I’ve been following the developments of Google Android and Chrome OS with much interest lately. Less from a security/technology perspective and more as a lesson in business. One way Google is expanding Android’s presence in the mobile market is by sharing ad revenue with mobile carriers (ie Verizon). Instead of incurring software licensing costs (of BlackBerry, Windows Mobile, Palm OS, etc) carriers may receive revenue when their Android users click on ads. Carriers love this because they get paid to install an OS rather than the other way around! This business model has been called “Less Than Free” and Microsoft should take notice of it because their Windows / Office business model could be at huge long-term risk. Let me explain.
Microsoft obviously makes significant revenue OEMing Windows to PC manufactures (Dell, etc.). At the same time Microsoft feels some level of price pressure from free good-enough operating systems like Linux installed on ultra cheap PCs. Now imagine for a moment if Google decided to leverage Less Than Free for Chrome OS. Google could feasibly pay PC manufactures to install Chrome OS through an advertising revenue sharing program. PC Manufactures, instead of paying a fee to MS for Windows, get access to a new revenue stream when Chrome OS users click on ads. Additionally, my understanding is you can’t install desktop software on Chrome OS so the huge money maker that is Microsoft Office is gone on that footprint as well. Such movements would not happen overnight, but the writing is on the wall.
Microsoft is of course not without options when it comes to aggressively fending off the Google powerhouse. One way is that Microsoft could leverage their dominant (50%+) Internet Explorer browser market share. They could use Windows Update to retroactively install ad blocking software as a “security feature,” like AdBlocker Plus on Firefox, in all IE versions (6-8). No doubt users the world over would love it! Less annoying ads, less malware distribution (much of which spread by online ads), and a snappier Web experience! How could Google complain, they are all about speed right? :) Oh, right, because it would cut Google and their dual-revenue stream (AdSense / AdWords) off at the knees.
Many users, even Firefox users, might actually flock to Internet Explorer if they knew this feature was available! Most don’t even know AdBlocker Plus exists. This new ad blocking “security improvement” may also pressure Firefox, the other major browser, to do the same as not wanting to be one-up by MS in the security dept. At least one Mozilla exec is encouraging the use of Bing. Giorgio speculates that is might be why Google Chrome doesn’t have NoScript-like support yet, because they can’t figure out how to do it without enabling effective ad blocking. Makes sense.
Sure, Web publishers whose life blood is ad revenue would hate Microsoft, at least temporarily -- but fear not! Those billions in advertising dollars flowing to Google would still need to land somewhere, but where!? MS could open a “blessed” safe, secure, and user targeted advertiser network! So if Google, or anyone else, wants their ads shown to an IE audience they’d have to pay a tax to MS for the privilege. Still I’ve long wondered by pay-wall Web publishers didn’t heavily advocate the use of ad blockers to put pressure on their free content competitors.
I’ve also glossed over a number of important factors that come into play should any of this play out, like antitrust, but Microsoft is presently is 1-0 so maybe that possibility doesn’t scare them. Meanwhile during whatever legal proceedings, Google would be sucking wind revenue wise. As I wrap up this post, please keep in mind that I’m no industry analyst, just a curious observer who hasn’t vetted their ideas nearly enough.