

Carbonite vs. Dropbox - The Economics of Carbonite (or Lack Thereof) - asanwal
http://wikibon.org/wiki/v/The_Economics_of_Carbonite,_or_lack_thereof

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ChuckMcM
The interesting point about this analysis is that the 'freemium' model, where
you give away the service for 'free' and them upgrade folks to 'pay' has a
lower customer acquisition cost than the "advertise and convert" model.

This has been a very successful strategy in the apps market for mobile devices
as well.

I did not see where the cost of hosting the free users was being factored into
the acquisiton costs. Presumably a large number of people are 'free' users and
there is certainly an operating cost associated with that, and over time that
cost accrues against your acquisition costs.

If the addressable market for 'free' use was 100x the size of the market for
'paid' use then you would be holding 100GB of data for every GB of data that
you were being paid to hold. If you can net revenue for that paid GB to cover
that cost then you're good to go, but if not you push back on the free size.

Google offered everyone a GB of free email space when they started gmail but
they understood that most people would not use a full GB. So in the 'hosted'
storage space if you are going with a freemium model you've got a spectrum
between '0' where your free customers aren't actually using your system and
'max' where your free customers are all pushing right to the limit.

The other challenge with the 'freemium' model is that bandwidth costs do go up
as you use more. So having a 1GB pipe to the internet might cost you $3K/month
whereas having a 10GB pipe to the internet would cost you 20 - 25K$ /month.
Generally those are 'burstable' prices where you pay for a minumum bandwidth
usaga and you pay extra when you exceed your minimum (think minutes on your
cell phone).

Having and fully filling at 10GbE pipe to the internet can easily cost
$50K/month. Lots of 'little' customers can do that without providing any
return. So its harder to price out the 'free' customers into the total cost.

Bottom line its a great way to analyze your web service to get a feel for
whether or not you are really making money or you only think you are making
money.

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ianlevesque
Unfortunately this article gets the details of S3 storage costs for Dropbox
wrong. You only pay once to get (what Amazon says is) 3x copies of your data
on the backend.

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henryw
The article estimates that 8% of dropbox users must convert to paid to cover
the cost of the free users. I think this is an overestimate since I read
somewhere that dropbox do not use disk space for duplicate files. Therefore
the overall cost to store files are lower.

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bdonlan
Indeed, the S3 prices cited include triple redundancy already.

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RyanKearney
Another thing to consider is that Carbonite throttles the hell out of your
connection so that you're only able to upload at the following speeds:

* The first 35GB of data can achieve upload speeds of up to 2 mbps (megabits per second).

* Between 35GB - 200GB of data can have the upload speeds reach up to 512 kbps (kilobits per second).

* 200GB or more of data can be uploaded at up to 100 kbps (kilobits per second).

So if you use Carbonite to backup over 200GB of data, and let's say your
computer is on for 6 hours a day, you can only backup 270MB a day which is
useless (or 1.08GB if you run your computer 24 hours a day). I did the math
and it would take 1 year 7 months for me to backup the 800GB of data I wanted
to with Carbonite.

It's also not fair to compare Carbonite to Dropbox. Comparing Carbonite to
Mozy would be a more leveled playing field.

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lt
Do you know if Backblaze has similar limitations? I cancelled Mozy due to
their pricing changes and I'm looking for a replacement.

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budmang
Backblaze has no limitations on the amount of data you can backup or the speed
at which you can backup. You can read a bit more about this on our blog:
[http://blog.backblaze.com/2011/02/03/backblaze-is-
committed-...](http://blog.backblaze.com/2011/02/03/backblaze-is-committed-to-
unlimited-backup/)

Gleb Budman CEO, Backblaze

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lt
You just got a new customer.

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budmang
Welcome on board!

