Last week, Google showed off its progress on Chrome OS, introduced an apps store in support of it, and offered up a pre-release hardware trial program (real machines won’t ship until mid-2011). But it’s likely all for naught. Google CEO Eric Schmidt’s objective of making Chrome OS a “viable third choice” in operating systems looks doomed.

Limited Functionality, Limited Appeal

Right now, the hot trends in technology are social, real-time, mobile and cloud computing. Chrome OS is only optimized for one of them; its machines are true cloud clients. There’s nothing in Chrome OS or its user interface that accommodates social media or real-time information feeds. Schmidt even evoked the old Network Computer vision. Chrome OS computers will be highly dependent on the cloud for applications and minimally functional when disconnected. They’ll have cellular modems, but it’s not clear that existing networks can handle the network traffic demands of a cloud-centric client.

Problematic Positioning

Chrome OS also suffers from awkward positioning: both externally, to developers and potential customers, and internally within Google’s own product line-up. While it’s true that PCs serve both companies and consumers, the value of the Network Computer premise appeals only to enterprise IT managers. Its manageability and simplified functionality play best in applications like airline reservations, point-of-sale terminals and ATMs, or in limited-application mobile devices used in shipping and store inventory management. Yet at least for now, app stores are purely consumer offerings. The apps Google showed last week came from media companies (New York Times, NPR, Sports Illustrated), Electronic Arts, and Amazon.

Where Are Google’s Real Opportunities?

Meanwhile, Google itself says Android will be its primary tablet operating system. In fact, Google aims Android at most of the best opportunities to establish new or alternative operating systems. I’d argue that there are three product categories where Google could try to establish a new OS platform, either with Android or Chrome OS. I discuss these in more detail in my weekly update at GigaOM Pro.

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This isn’t because Microsoft is somehow smarter than Apple, but rather because the underlying dynamics of the technology industry have fundamentally changed. In brief, the technology world is increasingly embracing “write” communities, as Jono Bacon calls them, not simply “read” communities. Open source may have kickstarted this trend, but open APIs and open data are taking it to new heights.

Read communities aren’t characterized by a dearth of developers, but rather by what those developers can do on a given platform. After all, few can claim to sing to developers as eloquently as Microsoft CEO Steve Ballmer does, but there’s a (big) difference between talking to developers and letting them talk back. In your code. On your platform.

As noted, it’s telling that the shelf life of Apple’s dominance is much shorter than Microsoft’s decades-long dominance. Microsoft, after all, never had to deal with competing write communities, as Apple does with Google Android. Major developers like Facebook find Android more flexible: It allows them to write into and draw from the platform the capabilities they need.

Hence Apple, once the no-brainer first choice for developers despite its heavy hand on the development process, is increasingly losing out to the more free-spirited Android, which analysts see claiming over 50 percent of the smartphone market in just a few short years. Apple has responded by loosening its grip on iOS application developers, but it may be too little, too late.

Android isn’t perfect, of course, and still suffers from a worsening fragmentation problem. But its comparatively open nature makes it an inviting alternative to the closed iOS development. As but one example, try to get meaningful analytics data out of the iPhone. If you’re Apple, you can do that. If you’re anyone else, particularly Flurry, you’re out of luck.

Apple giveth, and Apple taketh away.

Contrast that with Google Android, which has an open-source logging/analytics tool developers can use called Logcat. Android is open source, which prevents Google from exercising control over how developers collect analytics data on Android devices. While one can make an argument that it’s good to have potentially sensitive analytics information guarded well by a responsible party like Apple, given Apple’s record of somewhat arbitrary and heavy-handed control over its platform, I’d vote for freedom on this one.

This isn’t just an Apple vs. Google story, either. It’s just one example of how innovation happens generally, no matter the industry. As Steven Johnson points out in The Wall Street Journal:

[I]deas are works of bricolage. They are, almost inevitably, networks of other ideas. We take the ideas we’ve inherited or stumbled across, and we jigger them together into some new shape. We like to think of our ideas as a $40,000 incubator, shipped direct from the factory, but in reality they’ve been cobbled together with spare parts that happened to be sitting in the garage.

