Personally, I believe that on so many layers, this topic is really a non-topic. It provides entertainment value, no doubt, in the form of daily tech soap opera (bloggers jumping on every new data point released and typically extrapolating it beyond meaningfulness to arrive at flame-bait headlines). But from an industry analysis point of view, or a company analysis point of view (scrutinizing Apple / Google), the market share comparisons are really just one data point – it’s meaningful, but certainly not to the degree that the blogosphere claims it to be. Apple’s future is not in jeopardy if iPhone loses pole position to Android.

Over at Wired, Fred Vogelstein takes a crack at this topic. His main point is that if you sum up all the iOS devices (iPhone, iPod Touch, iPad), they are still outselling Android, by as much as 42%. While this may be encouraging to the Apple camp, there is no reason we can expect this to hold, especially when other Android powered devices (e.g. Android tablets) eventually hit the market.

I don’t have any doubt that Android devices will outsell iOS devices. If it hasn’t happened already, it will happen soon. There is no reason to believe an OS from a premium manufacturer (Apple) with an extremely limited range of SKUs can outsell, on a pure volume basis, an OS that is free to use and which is backed by some of the biggest consumer electronics companies in the world. On a dollar value basis, it might be a different story, but still not that likely. On a dollars of profit generated basis though, highly possible (Apple generates more profit than rest of mobile industry combined, with only 3% unit volume share).

That said, the main reason people are obsessed with these market share numbers seem to be the underlying assumption that iPhone and its eco-system will lose its draw to developers, and by extension to consumers, if it is relegated to a minority market share. I think there are at least a couple of counter-arguments to make here.

First of all, being the minority market share platform does not translate into a lack of quality apps, to the extent that it will hamper mass-premium consumers’ (Apple’s core segment) interest in the platform. For example, if you flip the argument over the number of apps in the Android vs. iPhone app stores on its head, you may well say that even though Android has a smaller number of apps, the eco-system is already sizable enough, so that for any functionality there will be “an app for that”. Another example would be none other than Macs – what’s the market share that Mac OS holds in all personal computers? Single digits? Do mainstream Mac users complain about the lack of quality apps (note the emphasis on mainstream – specific categories like hardcore gaming is lacking on the Mac, but even that is seeing improvement)? Holding these two examples, I would argue that with the developer community Apple has already amassed, it would be hard to foresee a drastic dying out of quality apps, even if Android floods the market.

Secondly, if you take a step back and look at the broader trend in computing, it is definitely headed in the direction of platform-agnostic. Some tech purists would even decry the whole notion of apps – everything should be realized on the browser, over the web. If you look at the desktop space, there is indeed the trend of “fat” clients (local apps) losing out to “thin” clients. Indeed, Google is perhaps one of the biggest proponents of this – its whole challenge to Microsoft is based on the browser. If we believe that the same trend will apply to mobile devices, then the apps craze we are experiencing really is just a transition phase – at some point, most of the apps you want would be delivered to you on the browser, as opposed to an app you download (again, Google’s Gmail mobile version on the browser is arguably better than Apple’s Mail app). And let’s give credit where credit is due – when Apple launched the iPhone in 2007, Steve Jobs’ initial vision was to have web apps (browser-based apps) instead of local apps. The app SDK and the app store only came out a year later, due to popular demand. (So you could say that Jobs had already envisioned an end-game where the browser was the point of delivery for apps, not the app store – his vision was perhaps just ahead of its time.)

If you sum these two arguments together, the bigger point is that iPhone will not lose its richness of apps in the face of Android capturing majority market share – it’s big enough already of a market so that there will be quality apps developed, and apps will be platform-agnostic anyway down the road. As long as Apple continue to bring innovation to its devices, it should not be overly worried about losing market share leadership – its whole strategy is founded on premium products, which implies that it won’t be market leader from a revenue / volume perspective. That’s why I wrote the headline of this post.

PS: Also, for people who continually say this will be a rerun of Apple vs. Windows in the 80s, please pause for a moment and reflect on the Mac’s continual resurgence over the last decade. This is again very indicative of the broader trend. In other words, one could almost claim that the “network effects” so famously championed by Wintel is close to becoming irrelevant, because the Internet has leveled the playing field for the small market share OSes.

