“Bottoms up” is not just something you say during cocktail hour or at a strip club. It is a market strategy as well, and Google will implement it with a fist full of dollar bills.

News of a Google netbook operating system – Chrome OS by name – has emerged. Targeted for netbooks running ARM and x86 chips, COS centers Google’s Chrome browser as the interface to the world and to Google applications. This latest Linux distro is designed to address the bottom of the commercial computing market (we’ll ignore the One Laptop per Child gizmos that would otherwise win the Barrel Bottom Scraper Award for underpowered PCs).

Scott McNealy understood half the equation when in an over-caffeinated frenzy said “The network is the computer.” Naturally McNealy saw the hardware side of the system, being that he was in the hardware business. But as any technology marketing maven will maintain, it is the apps that sell the hardware.

Google is all about the apps.

Restate McNealy’s maxim for software and you get “The Internet is the app.” Google search is arguably the most popular app on the Internet. Their desktop applications … not so much, but for low-end users they are plenty.

Low-end users like netbook buyers.

Now that Google apps (Docs, Gmail, Maps, etc.) can operate offline, and given that Google’s browser can be tweaked to enhance these offline apps, Google has all the components for customer lock-in or delight, depending on how un-evil Google really is. Non-power users who want a computer for the most mundane uses – people for who Open Office is overkill – could easily exist using Chrome OS, Chrome Browser and G-apps. This is probably 80% of the market.

I’ll take an 80% segment any day.

The open marketing question is “what hardware vendors would ever use COS?” Industry analysts assess the low end Microsoft tax on netbooks to be about $20 a unit when XP is deployed, or about 7% of the cost of the cheapest netbook available today at CompUSA. $20 may not sound like a lot to you or me because it is a one-time cost. Some industry estimators expect 35 million of the little laptops to be built this year. The Microsoft tax would rack-up nearly three quarters of a billion dollars, which is serious money to hardware vendors or anyone outside of the Obama administration.

Smart money is betting that Google will ask only a nominal, fixed partner fee for joining the COS party. Pay a few grand to gain access and your hardware company is alleviated of the Microsoft tax. Assuming that the brand of operating system is irrelevant to the average netbook buyer, netbook builders are looking at a few extra million dollars a year to pad their 201Ks (which were 401Ks before the recession).

Google’s goal then becomes monetizing the user, not the OS. Tech pundits predict that advertising will be Google’s approach. This may well be. The evil half of my brain (which in full disclosure actually occupies more than half my cranium) sees a million ways of inflicting advertising on unwary netbook buyers. Most methods however are intrusive, unwelcome and exactly what Google will not do. Chrome will not force people to endure Google ad pop-ups, or permanently scrolling banners on the top of the screen (besides, netbook screens are too small to waste on banner space).

Brand and first choice in external interactions is where Google gains, advertising revenues following online. Google is creating a 100% Google environment and a go-to brand. When netbook users wake in the morning, their lives will revolve around the Google OS. Add Google browser, add Google desktop applications, add Google search (built into everything), ad nausium. It is a completely interconnected and Internet driven brand. Microsoft came close to this when indoctrinated info workers adopted Microsoft Office atop a Microsoft OS.

It was Microsoft’s overriding strategy that both gives Google opportunity and may require Google to cede it. We still have a lot of good offers from Microsoft, including getting MS Office for cheap.

The question is if Google must open the OS in order to compete. For all Microsoft’s faults (a list that is slightly longer than War and Peace and a Hugo Chavez speech combined) it understood that the application sells everything else. The network is the computer, the Internet is the app, the app is everything. When there is a market leading application, Microsoft supports it then clones it. Microsoft has always entertained, encouraged and even funded developers to assure that the next great app – whatever it may be – will be under development somewhere. Microsoft always wants the Next Big Thing to run on Windows first.

If Google closes COS, it will enjoy only limited market penetration. People slightly more advanced than monkeys – anyone who has not created permanent couch indentations – will eventually want to do something on their netbook that Google has not provided. Google’s desktop toolbar is not a digital Darwinian ecosystem. Gadgets are insufficient. Google will open COS in order to expand.

Just don’t expect it in version 1.x. Google knows not to invite unnecessary heat, and will keep COS locked while it matures and takes complete ownership of the low end of the market. After that beachhead is secure, they will open, expand and become a serious threat to Microsoft.