It looks like yet another "storage in the cloud" service is shuttering — Yahoo Briefcase will be closed down at the end of March, including their paid service, according to an email from Yahoo. This announcement follows close on the heels of AOL's shutdown of xDrive.

Other similar services, even some that have gotten great reviews, appear to be on life support. My take: there is no business model here. While these services are cool, few people find them compelling enough to pay for them. And the advertising thing hasn't worked either: there was some thought that they could scan your backed up files and try to figure out what advertising to target you with. Not a very attractive idea to most folks.

So why are hundreds of thousands of people willing to pay for Carbonite? Simple — we solve a real problem. The cost and pain of having your hard drive crash and losing all your financial records, business documents, wedding photos, and so forth, is so high that people will gladly shell out $50 a year to have the problem go away. Storage in the cloud, like Yahoo Briefcase, is not really a backup system. Yes, if you're willing to work at it, you can store files on Yahoo Briefcase. But they are not encrypted, updates are not automatic, it doesn't just work continuously in the background, there is limited capacity so you're always running out of space, there is no client software to check the integrity of the backup, no visual representation of what is backed up, no way to manage your bandwidth so that the backup doesn't drag your computer to its knees, there is no warning to tell you that your backup failed or is out of date, there is no way to easily restore all your files, no help with migrating from XP to Vista, and on and on. Storage in the cloud is, to some extent, a solution looking for a problem. Look for other similar services to pack it in over the next year.

— Dave
CEO, Carbonite

Microsoft announced yesterday that they were "throwing in the towel" on their Live OneCare service which included a backup service. According to the web site, "data are continuously protected—automatically backed up on-schedule to a single location I specify."

This announcement comes on the heels of AOL shuttering its xDrive backup service and several smaller competitors biting the dust. Meanwhile Carbonite continues to grow at double-digit month-over-month rates. And we think at least one of our "pure play" competitors is also enjoying substantial growth. So what's going on here?

I think it's a matter of focus. Some vendors seem to think that backing up your PC isn't enough. You ought to throw in anti-virus, firewall, syncing PCs and mobile devices, sharing photos with friends and family, and many other "features." Most of these products seem to be dead or on life support.

Everyone knows they should be backing up their PCs. It's a big and immediate problem. Most of these other features are things that the user already has or are simply a "nice to have" for some subset of users (often younger users who tend to not want to pay for such things). When you have all these other features to sell, it dilutes the important message that you need to be backing up your computer. And because most of them have so many features to support, they don't do a particularly good job at any of them. We're content just to do a spectacularly good job at backup (if I do say so myself). In five years, I believe half the world's PCs will be backing up online. If we want to continue to be number one in this market, we really have to focus and do a better job than anyone else.

I think Microsoft has found that their expertise at writing software does not automatically translate into an ability to run a rock-solid backup service. When we were out raising our first rounds of venture capital a couple of years ago, I was told repeatedly by investors that Microsoft was going to enter this market and crush us. What has been demonstrated time and again is that if you focus on doing one job exceptionally well and if you're motivated to the point where you’re life depends on it, no big corporation can keep you down.

— Dave
CEO, Carbonite

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 company's goals.

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?

— Dave
CEO, Carbonite