PS2: And even if we are to talk of the platform wars of the 80s, we should get the facts straight. The following is my reply on a Quora question (similar topic really) awhile back:

First of all, it’s not really windows vs. mac, but PC vs. Mac. I would say by the time windows 3.0 came out, the platform war between PCs and Macs (at least the first war, not including Mac’s resurgence in recent years) was already over.

If you look at this article on Ars Technica, http://arstechnica.com/old/conte…
as early as 1986 PCs already had over 50% market share of computers, and it over-took the mac platform’s shares a few years before that. So in that sense, there never was a windows:mac war, at least not until very recently.

I think one key distinction between the platform wars of the 80s and android:iPhone is that in the 80s it was primarily driven by b2b, not b2c. IBM was late to the personal computers space, but they were the driving force behind making personal computers legitimate for business – they could go to a sales pitch with a business client with a perhaps inferior product but still sell it, and they could generate serious developer interest in developing for the PC. The killer apps of the 80s were spreadsheets and word-processors, sold to businesses. Apple could have better versions of such products on macs, but they couldn’t sell to businesses as quickly as IBM and clones like Compaq could, which is dictated by company structure and channel strategy – they are positioned as a consumer products company, and the only verticals where they made serious progress were education and publishing (where their products were clearly far far superior). That’s where the network effect kicked in and made Macs a niche.

Flash forward 25 years, and smartphone adoption is primarily driven by consumers, not businesses (blackberries being the exception). This is in Apple’s core area of expertise. It will still be challenging to fend off a group of competitors’ collective efforts (Samsung, HTC etc.), but as long as Apple retain a significant portion of the market, it will be in good shape. Apple doesn’t need to be market leader to be hugely profitable and have a sizable eco-system of 3rd party apps etc. – just look at macs today, as a general consumer you have majority of the apps you need to be happy with it (games being one major exception, which is also therefore a good business opportunity).

So back to your original question, I’d say Android:iPhone will play out very differently compared to Windows:Mac. Android might still end up with a more market share, but iPhone will have enough share and a big enough eco-system so that Apple won’t have to go through the kind of existential challenge it had back in the mid 90s.

There is no doubt that Android has been a success, especially in terms of offering consumers more choices. US consumers now have a perhaps overwhelming number of smartphones to choose from, across the major carriers. This is certainly a great development.

What I want to focus on in this post, however, is looking at Android from the eco-system players’ perspective – Google, the handset manufacturers, the carriers, and the app developers. My position is that while Android is full of promise as a platform, some fundamental dynamics of the eco-system will make it very challenging to navigate, especially in terms of financial gains – at the end of the day, these players are in it to profit.

I would like to start by going through each player’s objectives from participating in the Android eco-system. Starting with Google, its objectives are:

• Gain a permanent foothold in mobile, ensuring Google’s future when the web becomes increasingly mobile-driven
• strategically, prevent dependence on Apple in mobile, limit its bargaining power
• Increase traffic to Google properties, most notably search, which will in turn grow Google’s ad revenue
• Offer users a consistent Google user experience across mobile devices
• “Lock” users into Gmail, Google Maps, Youtube etc. (think Microsoft shipping IE with Windows)
• Develop a mobile go-to-market channel for future Google products

In essence, it’s all about Android being the hook which will retain the user in using Google products.

What about the handset manufacturers’ objectives?

• Develop handsets that rival the iPhone’s value proposition, capture market share in the booming smartphone segment
• Differentiate from competitors
• Reduce OS R&D costs

And the carriers:

• Retain some degree of control in the device, unlike Apple’s terms with AT&T
• Prevent becoming “dumb pipes, up-sell users on carrier VAS (value-added services) such as mobile video, ring-tones, gaming etc.
• Reduce Apple’s bargaining power
• Differentiate from other carriers

There is one thing all players agree on – counter the iPhone; but beyond that, there are some immediate points of tension. As smartphones seem to converge on the single big touch-screen form factor, hardware manufacturers will find it increasingly difficult to differentiate in shape and design. In that sense, HTC / Motorola / Samsung would very much want to tweak the UI or customize the OS, but that would quickly run into conflict with Google’s wish to offer users a consistent experience; and practically speaking, UI may really be too much a core part of the OS for the manufacturers to customize. Hence, manufacturers face the dreaded prospect of following the footsteps of PC manufacturers – low differentiation leads to low profits.

