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Apple's Internet strategy takes shape

Jobs looks to Net as next Apple revenue stream, prepares ground for move on info appliance market

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Steve Jobs finally unveiled Apple's long-awaited Internet strategy during his keynote at Macworld Expo today - the only one of the many rumoured keynote topics the Apple CEO actually spoke about. However, the plan doesn't go as far as many observers had expected.

The Mac maker was believed to be planning a branded Internet access service, either by itself or by rebranding an existing ISP's offering. Instead, Apple just signed up US ISP EarthLink as its exclusive access provider and has chosen instead to focus its Net efforts on shifting its own website into portal territory.

EarthLink, fresh from its acquisition of rival ISP Mindspring, does rather nicely out of the arrangement. In addition to a $200m investment from Apple, it gets promoted as the Mac world's chief ISP. In return, Apple gets a seat on the board and a cut of the subscription fee from Mac users who subscribe to EarthLink's service.

Of course, while this is fine for US-based users, it does rather ignore one or two other territories - the rest of the world, in other words - and it will be interesting to see if Apple pursues similar deals with European and Asian ISPs, or the $200m will be used to fund EarthLink's expansion overseas. The trouble with the ISP business is that it's only plumbing. As AOL realised, content, not connectivity, is king, which is why AOL has rather more subscribers than EarthLink.

By working with EarthLink rather than setting up its on Net access service, Apple insulates can focus its energies on providing content and building up the Mac online community, and at the same time insulate it from future turmoil in the ISP business, such as moves toward providing Net access for free. Apple's approach here is to extend its website to provide services for all those consumers keen to get online. Its own market research suggests some 93 per cent of iMac customers bought the machine for Web surfing, so it makes sense to make that as easy as possible.

So, Apple today unveiled a stack of new Web-based services, including free email accounts, an anti-porn protection system, electronic greetings cards, homepage design and hosting facilities, and an interactive Web site reviews area. Most of these are only available to Mac users and require users to sign up as members, allowing Apple to trap demographic data it can later use to target advertising and ecommerce. Which is really what all this is about.

Apple's Internet strategy is partly geared towards making consumers' experience of the Net better on a Mac than any other platform, but it's mainly designed to realise the revenues the Internet can provide in its own right, essentially to provide Apple with other ways of making money than just flogging computers and software. Apple isn't unique in this - it's one of the tricks Linux companies are pursuing to make the money they can never make simply by selling a fundamentally free operating system.

One final point: Apple's Internet plan also shows the hidden hand of Oracle CEO, Apple board member and Steve Jobs' chum, Larry Ellison. One of the redesigned Apple web site's so-called iTools is iDisk, 20MB of free online storage for sharing and transferring files. Essentially, it gives Mac users a virtual removable hard drive.

Not so long ago, Ellison was predicting how we'd soon all be using network computers to access data and applications stored remotely. In fact, he reckoned we wouldn't need any local storage at all, allowing manufacturers to dispense with floppy drives and hard disks. Of course, Ellison's NC concept failed to take off as a product, primarily because the Net isn't yet up to the task. But its legacy lives on, in particular in the iMac, a computer deliberately designed without a floppy drive and with the ability to boot up and grab its OS, apps and data from a remote server. And now we have also have Apple offering up Ellison's idea of remote storage accessible via the Net.

Coincidence? No, we don't think so either. The diskless iMac is some way off, but as Net connection speeds and server technology improve, it's not hard to foresee an iMac-like device running a ROM-based cut-down version of the MacOS providing access to the Net not only for surfing but for multi-gigabyte iDisks. If today's announcement doesn't say Apple has its eye on the information appliance market, nothing does. ®

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