A few weeks ago, Google Chrome was released with much fanfare, press, celebration, comic books, and praise (with the usual skepticism and contrarian views thrown in for good measure). People wondered if Google was getting into a browser war, an OS war, a land war in Asia, whatever. I kept waiting, kept waiting, kept waiting until finally … oops, no finally, just more waiting. No one pointed out the biggest strategic benefit of Google Chrome.

First, some background. Google makes a lot of money. Like, they didn’t have enough bathtubs in the Googleplex to put all the money in. They were going to build swimming pools to put their cash in but all of the pool contractors in the Bay Area were already committed, so they’re working on damming and draining part of the San Francisco Bay to make a pit big enough to put all of the coins, bills, doubloons, and gems that those little blue text ads deliver to Mountain View. Meanwhile, Larry and Sergey are impatiently waiting to fulfill their dream of swimming through it like Scrooge McDuck.

So Google = Money = Good. But they make ALL (like 99+%) of it from advertising, about 2/3 from search ads and 1/3 from contextual ads on other websites. So although they completely own this market, making more money than all of their competitors combined and more than anyone imagined was possible, this single-source-of-revenue thing scares the crap out of a lot of people (just ask anyone who has lost a job). That’s the only criticism of Google as a business that has any real substance.

What are the biggest, juiciest targets for a behemoth that needs another revenue source? Let’s look at the cash cows in the computer industry and how attractive they would be to Google:

• Hardware: a total non-starter. While Google might run the best data centers in the world, it is also one of their major competitive advantages, both in cost and performance. Selling or sharing it is out of the question. Other fields like PCs or servers are too low margin compared to their current business. Besides, hardware involves atoms, and Google has no experience with atoms.
• Operating Systems: Sure, Apple and Microsoft make a ton of money and high margins off of their OS products, but they also have decades of accumulated advantage, installed base, and brand equity. And they got to build those things back when people PAID for new operating systems.
• Office Software: Someone at Google is at least as smart as me because they went through the same process of elimination and ended up here. So they’ve built and bought their way into Google Docs, which does enough of what people expect in an office suite that it is considered a plausible alternative to MS Office.

They built it, some businesses have adopted it, but they’re not making billions of dollars off of it. Why not? Let’s ask Joel. His Strategy Letter III is probably the most important business lesson that people don’t get.

The only strategy in getting people to switch to your product is to eliminate barriers…Think of these barriers as an obstacle course that people have to run before you can count them as your customers. If you start out with a field of 1000 runners, about half of them will trip on the tires; half of the survivors won’t be strong enough to jump the wall; half of those survivors will fall off the rope ladder into the mud, and so on, until only 1 or 2 people actually overcome all the hurdles. With 8 or 9 barriers, everybody will have one non-negotiable deal killer. This calculus means that eliminating barriers to switching is the most important thing you have to do if you want to take over an existing market, because eliminating just one barrier will likely double your sales. Eliminate two barriers, and you’ll double your sales again.

(Incidentally, he used Excel as his example, pointing to the last time a smart aggressive software company with one revenue stream was looking to diversify. Maybe office software is just more usurpable than operating systems.)

Google is facing a whole different set of barriers to adoption than Microsoft faced when attacking Lotus 123. What are some of the barriers to adoption facing Google Docs?

1. Storage space is limited.
2. MS Office has office has more features.
3. It’s slower than installed apps.
4. It can only be used when online.
5. People are used to opening programs, not websites to work on documents.
6. IT Departments won’t upgrade their browsers beyond IE negative three.
7. [UPDATED] Some companies will NOT store their docs online – they only want them on their own machines/network (government, confidential, corporate secrets, etc)

Pre-Chrome, it looked like only #1 and sort-of #2 could be solved. Google, home of the original 1GB email account, isn’t afraid to offer more space when their products are mature. They have great developer resources to add whatever features are necessary, but the JavaScript foundation put a cap on the kinds of features that could be delivered with acceptable performance. The rest just seemed out of reach.

How does Chrome change this?

• The V8 JavaScript engine greatly improves the performance, basically solving #2 and #3. Coupled with the size and bloat of MS Office, Google Docs on Chrome is pretty comparable for speed. Also, now Google can control the entire stack between the OS and the office apps (browser, renderer, JS engine, software, etc) so they can optimize in ways that they couldn’t do on other browsers. Both Google Docs in Chrome and MS Excel take 1-2 seconds to open on my computer, while Firefox 3 took about 4 seconds and went through several ugly partial rendering states.
• Google Gears is pre-installed, which should speed up adoption of Gears and solve #4.
• The “Create Application Shortcuts” feature means that you get a nice desktop link that gives you an applicationesque window with either the list of all your docs or a specific doc, which can also be easily synced for offline access. Take a look:
• Bye bye, #5.
• And last but not least, the $50 billion question, what about #6? Imagine a version of Chrome with a different installer that a) included an IT controlled whitelist, b) automatically ran the offline setup after installing, and c) created appropriate shortcuts. This means it can be centrally installed, restricted from general browsing, and treated like an installed app. IE6 or 7’s role isn’t changed. That would get the seal of approval of many more IT departments because of the greater control they would have over it vs a standard browser app.
• [UPDATED] If there was an option to store documents offline only, that would solve #7. This would negate one of Google Docs’ biggest strengths (collaboration) but giving companies that option just might be worth $50B.

So in one move, Google addressed all but one of the strongest obstacles to Google Docs, paving the way for a much bigger, more profitable expansion and the coveted second revenue source. Can you think of any other obstacles to the wider adoption of Google Docs that Google needs to address?

[UPDATES: Thanks for the suggestion Evan!]