At the same time, carriers and Google’s interests aren’t that well-aligned, either. Google recently shuttered its Nexus One online store, which was hailed to disrupt the status quo of handset distribution by offering a contract free model instead of the typical carrier-subsidized model. Obviously this did not please its carrier partners. On the flip side, carriers perennial fear of becoming “dumb pipes” drove them to loading up Android phones with hard-to-remove bloatware, which consumers generally dislike and probably is making Google cringe – and just serves as more ammo for Apple’s value proposition of a refined experience.

My point here is that the logical implication of these interlocking conflicts is compromise. Google aggressively wants Android to become the de facto mobile OS – so much so that not only is the OS free to manufacturers, Google is also reportedly sharing search revenue with carriers / manufacturers. (Pretty amazing that you can think of this as almost the opposite of Apple’s original iPhone terms, where Apple got a share of AT&T’s revenue.) Manufacturers will get away with deals such as putting a Baidu search box on the phone, which would obviously go against Google’s interests. Carriers will get to keep their finger in the OS.

Sometimes these compromises result in degraded user experience, such as bloatware. Most often, they call into question the financial returns on Android. It would be a very difficult task to model how much incremental revenue Google will generate by owning Android, as opposed to not owning an OS and just receiving mobile search traffic from all devices. Manufacturers will get to ride the smartphone boom for a while, but then will again be hard-pressed for innovation – again, the PC manufacturers come into mind. The biggest winner from all this seems to be the carriers – especially Verizon – they finally have options other than Apple, and they can keep their old business model.

Well, that was a temporary fix, as Google’s China ICP license is up for renewal, and they need to appease the Chinese government. Google is again trying to do so with a half-measure.

The Atlantic has a good summary of major tech blogs’ response. Opinions are somewhat divided on how things will progress, but if anything no one is talking about how moral and upright Google is, this time around. Good. In my original piece back in January I had argued how dubious Google’s stance was:

… a cyber-attack is illegal by any country’s law, whereas what is censored and what is not censored can be different due to country-specific issues like religion or in the case of China, politics. So for Google to use the hacker attacks as justification that it can’t tolerate Chinese censorship anymore is somewhat dubious, since this is not exactly the same issue.

Google’s latest announcement just further confirms my position. It seems that, after all, Google does care about its business prospects in China; but it appears to be too smart for its own good, trying to get away with both being morally righteous and doing business as usual.

Read this together with another piece of news today, which talks of Google’s ambitions for Android in China and India, and I’m starting to feel that Google internally does not have a coherent strategy for China. Obviously, having a row with the Chinese government is not good for business, especially when looked at from the Chinese perspective – nothing had changed in the government’s policy throughout the years of Google China’s existence, and Google’s January fit seemed completely out of left field (again, cyber-attacks and government censorship are very different things).

I remember a few months back, at an investors event in San Francisco, Kai-fu Lee, the former head of Google China, had mentioned in passing how his company – Innovation Works, a early stage VC / incubator – had a few projects that were basically picking up the development of Android in China after the Google debacle (if my memory serves me correctly). Essentially, quite a few Chinese companies are interested in Android, but dealing with Google has become a politically charged issue, so you’d almost have to have an intermediary. This is especially true of the major Chinese carriers – it is unthinkable to see China Mobile do a high profile partnership with Google while this political spat is ongoing.

Google needs to work out its priorities. If it wants business in China, it needs to drop its high talk and start showing genuine long-term commitment to the market – otherwise it will be hard to retain its Chinese business partners, and it will always be a distant second.

My biggest takeaway from Chirp was how ambitious the Twitter team is. For a company that has long been under critics’ fire for not having a business model, the core of its strategy remains surprisingly attached to “getting the product right” first. The company’s priorities, according to CEO Ev Williams, is “0. Infrastructure; 1. Friction-free; 2. Relevance; 3. Revenue.” Revenue was decidedly last on the list.

Infrastructure is easy to understand – Twitter has been hurt by scaling pains so many times that it makes sense that the company is focused on coping with the growth first and foremost. Friction-free is about making the service easier to use, especially in the context of retaining new users, which was Ev’s rationale for the Tweetie acquisition. Friction-free is also the thinking behind the @anywhere initiative – so that users can use Twitter anywhere on the web, and not be interrupted by having to open another web-page etc. Relevance is partly about search, and partly about new features such as location and annotations.

And this is where things start to get interesting. For a long time, Twitter itself did not have an inbuilt search function; a number of 3rd party developers offered competing Twitter search products. The leader of these products, Summize, was eventually acquired by Twitter; but as Ev described it at Chirp, it was more like a merge of equals (size of team etc.). While the Twitter team didn’t talk a lot about search, I felt the key to the service’s relevance, and future business model, would be search – how do you organize this world of information (to paraphrase Google’s mission) stored in the billions of tweets, so that value can be extracted?

