In response to complaints about MobileMe(s aapl), the latest terse Steve-mail (via MacRumors) asserts Apple’s cloud services “will get a lot better in 2011.” That’s good, because it’s hard to imagine the industry-trailing MobileMe taking a downward turn from where it is in 2010.
While a year of MobileMe goes for as little as $50 on eBay (s ebay), Apple sells the service for $99 per year, or $69 for the first year with the purchase of a Mac or qualifying iOS device. For that, the MobileMe subscriber gets services like IMAP e-mail, data syncing, photo and website hosting, an interminably slow iDisk, a questionable Backup, and Find My iPhone. They also get 20 GB of storage and 200 GB of monthly bandwidth. There’s also a MobileMe Family Pack for $149, providing more e-mail addresses, storage, and bandwidth.
In comparison, Google (s goog) offers free e-mail, data syncing, photo hosting, along with a free office suite, and free Android device location. If you need more than a limited amount of storage, it’s cheap. 200GB can be had for $50, with less space available for less money. Microsoft (s msft) provides 25 GB of storage, along with free e-mail and other similar services, all for free. See where this is going? Apparently Apple doesn’t. Apple just recently introduced Find My iPhone for free, but it basically had to because of what the competition is offering.
Sell Hardware, Not Services
That’s just the latest example of the miserly attitude Apple has had towards the cloud, an attitude that is a far cry from the forward-thinking introduction of iTools in 2000. When that predecessor to MobileMe launched, all services were free, and millions signed up. Two years later, Apple renamed iTools .Mac and started charging for it, losing about 90 percent of users in the process. Even after opening the service up to PC users, and more recently iOS devices, MobileMe has never been as popular as iTools. A free MobileMe would change that.
If it seems counterintuitive to give services away free that currently earn money on a subscription basis, it is, unless you aren’t really in the software subscription business to begin with, which Apple is not. Last quarter, Apple earned $20.3 billion in revenue, with just under $18 billion coming from sale of Macs and iOS devices. MobileMe was lumped in with software and services, which presumably includes OS X and applications like iLife and iWork. The entire group earned $662 million for the quarter. From desktops to handhelds, Apple is in the business of selling computers, and free cloud services sells more hardware, or at least help retain more existing hardware customers.
By making MobileMe free, those using it with iOS devices won’t be using services from Google (s goog) or Microsoft (s msft), which makes switching to Windows Phone 7 or Android more difficult. While PC users would also have MobileMe free, they’d need to have iOS devices to make it really worth using. The Halo Effect, which argues that iOS device sales later lead to Mac sales mitigates the loss associated with giving away MobileMe to PC users in the present. If they do switch, free MobileMe helps encourage them to remain all-Apple in the future. Free MobileMe would be an investment in hardware customer retention, and it doesn’t even have to be completely free.
For example, Apple could give away a year of MobileMe with the purchase of every Mac or iOS device. After all, they already offer a discount with purchase. Free MobileMe would be an incentive to upgrade every year, like the “free” year’s warranty you get by upgrading your iPhone every year. However, that would still cause at least some consternation when the $99 bill comes due a year later if you don’t upgrade. A better solution would be to offer a version of MobileMe free for anyone using a Mac or iOS Device.
If I were in charge of Apple marketing and stuck with the cloying MobileMe moniker, I’d go with: MobileFree, MobileMe ($49), and MobileWe ($99). The latter would be the MobileMe Family Pack. The prices would be reduced, of course, because this is 2010 and storage is cheap, especially in North Carolina, home of Apple’s new data center. MobileFree would include a basic set of services: mail, syncing, hosting, and a more appropriately named device locating service. Additional services and storage could be added in paid tiers.
Admittedly, most people would be happy with the free option, but there would be money to be made with advanced services, too. A service called Cloud Capsule would be a real, reliable backup solution using Time Machine off-site. Domain hosting would be Apple’s simple, elegant answer to what can be a difficult service to set up for the non-technophile. Perhaps a subscription iTunes service. These are just examples of ways to get people to use more storage and services to generate revenue, but revenue from MobileMe is not, and never will be, the point in and of itself.
The point is lock-in. Get people using Apple’s free services with Apple’s highly profitable hardware, and they’ll be less likely to buy hardware from competitors. That’s how the iTunes and App Stores work, and that’s how MobileMe could, too. If only Apple would set it free.
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