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that the backup doesn't drag your computer to its knees, there is no warning to tell you that your backup failed or is out of date, there is no way to easily restore all your files, no help with migrating from XP to Vista, and on and on.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

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