This is by no means an easy task. The distinctiveness about Twitter is its timeliness – you can literally find out what’s going in the world right now. However, this also makes search, or any other type of data organization, technically complex. Annotations and other types of meta-data helps reduce the complexity, as well as efforts to understand the users’ intent – are you looking for info on a specific location or event – but it will still be a daunting problem. (Google and Bing has had access to Twitter’s data-stream for a while now, but whether it’s for lack of trying or the complexity of the issue, their current use of Twitter data in their search results seem largely inconsequential.)

Still, if the Twitter team can crack this nut, then they may have on their hands a truly blockbuster product. The beauty of Twitter is how many different usages people have come up with for it – as a communications tool, it is simply an enabler of numerous services. If they can make their information much more organized through search, then the value of the communication tool is enhanced, as well as the services built on top of it. The recent story of how Twitter can be used to predict box office success is just one example of the potential value.

(This post was written over several days so the thought-flow is somewhat broken.)

When I was interviewing for my summer internship, I got asked the question “if you had funding to build a new search engine, what would you do?” My response was you can either tackle the existing search problem through a drastically different algorithm, or focus on specific verticals (e.g. travel) or new markets (mobile, location). If we change the phrase “search engine” to “method of organizing information”, then certainly both Twitter and Facebook are taking on a differentiated approach from Google. While the three companies may at face value be in very discrete markets, they are on a unavoidable collision course in terms of competition. While Google is all about indexing the static web, Facebook and Twitter are built on the social web, and they may well grow to become the Google killer that many have been searching for.

This is not as far-stretched as you may think. Think about the last time you performed a search. Did you ask any friends first? Was it only when they said “I don’t know” that you replied, “don’t worry about it. I’ll just Google it.”? Google search is powerful and hugely useful, but only to the extent of how useful the static pages it indexes are. When you do a search on a specific question, you often have to tinker it a few times. Click on a few different search results. Read through them. Often the pages won’t have the answer to the exact question you have, but enough info to give you pieces of the puzzle so you can piece it together. This is still much, much more efficient compared to doing research at the library, but the power of the social web is that you are not confined to static pages and information – the odds are that there is some person out there who knows exactly the answer to your question, and the power of the social web is that it enables you to ask that person directly. Quite a few of the people I follow on Twitter use it as a magical search engine – you pose a question on Twitter and your followers answer it.

Of course, this is just one specific scenario where social web services such as Twitter and Facebook have the upper hand against Google (and for the many, many instances where you need static information Google is still the better option – e.g. what is the year that the US was founded); but it does highlight Google’s key vulnerability – its lack of presence in social. Be it Orkut, Wave or Buzz, Google has repeatedly shown its inability to come up with a competitive social networking product. Maybe Google simply doesn’t have the social genes in its DNA – which is fine, as for the foreseeable future they will still make a killing in Adwords/Adsense. But the danger for Google is that search gets demoted from a primary instinct into a secondary instinct, the same way that Kayak / Mobissimo / Bing Travel and other vertical search engines have made Google irrelevant in travel search. It will still be a huge market, but only a less efficient/user-friendly alternative. And it’s clear from Facebook this week and Twitter last week that these companies have huge ambitions too in organizing the world’s information – hence the competition will be inevitable.

One last note – while Facebook has seemed to garner much more attention and praise with its announcements, Twitter’s efforts, especially in mobile shouldn’t be disregarded. The news today that Twitter has acquired SMS service Cloudhopper may sound insignificant to those of us who are used to iPhone apps and 3G networks, but in the grand scheme of things SMS is still such a viable and active method of information delivery. It will be interesting to see how Twitter uses SMS to its advantage.

The second post shows a fairly slick youtube video of Flash on Android, through a Farmville demo:

If you look closely enough, you can see that 1) there is an issue with mouse hover-overs; 2) for a intensely interactive Flash app, there is “money left on the table” in the sense that it is not customized for touch and the controls feel clumsy (or maybe it’s just the demo person…).

