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Safe House

Online data storage ain't free anymore, but your company still needs it.
Magazine Contributor
5 min read

This story appears in the August 2001 issue of Entrepreneur. Subscribe »

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.

Who's Who of Who's Left

Nothing separates the looky-loos from the serious customers like asking them to pay. Phil Ressler, Xdrive's senior vice president of marketing, expects to lose 90 percent of his 9.5 million customers as a result of his company's new $4.95 monthly minimum. But he figures he needs less than 20,000 users to make it a go, and he's already converted more than 95,000 to paying customers.

To further its professional appeal, Xdrive has upgraded its software platform to provide faster transfer speeds, heightened security, peer-to-peer file sharing and tech support. Through Xdrive, you can send files as e-mail attachments using any Web-enabled device, including mobile phones.

The company has also struck a deal with Microsoft so that its site is one of the options for storing Web pages online offered by the Web Publishing Wizard of Windows XP.

Partnerships like that can help companies attract customers in bulk. That's how My Docs Online of Naples, Florida, gets most of its subscribers. Bell Mobility and Nextel customers use My Docs' service to receive, view and forward files as e-mail attachments using Web-enabled devices.

My Docs never bought into the ad-supported model. Except for a few thousand Beta testers, individual subscriptions start at $34.95 per year for 50MB.

Although FreeDrive still offers a free 20MB "Test Drive," try to find out about it from the company's Web site. Arguably the largest storage provider, with 15.5 million subscribers, FreeDrive would rather you upgrade to at least a $4.95 monthly subscription.

FreeDrive president and COO Dave Falter says about 30 percent of his 2 million business users have followed suit-that's 30 times the rate of consumer upgrades.

FreeDrive subscribers enjoy online chat, private and public file sharing, Web page clipping and access to files from Palm handhelds. Companies can negotiate prices for storage in 1GB increments.

The best prices for large amounts of storage can be found at Everything Backup, which sidestepped the temptation to provide free storage. The still-small company's subscriptions start at $34.95 per month for 1GB of space.

Like most of the other providers, Everything Backup downloads an application to your desktop that you can use to map your drives. Everything Backup's software icon also lets you schedule automated backups of single files, directories or entire drives.

Online storage will never replace your local hard drive, but it's a necessary adjunct. And if you're storing sensitive data online, shouldn't it be in a secure facility whose operator has some chance of being there tomorrow?

Room To Let
Back it up. Download it. They'll take care of the rest.
Everything Backup$34.95 per month for 1GB, $49.95 for 4GB or $89.95 or 10GB; $10 to $15 more for additional 500MB to 1G increments
FreeDriveBeyond the free 20MB test drive, $4.95 per month for 65MB or $9.95 per month for 150MB; companywide storage available in 1GB increments
My Docs Online$9.95 per quarter for 50MB, with steps up to $120 for 1GB; wireless access and faxing cost extra
Xdrive$4.95 per month for 25MB; $2.95 for each additional 25MB block or $69.50 for each 1GB block

Mike Hogan is Entrepreneur's technology editor. Write him at

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