Online Storage vs. Online Backup - The Business Side of It

by User Not Found | Aug 11, 2008

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.

CEO, Carbonite