The first four Google (GOOG 0.86%) (GOOGL 0.92%) Android apps for Chromebooks are here -- Vine, Evernote, Duolingo, and Sight Words. Moving these apps from Android to Chrome OS represent part of a major initiative, first announced at I/O 2014 in June, to lower the barriers between Google's mobile and laptop operating systems.
Source: Google.
Right now, app developers can't directly convert Android apps to the Chrome Web Store, since Google controls the conversion platform, App Runtime for Chrome. Google is only converting free Android apps for now, since the revenue sharing arrangements between the two stores is different -- developers keep 70% of their revenue in Google Play compared to 95% in the Chrome Web Store.
This convergence of Android and Chrome OS could deal a major blow to Microsoft (MSFT +1.32%), which recently partnered with hardware manufacturers to launch low-end Windows laptops to contain the rising Chromebook threat.
How Android on Chromebooks could help Google
By merging Android and Chrome OS, Google can combine its dominance of the mobile market with rising demand for Chromebooks.
Android powered 84.7% of all smartphones in the second quarter of 2014, up from 79.6% in the prior year quarter, according to research firm IDC. Meanwhile, Gartner believes that sales of Chromebooks will nearly triple from 5.2 million units this year to 14.2 million units by 2017. Within that market, Samsung (NASDAQOTH: SSNLF) is the clear leader with 65% of the market, followed by Acer at 21%. Last year, 82% of all Chromebook sales came from North America.
Hewlett-Packard (HPQ +1.74%) recently tried to leapfrog over Chrome OS with its Android-powered HP Slatebook 14 laptop, but it was a terrible idea. Most Android apps were poorly optimized for the form factor, and it cost $430 -- making it inexplicably pricier than Chromebooks, low-end Windows laptops, and convertible Android tablets.
HP's Slatebook 14. Source: HP.
Chromebooks running select Android apps, on the other hand, address both problems. Google will only allow properly optimized Android apps onto Chrome OS, while sticking with its strategy of supporting low-cost laptops with its cloud-based ecosystem.
Acer's C720 is currently the cheapest Chromebook on the market, with a retail price of $199. Prices like that will keep Chromebooks popular among students and young professionals, and proper support for Android apps will be a great bonus for Android smartphone owners.
How Android on Chromebooks could harm Microsoft
Microsoft, on the other hand, is relying heavily on its dominant market share in PCs to counter the rise of Chromebooks.
Microsoft Windows is still installed on over 90% of all PCs worldwide, according to Net Market Share, and 13% of all PCs run Windows 8 or 8.1. Microsoft hopes that these Windows users will continue buying Windows laptops, as long as they are priced competitively against Chromebooks. That's why HP, Dell, and Lenovo recently launched laptops that cost less than $250. These low-end systems all run Windows 8.1 with Bing, a royalty-free version of the OS which has been offered to select manufacturers. Microsoft is also waging a war against cheap Android tablets with new Windows 8.1 tablets which will cost as little as $99.
On both laptops and PCs, Microsoft is depending on two factors -- familiarity and a dependence on old software -- to keep users tethered to Windows.
Unfortunately for Microsoft, the world favors mobile operating systems over desktop-based ones. According to Gartner, approximately 1.17 billion Android devices will be shipped this year, compared to 333 million Windows devices. Within the PC market, global shipments of desktops and notebooks are expected to fall 5% next year, which makes the sudden rise of Chromebooks an alarming anomaly for Microsoft and its partners.
A Foolish final word
Once Google fully lifts the barrier between its mobile and PC platforms, Microsoft will inevitably lose market share in laptops and convertibles as Android users start mixing with Chromebook ones. Microsoft's best strategy to counter Google is to fulfill its promise to merge its mobile, tablet, and desktop operating systems into "One Windows," which will finally allow it to retaliate against Google with a unified platform.
But until that happens, Google will keep enhancing Chrome OS with Android apps -- turning Chromebooks into the proper Android laptops that HP failed to build -- and continue chipping away at Microsoft's dominant position in traditional laptops.
