I was reading a blog the other day from noted Silicon Valley blogger Om Malik,
and I wanted to share my thoughts on it: I think Om is absolutely right
about the "online storage" market – most of the attempts to support
such services with advertising have failed miserably and it's amazing
to me to that people keep trying. Only Google, Yahoo, or other portals
have much chance of being successful with a free ad-supported
collaboration service. Few people are willing to pay for these services
given the wide range of free options already available.
It seems to me that online storage is a solution looking for a problem.
What exactly is the problem? Data protection? Photo Sharing? Remote
access? Publishing and file sharing? Syncing multiple devices? The more
features you throw into these products, the worse they seem to sell.
Most of the products that purport to "do everything" lack focus, are
hard to market, and have not been notable financial successes. Before I
started Carbonite, I was looking to buy an online backup service for my
daughter who had already had two hard drive crashes. I remember looking
at xDrive and saying to myself "This product does so many things, I
can't figure out what it's for." The marketing message was hopeless!
Pure, simple, set-and-forget online backup is thriving, thankfully.
Hundreds of thousands of people now pay $50 per year to back up their
PCs with Carbonite. We've enjoyed 26 consecutive months of double-digit
month-over-month revenue growth. And investors and corporations are
paying good money for companies in this space – Mozy sold out to EMC
for $63M and Swapdrive sold out to Symantec for $123M, to name a
couple. Online backup (as opposed to storage) is a great subscription
business. You pay your money and your worries go away. Simple.
Amazon is the only online storage company that has really found a
market, and that market, as Om points out, is all the little companies
that are trying to put lipstick on the service and sell it to the next
guy. And Amazon charges real money for their service.
And while I agree that there is no clear leader in this collaboration
space (my bet would be for Google, long term), there are clear leaders
in Online Backup: NPD Group, the company that surveys consumers to rank
various consumer products, recently started covering the online backup
market and ranks Carbonite as #1 in the market. I think that when the
dust settles in four or five years, almost every PC is going to ship
with online backup built-in (every Packard Bell in Europe ships with
Carbonite pre-loaded with similar deals in the US close behind), you'll
be able to buy online backup (and maybe online storage) from your ISP,
and online backup may be bundled with other data protection services,
such as anti-virus. There will be two or three leading players in the
space with tens of millions of subscribers each, and a bunch of little
guys occupying various niches.