Safe House

Online data storage ain't free anymore, but your company still needs it.

Free? You want free online storage? Of course you do. We've all been taught to regard free Internet this and that as our right. (The only cure for that line of thinking seems to be to start your own Web business.)

But, like so many other dotcoms, online storage providers are learning they can't rely on Web ads or relationship-marketing newsletters to cover their costs. When Net advertising waned earlier this year, online storage companies' free users suddenly turned from assets into overhead. In dotcom parlance, they couldn't be "monetized.", which once provided 100MB of free storage, has quit providing. Ditto for, whose 7.6 million customers could once get up to 300MB free. High-profile Driveway, once a partner to MSN, has discontinued its end-user storage services. The best it hopes to do now is sell its storage platform to other Web sites.

The air hasn't gone out of the market, though: Survivors are scrambling to find new revenue models. Likely, they'll stumble on a combination of end-user subscriptions and software sales. New market entrant Everything Backup never even considered offering its services for free, says president and CEO David Roekle; and Xdrive and My Docs Online now charge for storage they previously gave away. Only FreeDrive still offers free storage (cut back from 50MB to 20MB), and it's making every effort to sell subscriptions.

The problem is that even though users are quick to sign up for anything that's free, that doesn't mean they'll use it regularly-much less respond to marketing e-mails or ads. So who are the most active online storage users and the most willing to pay for subscription-based service upgrades? Businesspeople. That's why so many sites are recasting their services with higher security, wireless data access and other extras that appeal to entrepreneurs.

Why bother with online data storage? Two words should suffice: rolling blackouts. Today California, tomorrow all the rest of the power grid. Why not just back up at your worksite? Sure, but where do you store the tapes and disks? Close to the PC or server being backed up? Lightning, flood, earthquake, tornado, fire and burglary all threaten them.

Security experts have always insisted you should back up data off-site. And once a file is online, it's easier for you to access from home or the road, share it with remote co-workers or use it to populate your company's Web site. A few providers even let you use mobile phones to access data or forward it to PCs and fax machines.

The provider you choose should have backup power, mainframe-quality environmental controls, rigorous security and, of course, a system of backups for your backups.

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This article was originally published in the August 2001 print edition of Entrepreneur with the headline: Safe House.

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