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

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.

— Dave
CEO, Carbonite

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 less expensive.

We just want to keep building the best online backup company in the world and hopefully take it public in a couple of years.

— Dave
CEO, Carbonite

Carbonite has received some excellent news coverage over the past week. I'm not going to post all the links, but there are two articles that I wanted to share with those of you who are interested.

First off, today, on the front page of the Business section of the Boston Globe, was an article about Online Backup. In the article, "Backups are a Breeze Online", Hiawatha Bray discusses the benefits of Carbonite and Mozy. More importantly, he sings the praises of Carbonite:

“

Given their nearly identical features, either Mozy or Carbonite will get the job done.

But Mozy is beset with a relatively geeky user interface and a tendency to throw up unexpected and confusing on-screen messages. Company officials admitted that they need to make their software more user-friendly. On that score, Carbonite is just about flawless. Just install it, launch it, and forget about it.

Earlier in the week (Monday, April 28th), Fort Myers News-Press tech columnist Al Winchell wrote about Carbonite, saying:

“

Carbonite not the least of which is I can personally attest to the fact that when I was ready to download my XP data from Carbonite to my new Vista hard drive, it performs flawlessly. I simply moved the Carbonite utility to my new Vista hard drive, selected the data I wanted to download (had I wanted to, I could have downloaded all 85 gigabytes of data) from Carbonite's Backup Drive presentation on my computer's list of drives, right-clicked on the data and selected 'Restore To.' That's all there was to it.

We are always happy to see the Carbonite message getting out there, because so few people realize that online backup is an easy and secure solution to preventing data loss. I'll be sure to keep you posted with more coverage.

Until then,

— Alison