Nexus One smartphone, which is no longer sold direct from Google to consumers in the U.S. Last year, Google announced Chrome OS devices for the second half of 2010, so it’s highly likely the rumors are true. The problem: The mobile computing landscape has changed since that announcement, causing me to wonder if there’s really a need for Chrome OS devices, or if Android has already won the day.

Who wants a netbook these days? Part of my Chrome OS device pessimism stems from the netbook market. As Google shared details of the new platform throughout 2009, netbooks were selling like gangbusters with year-over-year sales growth often over 179 percent. But the growth rate stalled late last year to practically no growth by April 2010 as shown by a Fortune chart comprised with data from NPD and Morgan Stanley Research.

Chrome OS devices might be called smartbooks instead of netbooks, but it won’t matter to consumers who will compare them to netbooks based on price, form factor and functionality.

There was no iPad nor credible consumer tablets last year. Another timing issue for Chrome OS is the emergence of Apple’s iPad (s aapl) and the many Android consumer tablets that are following suit, such as Samsung’s Galaxy Tab. I don’t believe the iPad single-handedly dismantled netbook sales, but it surely had an impact and continues to do so. The $499 starting price of an iPad Wi-Fi model isn’t that much more than some netbooks, and its generally faster and lighter. Plus, it provides a great experience for web and other content consumption. A Google Chrome OS netbook might excel at content creation, but given the limitation of a machine that only runs a browser and web apps, not enough to challenge tablets or even current netbooks.

Consumers like rich mobile apps. With its rise in Android powered smartphones, Google should know that we’re currently in a hot mobile app economy. Given that Google Chrome OS is essentially a browser atop a Linux kernel and will run web apps, how will consumers enjoy the app experience? Google introduced the Chrome Web Store back in May, but it’s not open yet, so we can’t see how robust the apps will be. While there is a future for such rich web apps with HTML5 standards, it’s going to take time before developers leave or augment their current activities for iOS, Android and other mobile platforms.

Android is the winning play. With Android, Google has proven it has a winner in the smartphone space; the platform fills a need both at the high- and the low-end for consumers that don’t want in on Apple’s (s aapl) ecosystem. Although the current version of Android isn’t optimized to compete against the iPad, customizations from hardware makers provide choice in the current tablet market, which will only get better when Google releases future versions of Android specific to tablets. Does it make sense to leverage Android in a netbook then, instead of Chrome OS? That’s no better an idea than Apple moving strictly to iOS for Mac computers in the future; it won’t work in the form-factor of a screen and keyboard because the operating system is suited for touch, not trackpad or mouse, as pointed out by John Gruber. Don’t believe him? Just run some iOS apps on a computer with the iOS emulator and see for yourself.

A browser-based netbook sounded like a good idea to me when it was first announced. At the time, I even said I was the perfect candidate for such a device. Given my meager computing needs, I’ve used both an ultra-mobile PC and a netbook as a primary device in the past, and even lived in nothing but a browser for 60 days on a PC just for the experience back in 2008. (I survived.) But that was well before market forces shifted to mobile apps and capable tablets with excellent browsers that are available at reasonable prices.

Unless Google plans to give away Chrome OS netbooks to consumers, or revamp the idea as a tablet, I’m not sure I see the need for it any more. Then again, everyone has unique device and use case requirements, so I’m interested in hearing thoughts from those who are still looking forward to Chrome OS netbooks and why.

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