One of the fastest growing segments of the mobile industry, as well as the greater economy as a whole, is the personal cloud, with services from Apple, Google, Amazon and others rapidly gaining traction.
A recent Gartner report stated that the personal cloud would replace the personal computer as the centre of users’ digital lives by 2014, a remarkable prediction by the bellwether (and typically most conservative) of global IT analyst firms.
An educated guess of the total number of users of personal cloud services today is north of 500m and counting, depending on one's definition of a personal cloud. Regardless of the definition, however, adoption is rapidly growing, due to the increasing use of smartphones and mobile data plans, as well as the growing prevalence of 'multi-device' users (i.e., people who use multiple mobile devices, such as smartphones, laptops and Tablets), on a daily basis.
This is helping the personal cloud evolve from a nice-to-have for early adopters to a must-have for mass market business and consumer users to backup mobile data, files and rich media in the cloud, and to sync them across devices and share content with others. In high tech jargon, the personal cloud is quickly crossing the chasm and reaching the tipping point.
Surging demand
At the same time in the mobile industry, there is a growing sense of déjà vu and a bit of unease, not about the surging demand for personal cloud services, but about how mobile providers can monetize them. Industry veterans of the past decade remember what happened with other hyper-growth markets, such as webmail and social networks. These ended up deserving the ‘hyper-growth’ tag in terms of user adoption, but were generally non-monetizable by all but the largest companies, who were willing to tolerate multi-hundred million dollar losses in support of other objectives.
A cursory examination of the methods available to monetize personal cloud services today reveals that current market leaders are, by-and-large, using personal clouds as another loss leader to generate sales in other areas. Apple’s iCloud is pre-installed on the iPhone and other iOS devices, and users get 5GB of free storage, with the option to buy another 10GB for $20 per year. Apple is not expecting to make a significant amount from iCloud premium storage, but rather, use it as a means to tie users into their ecosystem and sell more devices. iCloud is also a conduit to sell premium iTunes content such as music, movies and TV shows, as they automatically sync across user devices.
Similarly, Google’s cloud services encourage people to use as many of its disparate services as possible, with the intent to capture user data and content in its cloud, and to lock users into ongoing use. This user-generated content can be mined for advertising, Google's primary source of revenue. Similarly, Amazon Cloud Drive's primary raison d'être is to make it easy for customers to buy digital content such as music and e-books for easy access across mobile devices and computers.
There are some companies that attempt to make money directly from personal clouds. These are largely independent providers such as Dropbox, who employ a ‘freemium’ model of free storage to encourage trial. The difference is that Dropbox relies on enticing users to upgrade to premium storage accounts to make money, as the personal cloud is its core business.
Industry reports suggest that the percentage of personal cloud users who upgrade to premium accounts tends to be in low single digits. This suggests that these businesses are truly playing a numbers game, where their growth is predicated on signing up an ongoing fresh batch of free users, and doing everything possible to convert new and existing users to paid premium accounts.
Lessons learned
Against this backdrop, let's consider important lessons learned with marketing personal cloud services. These lessons are based on the things we have learned through offering personal cloud services for several years, before the personal cloud became fashionable. We don’t operate our own b2c service like iCloud, although we do have our OneMediaHub.com personal cloud service as a demo site. This has close to a half million users and although it is a demo site, we view it as a marketing lab which will help us to understand how people use the personal cloud, what they want in such a service, and how to market to them. Here are six important lessons that we have learned, not only from OneMediaHub, but also from our commercial customer deployments.
Lesson One is that it is critical to start by understanding the true value proposition of the service – what are its benefits and why should people use your service rather than another? In the case of OneMediaHub, several unique benefits have been identified, including having all of your important stuff (i.e., pictures, videos, documents, etc.) automatically backed up in the cloud across multiple brands of devices; having instant access to all of your important content on all of your mobile devices and computers; and making it more convenient to share important content via the cloud, compared to a mobile device or computer.
Lesson Two relates to launching the service properly. Good examples include Vodafone 360 and Apple iCloud (Vodafone 360 failed, not due to a lack of marketing, but because it did not make a good job of the Lesson One stuff.) A personal cloud service launch cannot be a one-off event; it requires a concerted effort over a period of time to make people aware of the service, what it does, what its benefits are, why it's fun, etc. Depending on your target market, this should include mass market TV ads and targeted marketing via the internet, email, SMS and social media. The key is to make people aware of the service, educate them about how it works, and encourage them to try and use it on an ongoing basis.
Lesson Three is that it’s crucial to understand the aspects of a personal cloud that people use and value the most. Are they only using it once or twice, periodically or regularly? What are they really using it for (e.g., for mobile backup, to share photos, to access PC files on a smartphone)? Users have different needs, and it is critical to understand them to optimize the personal cloud experience and its marketing. This requires analytics, i.e. reviewing data and stats about every aspect of a service, including the impact of marketing activities on driving user awareness and trial; how many people have downloaded apps from an app store or signed up in other ways; how often people access the service; conversion rates to premium accounts and so forth.
Continuous improvement
Lesson Four is around the need for continuous improvement. For example, if you notice that a lot of people sign up for a service, but only use it once or twice, that should tell you something. Maybe people are only using it to back up particular bits of data, and are content to do only that. Or maybe they signed up to see how it worked, but did not have a good initial experience, or lost interest. On the other hand, you might detect that people reached the free storage limit on their account and then stopped using it. Or maybe there are trends with respect to geographic adoption, or use with a particular type or brand of device. Part and parcel of enabling a personal cloud service to reach its potential is to identify barriers to adoption and ongoing use, and take proactive steps to address them. For example, if you notice that people are only syncing certain types of data, you could automatically send them an email with a video that shows how to take advantage of other service capabilities.
Lesson Five is that ease-of-use is paramount. It is critical for user adoption, because every barrier reduces the number of users. A good example is signup. Every effort should be made to minimize the effort to create an account and get an initial positive experience (i.e., instant gratification). Otherwise, people will struggle and give up. This requires a continuous process of analysis and action, as well as an attitude that the service must be as easy to use as possible.
Finally, Lesson Six is that viral marketing can make or break a personal cloud service. Viral adoption can propel certain cloud services to be tried and used by many millions of users in a short time, with virtually no spending on user acquisition. The key is to emphasize how the service allows sharing of media and files, which exposes others to the service and encourages trial and ongoing use. Relatedly, the service can offer incentives, such as additional storage or increased premium subscriptions, to encourage users to share their content with family and friends, which has the effect of exposing the service to more people.
In summary, the opportunity for personal cloud services is enormous. To make a new personal cloud service succeed and realize its potential, marketers need to pay close attention to both the strategic and tactical aspects of launching and operating the service. By applying the lessons learned to a new personal cloud, it is possible to create a highly popular and lucrative service.
Hal Steger is VP of worldwide marketing at Funambol
