Apple offers MobileMe users a second extension

The move may cost the company around $50M

For the second time in two months, Apple Inc. yesterday extended MobileMe subscriptions to calm users angry over the online service's rocky start.

In an e-mail Apple sent to MobileMe subscribers late Monday, the company said it would add an extra 60 days to their service plans. A month ago, Apple added 30 days for earlier snafus.

"We have already made many improvements to MobileMe, but we still have many more to make," the e-mail read. "To recognize our users' patience, we are giving every MobileMe subscriber as of today a free 60-day extension. This is in addition to the one-month extension most subscribers have already received."

Apple did not acknowledge any specific problem with the sync and storage service in its e-mail or the support document it posted Monday, but MobileMe has been plagued by troubles since it launched last month.

The transition from MobileMe's predecessor, .Mac, dragged on for a full day rather than the hours expected. A few days later, customers complained about slower-than-expected synchronization -- which Apple answered with the first service extension -- and then on July 18, an Apple server went dark, taking down the e-mail accounts of about 1% of MobileMe's subscribers for 11 days.

Last week, MobileMe's e-mail again went out, preventing users from accessing their accounts for about seven hours.

Even before that, MobileMe's problems prompted CEO Steve Jobs to issue an internal memo that admitted the service's poor performance. Interestingly, the memo -- which was leaked to the media -- used almost identical language in places as the support document Apple published Monday.

The launch "was not our finest hour," Jobs said in the memo, adding that the service "was simply not up to Apple's standards." As part of his response, Jobs reassigned executives, giving responsibility for MobileMe to Eddy Cue, who also heads the iTunes music store.

"The transition from .Mac to MobileMe was rockier than we had hoped," read Apple's support document. "While we are making a lot of improvements, the MobileMe service is still not up to our standards."

The e-mail pitched in to parrot Jobs' "finest hour" phrasing. "We know that MobileMe's launch has not been our finest hour, and we truly appreciate your patience as we turn this around."

The few users who posted comments to the MobileMe support forum applauded the newest extension. "Having been constructively critical of the problems, I should say this a welcome extension and acknowledgement of some of the problems," said Martin Cloake.

Another user, identified as "Tucker77," echoed Cloake. "Only fair really for the complete mess this whole thing has been. Well done to them for doing it, though."

It's uncertain how the extensions will affect Apple financially, if at all. Apple rarely discusses subscriber numbers -- the last time it did publicly was early 2006, when Jobs claimed .Mac had a million paying customers -- but analysts' estimates have usually been around the 2 million mark.

At $99 a head annually, MobileMe would bring Apple approximately $198 million if the service has two million subscribers. A quarter of that -- the extensions would delay renewals by a quarter of a year -- would be just under $50 million in lost revenues.

Apple can afford such back-of-the-envelope reverses, said Ezra Gottheil, an analyst at Technology Business Research Inc. "This company doesn't have profit problems," he noted. "Clearly they weren't ready to launch MobileMe, but the bigger question is, will they adapt?

Gottheil wondered if the company's engineering is up to the task of creating and running a sophisticated online service. "I think they weren't prepared, but do they have a moment where they go, 'Wait a minute'? MobileMe is a pretty substantial thing, because it's going to synchronize millions of users across a number of devices."

He guessed, however, that Apple will sort it out, if only because it must. "They know how important the online world is, so they'll push," he said.

Michael Gartenberg, formerly an analyst at JupiterResearch, now a vice president of mobile strategy at JupiterMedia, said that the takeaway from MobileMe's stumbles is a lesson in customer satisfaction.

"Apple continues to take the high ground," said Gartenberg. "They're not offering excuses; they've acknowledged that things were not going how they wanted, and they're doing the right thing by their customers."

Every technology company, Gartenberg continued, has gaffes and snafus. "But it's how they deal with the problems that's important," he said. "That's why Apple's customer satisfaction is so high."

Earlier today, the University of Michigan's American Customer Satisfaction Index (ACSI) survey noted that Apple topped all rivals in the personal computer category with a score of 80 out of a possible 100, beating second-best Dell by 10 points.

Copyright © 2008 IDG Communications, Inc.

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