The problem, as Johnson goes on to highlight, is that governments have largely pursued innovation in the past 100 years by doing the exact opposite of what is actually required to foster such innovation. The same is equally true of individual corporations like Apple or Microsoft:

[I]ntellectual property, trade secrets, proprietary technology, [and] top-secret R&D labs…share a founding assumption: that in the long run, innovation will increase if you put restrictions on the spread of new ideas, because those restrictions will allow the creators to collect large financial rewards from their inventions. And those rewards will then attract other innovators to follow in their path.

The problem with these closed environments is that they make it more difficult to explore the adjacent possible, because they reduce the overall network of minds that can potentially engage with a problem, and they reduce the unplanned collisions between ideas originating in different fields. This is why a growing number of large organizations—businesses, nonprofits, schools, government agencies—have begun experimenting with more open models of idea exchange.

It’s this sort of open exchange of ideas and code that leads to economic historian Eckhard Höffner to conclude that Germany closed the gap on England’s industrial revolution in a short span of time due to the wide-open nature of the country’s publishing market in the mid-1800s. Weak copyright law enforcement sent innovation into overdrive in Germany, while a comparative monopoly on publishing in England stymied that country’s early industrial lead.

Eventually, Germany followed England’s lead, and innovation slowed there, too, but ramped up in the United States, where “borrowing” the works of Dickens and other great European authors, not to mention technological inventions, was standard operating procedure. European creators didn’t like the Yankee “thieves,” but loose IP protection led to greater adoption of their works, industrial and cultural progress, and the authors still managed to get paid.

Since then, the industrialized West, including the United States, has increasingly clamped down on intellectual property in the interest of fostering it, but with the opposite effect. As numerous studies attest, patents and other intellectual property tools have slowed innovation, not accelerated it. Industrial innovation has accordingly moved to areas like Brazil and China where IP protection is light.

This isn’t just a matter for economists, but also for business strategists. It’s possible, for example, that Oracle’s integrated approach to product development will prove successful, but likely not over the long term. Such an all-consuming, go-it-alone approach breeds powerful enemies, including within one’s own customer base. It certainly creates distrust within the developer ecosystem.

Oracle may profess not to care, but competitors like Microsoft increasingly recognize that they must care. Software developer Dave Newman declares that “The .Net community operates in a non-collaborative vacuum,” and then announces he’s abandoning .Net. Microsoft can’t afford to lose too many Dave Newmans.

Neither can Oracle.

In today’s market, companies need community. They need adoption of their APIs. No company is smart enough to come up with all innovation on its own, so the best companies will create read/write platforms through which third-party developers have the flexibility and distribution to reach customers.

Open source is an essential part of this, but isn’t sufficient of itself to crown any particular vendor or technology king. Linux is rapidly taking over in the mobile market, but has yet to make a dent on the general consumer desktop. But the fact that open source isn’t sufficient of itself to decide a winner is no reason that platform vendors, specifically, and technology vendors, generally, shouldn’t be making the most of open source to enhance their attractiveness to third-party developers.

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If the reports are correct and the phone looks good, T-Mobile customers will be happy as well. A version of the Samsung handset is expected for T-Mo folks as well, making for an option to the G1. Considering that Samsung makes some slick devices like the Omnia and the BlackJack II (how can you argue with the Consumer Reports top pick?), I think they’re among the few companies that can make a very compelling Android device.

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Although Asus wasn’t what I’d call a big player in the Windows Mobile space, they do have a few handsets on that platform. It’s going to be interesting to watch traditional WinMo handset makers and see how many take a multi-platform approach like HTC and Asus are doing.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Why iPad 2 Will Lead Consumers Into the Post-PC Era
• The Near-Term Evolution of Social Commerce
• Content Farms: The Players, The Benefits, The Risks