Cloud services�storage of customer information, data, documents, and media such as movies, music, and games on servers maintained by companies rather than on personal memory devices like hard drives�are hot business in 2011. At least, that appears to be the case.
Amazon (NASDAQ:AMZN) launched its Cloud Drive music service and Cloud Player playlist manager back in March. Dell�(NASDAQ:DELL) and Hewlett-Packard (NASDAQ:HPQ) are banking on cloud storage�and computing services�to compensate for falling consumer PC sales. Microsoft (NASDAQ:MSFT) is trying to transition its $20 billion Office software business into its cloud counterpart, Office 365. And Apple (NASDAQ:AAPL) will usher in the age of iCloud with its launch of the iPhone 5 this fall. Gartner expects cloud services to generate close to $149 billion in revenue by 2014. Big business indeed.
There’s a curious angle to all this, though: Many consumers don’t know what “cloud computing” is or why they should spend money on it.
A new report from research firm NPD Group, reprinted�by Apple Insider, showed that almost 80% of consumers are unfamiliar with the term cloud computing. That’s a discouraging statistic for consumer-centric companies like Microsoft, Amazon, and Apple, which feature the word cloud prominently in the branding of their online services. It would appear, then, that branding is one of the biggest hurdles these companies will have to overcome as they try to get people to embrace their new services.
The reality, however, is that even though close to 80% of consumers don’t understand cloud computing, nearly as many already use cloud services. NPD vice president Stephen Baker explained that consumers can be broken into two groups, “cloud savvy” and “non-savvy,” and that usage of cloud services between the two differs slightly in some cases, more so in others. Of those respondents who know what cloud computing is, between 40% and 50% use it for video and photo sharing, while around 30% of those who don’t understand the term use the services for those same purposes. About 70% of those “non-savvy” consumers use cloud-based email services like Google‘s (NASDAQ:GOOG) Gmail, though, and 40% of them use tax preparation services like Intuit‘s (NASDAQ:INTU) Web-based TurboTax.
It’s those tax preparation services that may hold the key to making new and future cloud services successful. “The consumer’s knowledge and sophistication matter little in terms of how much they use tax prep services,� Baker noted. �Additionally, it is the only type of cloud-based application consumers have shown a willingness to pay for.”
Translation: Apple, Amazon, and the rest need to stop focusing on the word cloud and start convincing consumers that new services like media storage are exceedingly simple to use, and that the convenience they provide is worth paying for.
If any company is capable of nailing that strategy down, it’s Apple. The company has made its current $76 billion fortune by selling products that are, for lack of a better term, idiot proof. It will be up to Apple to make its iCloud services as transparent and convenient as possible to win consumer dollars. Everyone else�from Amazon to Dell�needs to strike the same balance, or they�ll miss out on their piece of the expected $149 billion pie.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello�and�become a fan of InvestorPlace on Facebook.
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