Attack of the Chromebooks

Google is about to make a hard push with Chromebooks. Chromebooks have had back-to-back holiday quarters in the US where Chromebooks were one of the bright spots regarding growth. Google seems to be orienting themselves to initiate a strategy to grow Chromebooks outside of the only market where they have meaningful sales–education.

Google wants to break Chromebooks out of education and try to get more consumers and businesses to ditch their Windows or Mac notebooks and jump to Chromebooks. While I appreciate Google’s ambition, there are some trends that suggest this is going to be a steep hill for Google to climb.

Rising PC ASPs
The steady, and fascinating, trend in the PC market has been the continued rise in average selling price. This has been going on for two years, and it is something I predicted in 2014 when I published a state of the PC market report that year. I outlined several scenarios, one where ASPs declined and one where they rose. I stated the latter was my conviction of what would happen in the market as consumers were shopping for PCs as mature consumers which is a mindset that almost always leads to a rise in ASP. When consumers know what they want, and why they want it, they start looking for solutions that better fit their needs and that generally leads them to spend more money on the product to meet their needs.

Sure enough, since 2014 ASPs of PCs have been slowly rising as consumers look at brand, design, and key features and are willing to spend up/invest in the product since they are going to hold onto their PC for 5-6 at least. They spend up so it will last, and fill their needs for as long as possible.

PC Gaming
In light of what is one of the biggest sleeper trends around, the return of PC gaming, I found this article from the Information to be intriguing. The article gets the scoop on a project within Google to bring a gaming service, which streams PC games that reside on the server, code-named Yeti. If you are familiar with a service called OnLive which tried something similar a few years ago, this appears to be the same idea.

Streaming PC games failed back then, and I don’t have much hope it works now even if Google does it. PC gamers want the highest resolution gaming experience, with the fastest frame per second experience possible. To them, anything less is a competitive weakness. Dropped frames, lag, or not having a high-resolution visual experience can all mean death in the world of competitive online gaming.

That being said, PC gaming, good old-fashioned Windows gaming PCs is coming back into style in a big way with younger consumers. When we scratch below the surface of a range of data points surrounding the PC industry and combine that with end-user research from the gaming console market, it becomes clear that for those under the age of 20, they are dramatically decreasing their console gaming time and moving to PC gaming.

I’ve seen a range of data points that this particular demographic has decreased their console gaming time anywhere from 40-50% over the past three years. That time is moving to Windows PC gaming. I’ve interviewed more than a dozen Gen Zers across the country as to why they are switching, and it boils down to two things. All their friends are moving to PC gaming, and the pace of innovation of the games themselves is much faster in the PC world. A game called PUBG (Players Online Battleground) is a big source of this momentum.

This is a reason why PC gaming rigs from ASUS and ACER that cost under $1000 have seen an uptick in sales. What Google doesn’t grasp about Chromebooks is kids use them in schools up to High School, and then they move to PCs for High School and above. So kids go to their parents when its time for to get a PC for school and also want to play PC games with it. The parents agree getting a PC is a good idea but don’t want to spend 1400 dollars for a high-end gaming notebook. This is where the capable sub $1000 gaming notebooks from Acer and ASUS become great value for the money and a win-win for parents and kids.

Couple this with what NPD has confirmed as the single largest YoY growth category in US consumer retail in PC monitors and you can see the trends aligning as PC gaming notebooks had a lot to do with this trend.

Neither this trend nor the rising PC ASPs, signal in any way the broader market wants to move to less capable more thin-client computing as Chromebooks offer. But there is the last point still sticks out in my mind.

For Google to truly make a push with Chromebooks and have a prayer to take any share from Microsoft and Apple in the notebook PC market they will need to do something they historically have struggled with–get developers to actually develop for their platform. Yes, they have developers write apps for Android but rarely are those apps optimized for Android. This point sticks out like a sore thumb when it comes to Android tablets where apps are largely just blown up/scaled up versions of their small screen apps, and now larger screen optimization has taken place.

Part of this strategy by Google for Chromebooks is predicated on ChromeOS running more native apps via Android. The hope of Google here is that by bringing a more native app experience to ChromeOS, the platform will function more like a notebook with optimized Android apps for the big screen and notebook form factor. I’m most skeptical about this point as a giant hurdle standing in the way of Google’s ambitions with ChromeOS.

I want to conclude with an important observation. There is an event coming that will be fascinating to watch. There are approximately 350-400 million devices out there running Windows 7. Microsoft is ending Windows 7 support in 2020 and has urged customers to upgrade in the next three years. This end of life support will accelerate the upgrade process in certain markets and what those nearly half a billion customers decide to buy next is up in the air. Everyone competing with Windows here hopes they are in consideration and this includes Apple with Macs and iPad Pro and Google with Chromebooks. With this event coming, Microsoft’s competitors smell blood in the water and want to pounce on this opportunity. Our research is yet to suggest doom for Windows in this scenario, but I don’t think Apple, in particular, has shown their full hand at their strategy to take big market share from Microsoft.