Switched On: Apple's cloud conundrum

Each week Ross Rubin contributes Switched On, a column about consumer technology.

It is hard to believe that Apple has been trying its hand at the Internet services space since the year 2000, when it launched iTools. Like nearly all of iCloud, with which it shares its trademark vowel prefix, iTools was free. Unlike iCloud, though, its collection of services was all over the map, ranging from Web page creation to greeting cards. iCloud marks the third reboot of Apple's Web services suite since that foray. In the intervening years, we've seen .Mac (essentially a subscription version of most iTools features), and MobileMe, which paved the way for the contact and calendar synchronization that will be free as part of iCloud.

Modern-day Apple has shown an appreciation for seamless network access since the launch of the iMac in 1998, which eschewed floppy drives in favor of network-based sharing. One can even trace a belief in the power of the network further back to eWorld, AppleLink, and even the Mac's early, simple networking technologies, AppleTalk and LocalTalk. Internet services are clearly complementary to advanced devices running sophisticated software -- two areas where Apple excels. So why has the cloud rained on Apple?

First, while a crowd of young companies such as Dropbox, SugarSync, MiMedia and others have pursued cloud services for consumers and businesses alike, it's difficult to find an example of any company that has built profitable and compelling consumer cloud services at Apple's scale (although some of this depends on definition). While its ecosystem competitors Google and Microsoft have formed a fierce rivalry in Web media based on search and mapping services -- from which Apple has thus far abstained -- their network storage initiatives haven't gotten much further along. Microsoft, for example, offers 25 GB of cloud-based storage with SkyDrive, but is only now stepping up efforts to hook it into its operating systems. And while Google has long offered growing gigabytes for Gmail, storage of consumer content has taken longer to roll out -- Google Music steps up an offering that began with a single gigabyte of free photo storage for PicasaWeb.

Second, it has been difficult for Apple to pounce on a key maturing technology to offer disruptive timing or pricing the way it has with other technologies. Unlike with capacitive touch screens and retina displays on the iPhone, flash memory in the first iPod nano, or 1.8" hard drives in the original iPod, Apple can't swoop in, exercise its scale, and fluster competitors.

Third, and most significantly, the cloud has not drifted into many of Apple's areas of excellence -- industrial design, marketing and retail. It is a beast of a challenge to market something as abstract as "the cloud." Unlike sleek devices that tantalize eyes or software that engages fingertips, good cloud services disappear in the background. Compare the typically static Apple keynote slides to the WWDC ones that required animation to illustrate the concept of pushing data to multiple devices. And the cloud can't be merchandised in an Apple retail store, although store staffers can help explain it.

Over the long-term, Apple must differentiate and succeed in the cloud as more of the computing and entertainment value shifts there. For now, though, the value that it brings will be clouded indeed. The company derives relatively little revenue from iTunes music sales, less from free iPhone apps, and no direct revenue for the iLife software when it bundles them with Macs. But they all contribute to a user experience monetized through its hardware products. Such is the near-term promise of iCloud. Apple users won't pay for it, but they will buy it anyhow.

Ross Rubin (@rossrubin) is executive director of industry analysis for consumer technology at market research and analysis firm The NPD Group. Views expressed in Switched On are his own.