First, some facts.

• Android is native operating system for phones (and now Tablets), Chrome (or Chrome OS) is a primarily web-based operating system that will be targeted for “devices, tablets and TVs”.
• Android has the Android Market, on the surface similar to the Apple App Store to distribute/sell apps to devices. Both Android Market and App Store take a 30% cut of sales. Apple keeps its 30%, while Google distributes its 30% to handset manufacturers and/or telcos.
• Chrome OS will have the Chrome OS (web app) Store, which, even in closed beta, seems to have solid discoverability and organization built in.

Next, my hypothesis: Google wants Chrome OS to beat Android. There are lots of reasons for this.

History: Google’s history is web software, and they excel at quickly creating simple, scalable web applications. Android is native software (i.e. software that is stored and executed on your device), which they historically have eschewed. Consider the Google Voice Desktop App saga. If true, Google pulled a potentially killer desktop product because it was not ‘web’ enough.

Control: Android is almost fully open source, while Chrome OS’s web underpinnings inherently make it closed source* Chrome OS’s user experience is loaded over the wire after Chrome OS gets onto the Internet, ensuring that closed web apps take top billing on the OS. Because Android’s source code is readily available, other developers and device makers can fork it, customize it, even go so far as to rip out Google as the default search engine and drop Yahoo or Microsoft in its place. The same (likely) can’t be done to Chrome OS, because the guts of the operating system are loaded from Google’s servers when you turn the machine on. UPDATE: struck out the incorrect bits. Thanks, Mark.

Economics: Google’s decision to deliver the 30% cut of Android Market app sales to telecom companies, instead of keeping it for itself, results in a lack of incentive for Google to invest in the Android Market. Why would they? They make no money on it. This manifests itself in many ways:

• Android Market pales in comparison to iTunes and (at least by the screenshot) Chrome’s upcoming Web Store. 2+ years and 100K apps after the first Android phone was released, there is still no web presence (outside of a couple hundred apps) for the Android Market, while the other two have (or will have) robust ways to navigate and discover new apps from your PC.
• The developer console to the Android Market is plagued with repeated, significant problems. Most recent: developers with multiple apps have not been able to see all of their apps for many days now.

Having built such a success in Android, Google has no choice but to continue building upon it. But that doesn’t mean they need to be committed to it. I believe they will continue to invest the bare minimum to show progress and appease their wireless and handset partners. I believe this will result in the following outcomes:

1. Google will lengthen Android’s release cycle from every 6 months to every 1 year… oh wait, they have already announced this. Increasing the cycle length reduces the speed at which features and functionality will be built into Android, and allows its competitors to catch up or keep moving past Android’s feature set.
2. Google’s press/blog entries for Chrome OS will increasingly talk about how it will power phones.
3. Google will fast-track Chrome OS to try to beat Android on tablet devices. The Galaxy Tab sold a reported 600K units in its first month. While solid, this number is still low enough to allow Chrome OS to supplant Android as the non-Apple dominant tablet OS. Google has to act quickly for this, however, as the momentum behind Android by device makers is very significant.
4. Having considered Android, and the smartphone space as a whole, ‘conquered’, Google’s senior Android engineers will increasingly be allocated to Chrome OS.
5. Unless Chrome OS dies out of the gate, future Android releases will be underwhelming in both user features and developer tools.

* Yes, Google released the source code of Chrome OS. However, much like Android, the key bits are either going to be closed-source (GMail, Calendar, Android Market), or hosted on Google’s servers where they are untouchable to outside developers.

Thoughts? Other points? Factual inaccuracies? I’d love to hear from you.