We know our users love us, but will they vote for us? That is the question.

We get plenty of fan mail from users whose data we saved — we restore over 10 million files every month. That's a lot of saved bacon. But do they love us enough to give us their vote?

Every year, CNET runs the prestigious Webware 100 contest — really an industry popularity contest where users get to vote for their favorite applications. Over 5,000 companies got nominated by readers of CNET's Webware site. In the end there were only 300 finalists. And after 630,000 votes, only 100 winners. Carbonite was one of them. So thanks to all of you CNET readers out there who voted for Carbonite. You didn't let us down, and we will never let you down!

— Dave
CEO, Carbonite

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that the backup doesn't drag your computer to its knees, there is no warning to tell you that your backup failed or is out of date, there is no way to easily restore all your files, no help with migrating from XP to Vista, and on and on.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

Here's some moderately big news in the online backup industry: HP has decided to discontinue their HP Upline service. HP got into this business by buying a company called Opelin. They spent about a year fixing the product up before launching it as HP Upline. I tried the service when it first came out and found it to be a little complicated for the average consumer. Only a few days later, they experienced an embarrassing outage where the whole service went down for several days. This was followed by a string of other software failures.

I'm not sure what HP was thinking when they decided to get into this business in the first place. They aren't in the antivirus business. They're not in the operating system or firewall business. What made them think that they could build and operate a world-class online backup service?

Everyone thinks that building an online backup service is easy. When I was raising money for Carbonite, one venture capitalist waved me off saying, "Any engineering team could design a product like that in a couple of weeks." When I was teaching at MIT seven or eight years ago, one of my students was fuming about Google's success, saying "Anyone can write a search engine. What's the big deal with these guys?" Maybe so, but writing a search engine that can process tens of thousands of searches per second against a database that is bigger than all the world's libraries combined is not so easy.

Same thing holds for online backup. We have 60 man years of development in the platform that stores your data. Data comes pouring into our data centers at a rate of about 100 million files every day, or 70,000 files every minute around the clock. The software and architecture that allows all that data to get onto our redundant storage arrays without losing even one byte is incredibly complicated. So while it's easy to back up one PC with one external hard drive, backing up many hundreds of thousands of PCs that are all simultaneously sending you data from every corner of the earth, is quite another matter.

I can understand why HP would want to put online backup on their PCs – when an HP PC fails and you lose all your wedding pictures, you are probably going to be mad at HP, not at the people who make the hard drive inside the PC. But I don't understand why HP wanted to own a service like this in the first place. They get their antivirus and other services from 3rd party vendors, and they should have done the same with online backup. I guess they learned it isn't as easy as it looks.

— Dave
CEO, Carbonite

Following up on my comments on Microsoft OneCare, I'd be interested to have you put on your wizard hats and tell me how the world is going to view companies like Carbonite five years hence. One scenario is that backup will be considered as part of the data security industry, and will be merged into anti-virus, firewall, anti-spyware, and the like. Another view is that backup will be one of a number of data storage-related products, such as archiving, local backup, bare metal restore, smart document storage, and so forth. A third scenario is that backup is just such a big opportunity in itself (after all, there are 700 million Internet-connected PCs out there) that you can build a very large company doing nothing but online backup.

The first scenario suggests that backup companies will eventually be gobbled up by the anti-virus companies, just as Symantec acquired Swapdrive (now part of the Norton 360 suite). The second scenario is that backup is about storage, and the EMC acquisition of Mozy would argue that direction. They are already making noises about bundling backup with other storage products, such as Iomega. The third is that none of these guys will have the focus to do a really exceptional job at online backup, and well-funded pure-play companies like Carbonite will build brand and distribution and a new category will emerge dominated by pure-play vendors.

Anyone care to comment?

— 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

Carbonite recently announced the completion of our Series C financing and a major deal with Lenovo. These two announcements generated some great press. But, there are two articles in particular that I wanted to share with you.

