Symantec announced today that they have acquired Swapdrive for $123
million. Swapdrive is the white-label online backup company that has
been providing the free 2GB offer that is included with every copy of
Norton 360. Frankly, I was surprised that the price wasn't higher given
how hot this market is. However, that's the danger of being a
white-label provider to someone like Symantec. It's like the little
lawnmower company that sells 80% of it's output to Sears. One day they
come along and make you "an offer you can't refuse," so to speak.
From what we hear, the take rate on the Norton 360 backup option has
been pretty good. The bundle definitely makes sense: you can protect
your PC with antivirus, anti-spyware, and so forth, but the most
important thing is to protect your data. And only online backup
provides that protection. No anti-anything can keep your hard drive
from crashing or keep a burglar from stealing your computer.
One by one our competitors have been snapped up by big old companies.
LiveVault, EVault, Connected, and most of the old-line enterprise
online backup companies have been bought. Mozy was recently bought by
EMC for $76M. And now SwapDrive for a reported $123M.
Our ambitions go far beyond the white-label strategy of Swapdrive. In
the consumer space, Carbonite now has 11% brand recognition. Swapdrive
is probably 0. Norton was one of the early providers of anti-virus
software and built a brand that, for a while, was almost synonymous
with anti-virus in the consumer and business markets. We’re trying to
do the same thing with backup – that’s why you hear our endorsement ads
on radio shows with hosts like Howard Stern, Rush Limbaugh, and others.
In fact, I often tell our employees that we’re going to be to online
backup what Norton is to anti-virus. While we have lots of co-marketing
and reselling deals, it should be clear to everyone that one of our
goals is to be the trusted brand name in online backup.
The online backup space is hot. Everyone is suddenly interested in
getting into the game. We just cut a deal with a leading PC
manufacturer (announcement shortly) that is starting to ship their PCs
with a free subscription to Carbonite pre-loaded. In a few years,
online backup will be part of the pre-install on every PC. Why? Because
when your hard drive crashes and you lose all your family pictures, you
don’t blame Seagate or Western Digital – you blame your PC
manufacturer. It’s a big brand liability issue for the PC
manufacturers. Carbonite can make that problem go away for a PC
manufacturer. Similarly, bundling online backup with anti-virus makes
sense and we’re pursuing partnership deals.
When you look out 5 years, I think almost everyone will be backing up
their PC using services like Carbonite. Broadband is getting cheaper
and faster, and disk storage costs are dropping like a rock. The
alternatives don’t look very attractive: a) don’t backup and risk
losing everything, b) buy an external hard drive. External hard drives
are not ideal for backups because they usually sit right next to your
computer, so if someone breaks in and steals your computer, or if it is
damaged by fire, flood, or virus attack, both the computer and the hard
drive will go bye-bye. Plus they are prone to failure (roughly 3% per
year die) – a RAID6 array that stores your data at Carbonite is 36
million times more reliable than an external hard drive.
We think Carbonite is a much better product than Swapdrive (we are
of coursed biased in that regard) — it’s much simpler to use, and much
We just want to keep building the best online backup company in the world and hopefully take it public in a couple of years.