Which leads me to the provocative title of this post. The whole demand for Flash on the iPhone and other mobile platforms is based on how it gives consumers the “real web.” However, if you think about the main uses of Flash, which is 1) video 2) games 3) ads, I would say that consumers don’t care about whether ads can be displayed, and as the above example illustrates, games (and other forms of highly interactive Flash usages) probably need to be redesigned anyway (which calls for custom apps). Which leaves video – and this is where the competitive landscape plays an interesting role. The biggest video site, Youtube, is owned by Google, and Google is definitely going for HTML5 + H.264 and moving away from Flash. (Tangent: Google is also getting some criticism for not truly supporting the open web, as H.264 is a licensed technology.)

So the bottom line is, while Flash has dominance on the web now, it definitely faces the danger of becoming completely irrelevant in the mobile space. This may not be a terrible thing – moving to a unified standard such as HTML5 and away from proprietary codecs – except of course for Adobe.

Haas MBA Google Trek 2010

Besides having a great time talking with the Googlers, I was also lucky enough to win one of the 5 Droids handed out in a surprise lottery (you can see the winners showing off their gear in the photo). The phone, targeted for developers, comes with a one-month free trial from Verizon, as well as a nice discount for a 1 year or 2 year contract.

This is the first Android handset I have used, having been a loyal iPhone user since January 2009. There are things I immediately like about the phone, and it really is almost a completely different experience from the iPhone. I know there are plenty of Droid reviews out there (since this device has been out for a quarter now), but here are some of my first impressions:

• Great support for Google products – really, no surprises here. The turn-by-turn navigation, a coveted app by many, could well be one of the killer apps for this device. (I am curious how well that works on the road, especially in areas with patchy reception – this was a key differentiation point Nokia was trying to emphasize for its Ovi Maps, where the maps are stored locally and require less data transmission – and therefore less dependence on reception – on the go.) And of course the Google Voice app is great, but it does make you wonder how Verizon feels about it.
• Background apps – Pandora while surfing? No problem. However, it’s not apparent what apps are running in the background, which could both be a drain on your battery and also a potential nuisance – I realized I was always on Google Chat, even though that wasn’t my intention.
• Poor support for business users. This is not a phone ready for corporate America. It supports Microsoft Exchange, but apparently the “corporate email” app doesn’t support search. That’s right. No inbox searching. That alone is enough for me to hold on to my iPhone. (I could, in theory, forward all my emails to Gmail, but I’m sure there are plenty of users like me out there who prefer to keep their work-email and gmail separate)
• Very slow charging on USB? I have a habit of carrying only the USB cord, and not the adapter, for my iPhone. For some reason, the Droid charges at a very slow pace via USB – something like 15% an hour, which is not satisfactory.
• The physical keyboard is redundant. Yes. I’ve gotten used to typing on virtual keyboards. Having to actually push down feels painful, and there is no auto-correct. In this regard I’d probably like the Nexus One a lot better.
• App market. Good number of apps already, most of the web2.0 services are present, but much less presence of old-school stuff – e.g. WSJ, FT, NYTimes etc.

Reading through the points above, it’s interesting to note how many of them are talking about consumers’ habits. For example the point about the keyboard – if I came from the blackberry world I probably would love the physical keyboard (remember all those people who hated the virtual keyboard on the iPhone when it first launched?), but I’ve grown accustomed to virtual keyboards. Same for the email search – my work-around would solve the problem, but it is asking me to change my behavior, so I have a strong distaste for it.

One final point – I want to comment on how fundamentally different the Droid is from the iPhone. I felt it was a phone for geeks and engineers. The UI was less polished, but there was much more that the user could customize (menus, widgets etc…) You need to spend time to play around with it. The iPhone, on the other hand, is a device ready for mass adoption. It’s frustrating for geeks who want to do all kinds of things (but can’t), but perfect for everyday users who can just use it intuitively. Very different philosophies, and therefore potentially a sharp divergence in consumer segments going forward.

