Business Insight Zone

I felt a great disturbance in the Interwebs, as though a million early-adopting geeks all cried out at once.

In the less-than-48 hours since Steve Jobs unveiled Apple‘s new iPod Touch and the latest iterations of the iPod and iPhone, the blogosphere has been awash with enraged commentary from early-adopting iPhone buyers. And who can blame them, since Apple just dropped the price of the iPhone from $599 to $399?

Jobs was quick to issue an open letter to address these concerns. After explaining, more or less, that them’s the breaks for early adopters, he wrote:

. . . even though we are making the right decision to lower the price of iPhone, and even though the technology road is bumpy, we need to do a better job taking care of our early iPhone customers as we aggressively go after new ones with a lower price. Our early customers trusted us, and we must live up to that trust with our actions in moments like these.

Therefore, we have decided to offer every iPhone customer who purchased an iPhone from either Apple or AT&T, and who is not receiving a rebate or any other consideration, a $100 store credit towards the purchase of any product at an Apple Retail Store or the Apple Online Store.

Reactions have been mixed, and tea-leaf-reading has been rife. Terrence Russell of Wired (via happy-early-adopter Scoble) explains “Four Mistakes Apple Made With The IPhone Price Drop,” including “Showing Obvious Contempt for AT&T.”

Meanwhile, Dan Frommer of Silicon Alley Insider reads Apple’s hasty reaction as an indicator that “iPhone sales are missing Apple’s internal targets.” And Om Malik thinks that the quick rebate offer is a reflection of the power of social media today.

In his weekly column, Robert Cringely offers an unusual take on the pricing move from Jobs — one informed by Cringely’s decades reporting on the computing industry:

This week’s iPhone pricing story . . . is classic Steve Jobs. It wasn’t an accident. It wasn’t a thoughtless mistake. It was a calculated and tightly scripted exercise in marketing and ego gratification. In the mind of Steve Jobs the entire incident had no downside, none at all, which is yet another reason why he is not like you or me. . . .

So Steve slapped his customers around a bit and what happened? Apple got free publicity worth tens of millions and the iPhone, which was already the top-selling smartphone in the world, will now sell two million units by the end of the year, up from an estimated one million. And Steve, having deliberately alienated his best customers, now gets a chance to woo them back. He has finally placed millions of people in the role of every key Apple employee — being alternately seduced and tormented. . . .

So Steve does things like this because he can. It reaffirms his iron grip over both Apple and Apple’s customers. It’s a lot about ego and a little about business, though with Steve Jobs they are hard to differentiate.

All of which confirms one more way that Steve Jobs is not like the average person: for better and for worse, he’s much more interesting. Expect the soap opera to continue, at least for the small fraction of the world that really, really cares what Apple does.

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An absurd footnote: this brouhaha has even led to a Google Adwords skirmish between Nokia and Apple, as pointed out by John Murrell of Good Morning Silicon Valley.