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

According to a recently released survey by Compuware, most data loss is attributable to either user negligence or malice. Only 1% of data loss is due to hackers. I loved the headline on this story: "3/4 idiots, 1/4 bitterness."

I have to confess to being part of the "idiot" crowd. Three weeks ago I left my laptop sitting on my seat when I got off the train in New York. I remembered it just in time to see my train, with laptop still aboard, disappearing down the track. Except for occasionally recovering individual files that I accidentally delete or overwrite, I haven't actually had a PC disaster since starting Carbonite 3 years ago. So, aside from the pain of having to buy a new laptop, it was fun to use my own product to get everything back. I was really proud of how well it worked.

What I don't see in the Compuware survey is data lost to hard drive failure. For some reason this doesn't show up in the survey, even though I will bet you that it tops all the other categories. We use a LOT of hard drives in our data center, and our statistics show that roughly 3% of all hard drives will fail each year. That's why we use RAID arrays which are 36 million times more reliable than a single drive. Google also publishes their disk failure rate, and it's roughly the same as ours. Hard drives are a data disaster waiting to happen, in our experience. That's why you need a LOT of redundancy in your data storage architecture, as we do. We store our customers' encrypted data on 16 drive arrays. We would have to lose 3 of the 16 drives simultaneously AND your PC would have to crash all at the same time before any data is lost. When you figure the odds of this happening, it's very very close to zero.

I hope you never leave your laptop on Amtrak, but if you do, you'll be glad you've got Carbonite.

— Dave
CEO, Carbonite

As most of you already know, Carbonite does a lot of radio advertising. The theory behind our advertising is simple: we know from our surveys that about 98% of our users say that they would "recommend Carbonite to friends and family," so people love the product. It's just a matter of getting people to try it. But most people have never heard of Carbonite. So the challenge for us as a business has been to let people know what we do, and to hear it from someone they trust. Talk shows work well because listeners tend to trust the host — if they didn't they probably wouldn't be listeners. Some ads work better than others, but one thing that always seems to work is when real Carbonite users write in and tell their own personal stories of how Carbonite helped them out.

The attached clip from one of Rush Limbaugh's listeners does a really great job of explaining the value proposition of online backup. Whether the host is Rush Limbaugh, Howard Stern, or Jimmy Kimmel, the stories of real users are the best endorsements that a company could get — more powerful than us saying it, or even the host.

Rush reads letter from listener.mp3 (1.87 mb)

— Dave
CEO, Carbonite

I thought you all might be interested to see where all your files live when you back up with Carbonite. This is one aisle of disk drives from our Boston data center. What you're looking at are arrays of 16 1TB data-center grade drives in a RAID-6 array. 3 of the 16 drives would have to fail simultaneously before we would lose any data. This RAID configuration is 36 million times more reliable than a single disk drive. Generally we don't even wait for a drive to fail — we have software that can tell when a drive is starting to get flakey and an alarm goes off on our operations console. A technician pulls the disk and puts in a new one. Within an hour, the new disk is automatically rebuilt and the full redundancy is restored. Every day we back up almost 60 million new files. We have backed up over 11 billion files since we turned our data center on in May 2006. The data center has over 9 petabytes of storage (a petabyte is a million gigabytes). All of this data flows in and out of our data center on two little fiber optic cables the size of a lamp cord. Truly amazing.

— Dave
CEO, Carbonite

As reported by By Ellen Nakashima, Washington Post Staff Writer, on Friday, August 1, 2008, Federal agents may take a traveler's laptop computer or other electronic device to an off-site location for an unspecified period of time without any suspicion of wrongdoing, as part of border search policies the Department of Homeland Security recently disclosed. An increasing number of international travelers have reported that their laptops, cellphones and other digital devices had been taken -- for months, in at least one case -- and their contents examined.

Personally, I'd be pretty bent out of shape if Homeland Security took my laptop the next time I came through customs. But apparently this is happening with increasing frequency and with no explanation and no requirement that it be returned in any reasonable period of time. Putting civil liberties and privacy issues aside, I've got a lot of valuable stuff on my laptop that I need for my business, not to mention family pictures and all the music I love to listen to while traveling. Plus, I'd have to go out and get a new laptop because I couldn't be sure when I'd be getting the other one back – that would set me back $1500, not including the software that I've purchased.

So a word of caution for anyone traveling outside the US – back up your PC online. If you have Carbonite and you open your laptop in the Hong Kong airport, Carbonite will automatically back up the work you've been doing while you're on the road. At least then you can be back in business quickly if your computer gets taken by our government on your return.

And if you're really worried about the privacy of your files, encrypt them on your laptop (I wonder if they can force you to give them the key?) and when signing up for Carbonite, choose to keep your own encryption key. That way, if they come to us with a court order, all we'll be able to turn over are your encrypted files. With the kind of encryption we use, these would be pretty useless without a huge effort. (But, if you choose to manage your own key, don't lose it, because there's no way to get your files back without it.)

Me personally, I'm going to write to my representatives. I don't like the idea that the government can go on a fishing expedition on a US citizen without probable cause. It's chilling!

— Dave
CEO, Carbonite

— 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

A friend of mine sent me this picture. If only she had had Carbonite!

— Dave
CEO, Carbonite

I got a nice letter from a user who was saved by Carbonite. For those of you who are running your own business, I'd recommend taking a look at her blog: http://www.ecommercediva.com. I was impressed with all the good advice. Here's her letter:

“

As a full-time "multipreneur" with several businesses — most of them virtual — my livelihood is in my computer. Over the years I've had a number of computer meltdowns where my data was lost. I'm a busy woman, never seemed to have the time or discipline to manually backup my data as often as I should have. I learned the hard way several years ago when my computer's hard drive literally melted and I lost almost all of my files and contacts. I vowed "never again!" My data is too important to gamble with.

Desperate for a solution that wouldn't fall victim to my busy schedule or my memory, I turned to Carbonite in January 2007. It was affordable and painless. Set up was so easy a monkey could do it! I just set it and forget it, and it automatically backs up all my important files and program settings, and even my music downloads. In May this year, I had another computer meltdown, and everything on my hard drive got wiped out. This time I was prepared — I simply retreived my data from Carbonite and I was back up and running pretty soon afterwards. What a relief.

Regards,

Jamila

— 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