Google Chrome OS and the economics of Free

Everybody is now talking about the announcement of Google that the Google Chrome Operating System will be available for users for free. From the Official Google Blog:

Google Chrome OS is an open source, lightweight operating system that will initially be targeted at netbooks. Later this year we will open-source its code, and netbooks running Google Chrome OS will be available for consumers in the second half of 2010.

Speed, simplicity and security are the key aspects of Google Chrome OS. We're designing the OS to be fast and lightweight, to start up and get you onto the web in a few seconds. The user interface is minimal to stay out of your way, and most of the user experience takes place on the web.

Analysts are calculating Google's strength and asking questions like "will Google OS kill MS Windows?"

We need to understand how Google places itself on the forefronts of change and offers services for free which others can only offer commercially. Jeff Jarvis explains:

How does Google win? Its products are generally but not always better and cheaper (read: free) because Google’s real secret is that it understands the economics of the internet and competed aggressively not against technology and internet companies but instead it competed for advertisers, selling performance over scarcity. The more Google serves end users – and the more it learns about them – the more opportunities it has.

These are the economics of free as Chris Anderson writes in his book Free For Free:

Free is both a familiar concept and a deeply mysterious one. It is as powerful as it is misunderstood. The free that emerged over the past decade is different from the free that came before, but how and why are rarely explored. What more, today's Free is full of apparent contradiction: you can make money giving things away. There really is a free lunch. Sometimes you get more than you pay for.

There were broadly two camps of skeptics: those over thirty and those below. The older critics, who had grown up with twentieth-century Free, were rightly suspicious: Surely “free” is nothing of the sort-we all pay sooner or later. Not only is it not new, but it's the oldest marketing gimmick in the book. When you hear “free”, reach for your wallet.

The younger critics had a different response: “Duh!” this is the Google Generation, and they've grown up online simply assuming that everything digital is free. The fact that we are now creating a global economy around the price of zero seemed too self-evident to even note.

Read the book to understand how the Free dynamics work.

Gigaom says:

Today Google went wild and announced its plans to create the Chrome operating system, which it says will be designed to run on netbooks. But it’s really an attempt to keep Google relevant as an advertising powerhouse as consumers begin spending more time playing with web-connected apps than the web itself. It’s the search giant’s reaction to a wholesale change in computing driven by ubiquitous wireless access and mobility. The Chrome OS is another step in allowing Google to create what we’ve called the OS for advertising — an ad platform that extends across all devices and all screens.