In an article that appeared in Mass High Tech, Christopher Calnan reported:

“

Online backup provider Carbonite Inc. recently closed its second bundling deal with a major personal computer manufacturer and followed that up last week by closing a Series C round of financing.

Boston-based Carbonite closed an agreement to provide free four-month online backup service subscriptions for the Ideapad line of desktop and laptop computers made by Hong Kong-based Lenovo Group Ltd., CEO David Friend said.

In June, Carbonite reached a similar agreement with Netherlands-based Packard Bell BV for the PC maker to bundle subscriptions for purchasers of Packard Bell desktop and notepad computers in Europe. Lenovo officials declined to confirm the deal with Carbonite.

Although Friend would not disclose the specifics of the Series C financing, he expects it to be enough to fuel Carbonite before it completes an initial public offering.

"That's the next step," Friend said. "The projections show that it will be the last cash we'll need. (Carbonite is) the type of company that should go public."

Shortly after, Xconomy reporter, Wade Roush published an article entitled "Carbonite Puts Its Online Backup Software on Lenovo Computers, Raises $20 Million" in which he notes:

“

Last Wednesday, the Mozy division of Hopkinton, MA-based EMC (NYSE: EMC) announced that its software will power an online backup service available to buyers of Thinkpad SL notebook computers, the newest line of business laptops from Lenovo. Not to be outdone, Boston-based Carbonite is expected to announce soon that it has formed an even broader partnership with the Chinese computer maker: All Lenovo IdeaPad and IdeaCentre computers—the company’s lines of home and home-office laptops and desktops, respectively—will now come with Carbonite's online backup software pre-installed.

At the same time, Carbonite is about to announce formally that it has closed a $20 million financing round, the third since the company's founding in 2005. (It raised $2.5 million in Series A funding in February, 2006, and completed a $15 million Series B round in May, 2007.)

Both of these articles attest to the fact that online backup is becoming mainstream. At some point in the future, we hope online backup is as common, and as top-of-mind, as anti-virus software is today.

— Alison

— 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

I wanted to bring to your attention another very nice review of Carbonite. This one, by Mike, at Simply Offsite is thoughtful and balanced, IMHO. In the comments on his blog, I did try to explain why it's very hard for Carbonite to have an "estimated time to completion" indication for the initial backup like some other backup services do. The reason, in short, is that Carbonite allocates bandwidth dynamically so that it never interferes with your browsing. If you're using the Internet for other things, Carbonite will automatically slow down to get out of the way. So we can't tell you how long your backup is going to take because it depends on whether you'll be using your computer in the meantime. Other backup services transfer data at a steady pace. So while that makes the backup time predictable, it also means that your computer is going to feel really sluggish while the backup is going on – not a good thing.

— Dave
CEO, Carbonite

I just had to comment on a video that I saw on CNN.com (The transcript can be found on the Data Doctors website). The answer given by "the Data Doctor" is a little strange – the guy loves online backup but he doesn't like unlimited backup plans like Carbonite. He seems to think that they are hobbled in some way. This doesn't make an ounce of sense and it would have been good for the "doctors" to check their facts before making such pronouncements. The assertion that vendors with unlimited backup somehow throttle or limit backup speed or capacity in some way is just plain wrong. I know it's not the case with Carbonite, and I suspect that our competitors, like Mozy, similarly do not encumber their unlimited offers. It's amazing how these rumors and "common wisdoms" spread on the Internet and how infrequently experts actually bother to check the facts.

I love these guys for promoting online backup, but I wish they would have reported unlimited backup for the incredible deal that it actually is. I wish they would have said, "With disk storage costs dropping like a stone, vendors like Carbonite are able to offer truly unlimited capacity for a fixed price. Yeah, they probably lose money on a small percentage of their users, but by making it unlimited they keep the user from having to make a lot of compromises and choices."

— Dave
CEO, Carbonite