February 2, 2011
WHAAAAT? Unlimited storage for $4.99 a month not a viable business model?
In the wake of the news that Mozy is scrapping their ‘Unlimited’ data plans , I figured it would be apropos to write a post on: a) the reasoning behind why we at SpiderOak do not offer unlimited data plans; and b) why we believed early on that it was only a matter of time until our competitors changed their thinking on the unlimited storage plan concept.
As most people can probably understand, running an online storage service (whether backup, sync, sharing, etc…) differs quite a bit from products like share ware or anti virus in that a storage service has a a concrete incremental cost.
To use an example, if an anti virus company attracts a new customer, the incremental cost of servicing this customer is practically zero (or barely visible).
However, when an online storage service wins a new user, the space to service that user has to be present and that cost is definable and necessary to support the user. Of course the law of averages does play a part in the storage business but a given amount of space has to exist before this new user comes onboard.
The cost per user does differ depending on storage architecture, location of data centers, etc… but there is always a cost and this cost increases linearly with the amount of storage used and how active that user will be over time.
At SpiderOak our philosophy is to offer a user secure, friendly, fast, and reliable backup service at a competitive price. In doing so we offer a free full featured service with 2 GBs of free storage (up to 7 with our Refer-A-Friend Program) for anyone who wants to try our service or maybe just doesn’t have that much to backup.
In the case of Mozy, Carbonite, or any other of the ‘unlimited’ backup providers, I think time has shown that the basic premise has changed and will continue to change over time. Users’ storage needs will only continue to grow and we – as service providers – can no longer blindly think of this as a race to the most users by completely ignoring both costs and market trends.
What does this mean for the online storage industry?
Well, I personally believe that within 6 months to a year there will not be any unlimited storage providers left on the market; and should a few remain, very heavy restrictions on file size, file type and amount of devices allowed per account will be imposed (such as is already the case with many of the online backup providers).
In short: There is no such thing as a free lunch. If it looks too good to be true then it almost always is and In the end, we all have to pay the piper.
TLDR: Unlimited backup for a fixed price probably won’t be around for too much longer.