I’ve just been on a Berkeley Haas MBA student trek to China, where one of the companies we visited was Google China (before the recent news broke). Having talked with several Googlers and also pondered on the issue for a bit on my flight back to Berkeley, I’d like to share a few thoughts on the still developing showdown regarding Google Inc.’s (NASDAQ: GOOG) Chinese operations:

1. As regards the abstract and philosophical issue of “what is the right thing for Google to do” — “abide by Chinese law” or stand by its “do no evil” mantra? — there is actually no right answer to this question. First off, most governments in the world adopt some form of censorship, and China is not the only country where Google has to abide by local law. Chinese netizens have pointedly dug out the 2008 news story in which Google assisted the Indian government in arresting an Indian man. Secondly, the argument made by Google 4 years ago when entering China (ie – that offering Chinese netizens access to limited information is better than no information) is still just as valid as the moral claims Google is now stating when threatening to exit China. As a poor analogy, should a man steal from a food bank if he sees lots of hungry people on the street? The act of stealing itself may be repulsive, but does the end (saving people’s lives) justify the means? I honestly believe this is an issue which you can side with either way and there is no right or wrong. Furthermore, a cyber-attack is illegal by any country’s law, whereas what is censored and what is not censored can be different due to country-specific issues like religion or in the case of China, politics. So for Google to use the hacker attacks as justification that it can’t tolerate Chinese censorship anymore is somewhat dubious, since this is not exactly the same issue.
2. Secondly, this confrontation helps highlight the different cultural differences that are important in business in the US and in China. On our recent student trek, every company (whether multinational or local) emphasized the huge difference in business culture – “it’s not right or wrong, it’s just different.” What I mean by this is that Google’s going public has made the Chinese government lose face, and this will only result in a lose-lose situation. If Google was pissed about the hacker attacks, it should have escalated that to the relevant US government agencies, and therefore go through official diplomatic channels. From the Chinese perspective, by breaching the regular channels and creating such a PR issue, Google has shown that it has no respect for China, its government, or even its people. Just a quick glance at my friends’ statuses on Kaixin, the most popular Chinese SNS, and I can see just as many people who are sad and “mourning” for Google as there are who are angry and skeptical of Google claiming the moral high ground (“just leave”). Google has arguably alienated some Chinese netizens by escalating this political disagreement into a high-profile media story.
3. Thirdly, what is the fallout? A few possible scenarios are as follows (my own speculation, neither confirmed nor denied by my chats with Googlers):

• “Worst case” scenario: Google China is completely disbanded, all .cn services sare hut down, and all employees are let go (or for some people, offered transfers to the US); the aftermath is very likely that the Chinese government will block Google.com for an extended period of time to recover its lost face. Absolutely worst possible outcome, termed “lose-lose-lose” by the WSJ editorial.
• “Moderate case” scenario: Google’s .cn services are shut down, but Google China’s engineering staff is kept on, in a pure R&D center (think Microsoft Research Asia). Some form of comprise will be reached between the Chinese government and Google, and Google.com will remain accessible but prone to occasional blocks in China.
• “Best case” scenario: Business as usual. Somehow all parties get out of this political row with something to show, and everyone can forget that the whole thing even happened. This is only “best” in that we can go back to our prior state, not necessarily “best” in the moral and philosophical debate about censorship etc.

In closing, I’d like to say that the current events are unfortunate by any measure, since the biggest losers potentially are the Chinese netizens. Competition is necessary for a healthy market, and letting Baidu, Inc. ((ADR) NASDAQ: BIDU) own the Chinese search market is just as bad as letting Google own the US search market. This is why I root for Google in China and Microsoft Corporation’s (NASDAQ: MSFT) Bing in the US.

Google held a press release for Chrome OS today. All the major tech blog properties are covering it. Just check out the first page on techmeme and you’ll get a good rundown of all the discussions going on.

What I’d like to talk about is how Chrome OS might impact the computing market. Google has taken a page from Apple’s playbook by deciding that Chrome OS will be available only pre-shipped with certain devices (netbooks, at this point), as opposed to being an OS that you can get and install on whatever machine you have.

This is actually a big deal. By doing so, Google is moving away from the traditional PC hardware / software paradigm and moving towards a model more typically found in other consumer electronics – the future Chrome OS devices will be more similar to your TV or other home appliances than to your laptop or desktop, in that its feature-set is pre-defined and not customizable (unless you are a hacker). It will be a simple, straight-forward user experience – when you boot it up, all it shows will be the Chrome browser window.

Commentators are divided over the OS, but the differences really are due to very different vantage points. The infoworld article boldly titled “why Chrome OS will fail – big time” focuses on how Chrome OS is not a substitute for Windows or Mac, and thus claims it fails. Robert Scoble on the other hand focuses on how Chrome OS is really about low cost supplemental access to the web, and a competition over web standards and tools – HTML5 vs. proprietary frameworks like Flash or Silverlight.

