The news that AOL is trying to sell off XDrive in a fire sale (asking
price: $5M vs. estimated $30M they paid) says a lot about the
difficulty of mixing business models. When we were out raising our
first round of venture capital two years ago, I can't tell you how many
times I heard 'I think Google or AOL is just going to end up giving
this away.' Well, they are in fact just about giving it away — but it's
the company, not the product!
In my opinion, there were business problems AND product problems. AOL's EVP Kevin Conroy explained in an email to employees:
To effectively grow the XDrive online storage business we would need to
focus on subscription revenues vs. monetizing through advertising
revenue, and this business model is not in strategic alignment with our
AOL is having plenty of problems with their core media business, let
alone trying to build a subscription revenue business on the side.
Mixing two totally different business models in one organization is
never a wise idea, which is why it's not likely that Google or Yahoo
will go down this path. An encrypted backup can't be indexed, so it's
of little value to a company whose primary business is search and
advertising. Backup is a background application and shouldn't be in the
user's face all the time, therefore, I'm not sure how you would get any
advertising revenue off of it.
The second problem was the product. There was a time when XDrive was
basically backup. Then they added file sharing, storage in the cloud,
photo sharing, and a zillion other features, probably thinking that if
they had more features it would sell better. Wrong. Every feature added
complexity. The success of Carbonite is based on our motto: "Backup.
Simple." What XDrive delivered was "Backup (and a whole bunch of other
things) complicated." When are engineers going to recognize why
products like the iPod are so successful? What's wrong with a device
that just plays your songs? Or compare the web pages for google.com and
aol.com; is there not an inverse relationship between the amount of
stuff on the page to the amount of money in the bank?