My concern with Chrome OS is really about the bigger picture of netbooks – having never bought one myself (though quite tempted at one point when the EeePC first came out), I am still not a big believer. Netbooks are a niche category on a rapidly converging field, squeezed between ever-more powerful smartphones one the one end and laptops on the other. In one sense there’s a definite value proposition for it – a $100-200 device that you can just boot up and google a recipe while you’re cooking, or just do some casual browsing while you’re on the couch does have some marginal benefit, but the emphasis here is really on “marginal”.

For Chrome OS and netbooks to succeed, Google is really betting on a couple of big industry trends. One is that HTML5 adoption will be smooth and major web properties will convert to it, instead of running on proprietary platforms such as Adobe Flash or Microsoft Silverlight. Of course in this aspect Google does have some control, since it owns Youtube, so at least it can ensure that the biggest video site on the web will be compatible.

The second big trend is the wide-spread availability of wi-fi, since the device is Internet only. Google and its hardware partners can opt for 3G capabilities, but that’s a harder sell because of the additional telecom fees. In one sense, wi-fi is pretty widely available, but it’s far from ubiquitous, and while the device will still sell, people will talk about it less if they don’t use it on the go that conveniently. To a certain extent, this point is more of a technical issue, but Google and friends will have to come up with some solutions to make the device more usable.

In sum, Chrome OS is perhaps just the beginning of the future – a future where every device is a thin client to access the web and everything is stored in the cloud. It may be too early for its own good. Only time will tell.

The Chinese media & web being the way it is, there has certainly been no shortage of rumors spreading like wild-fire. Proof: Kai-Fu Lee felt obliged to respond to certain rumors, on a new post on his Sina blog (link in Chinese).

Titled “Clarifications on some misunderstandings of the media” (my translation), Lee addresses several specific rumors:

• His resignation was a fallout from the Chinese government’s severe crackdown on Google China earlier this year (short recap: Google China was labeled as porn friendly by the national television and suffered regulatory punishments). Lee claims that he has met with officials of 3 government ministries in July, where they have acknowledged Google China’s efforts to comply with the Chinese government’s regulations. Lee also posted a (translated) excerpt of a letter from Eric Schmidt, where Schmidt praises the China team for handling the situation well. And Lee further says his resignation was delayed by 2 months as a result of handling this affair.
• Media speculation around whether he will fully devote himself to his new startup (some media columns seemed to be skeptical of Lee’s stated next venture). To be frank I found it a bit funny for Lee to actually address this – unlike the previous point, which was a natural source of rumors, any discussion around whether someone can be a good entrepreneur or not is just pure gossip. Anyway, Lee says a few things why he’s best fit for his new venture, and also claims that he has been working 20 hours a day for the last week, just to show that he still works very hard (again, a very odd issue to publicly address).
• Lee also briefly refutes some other speculations, to list a few: tax evasion rumors; Google is considering exiting China; he quit Google because Mountainview doesn’t give him real powers and authority.

My brief two cents:

• Lee must have been suffering a lot of personal pressure to actually respond to media speculation. This in part has to do with his semi-celebrity status in China, due to both the tremendous career success he has had (as former head of Microsoft Research Asia and Google China) and the very public figure that he maintains (he often talks publicly at universities – I’ve attended one of his “youth mentoring” sessions at my alma mater back in the day).
• Google China is still at a crossroads. While recent products, especially Google Music (which is a great great product to download music legally btw – the catalog is pretty amazing – though it’s limited to China), has certainly enjoyed some success, Google has only established a beachhead in China. Search market share still trails Baidu by a lot (think Yahoo vs. Google US share). A lot of products still needs refining – Google Ditu (local version of Maps) is subpar in terms of search quality compared to Baidu Map, and the GPS positioning on the iPhone in China is off by about two blocks, to give a few examples. And of course the regulatory environment just makes operating in China a big headache and very risky – as an example, almost all Chinese twitter clones were killed overnight recently (due to tightened control after the Xinjiang riots since July), without any official explanation.
• As a casual side observation, the fact that Lee hosts a blog on Sina is noteworthy. Sina’s blog platform is noted for “celebrity blogs”, where big real life celebrities host their blogs (one top celebrity, Han Han, has ~20k-50k pageviews and ~3,000 comments for each of his posts). Hosting his blog on Sina is an acknowledgement of how the Chinese web operates (the big 3 portals have immense influence, and Blogspot frequently gets blocked by the GFW). It could also be a sign of friendship since one of Google China’s biggest search deals is to power Sina’s entire website.