Are Unlimited Online Backups for $5/month REAL?
Some of the most noticable players in the personal Online Backup market offer “unlimited” backups for about $5 per month. How can they do that? How can you possibly compete with them and make enough profit? The answer is, “They don’t, and you shouldn’t try.”
The Online Backup Guide for Service Providers is a complete 196-page guide on starting and operating an Online Backup Service – the latest revision of Rob Cosgrove’s industry defining RBS Book originally published in 1987. The entire book is being published here, chapter by chapter.
Doesn’t “unlimited” mean unlimited? Can’t I store as many files as I want, use up as much bandwidth as I like, and eat terabytes of storage space for just $4.95/month?
Well, it turns out that those companies have what’s call a “Fair Use Policy.” It’s a clause in their Terms of Use (or Software License Agreement) which acts like a sort of safety net, allowing the companies to take action to prevent users from sending too much data. Most Fair Use Policies (also called Acceptable Use Policies) allow companies to take action against individual customers who use more storage space or bandwidth than “average” users.
None of the many Terms of Use that I have read actually spelled out just how far you would have to go to have your hand spanked. One would think the web would be full of customer complaints. Interestingly, though, I found very few complaints from customers who had run afoul of Fair Use Policies.
I DID find complaints about upload speeds, though, and a few bloggers who claimed that the more data they uploaded, the slower the speed. So, I conclude that the companies are enforcing their Fair Use Policies by individually throttling bandwidth. That’s what I’d do. It makes fewer waves than slapping hands. But I also found rebuttals by Online Backup companies denying throttling bandwidth. I guess I’d do that, too, or have my PR people do it.
Topping my “Bending Unlimited” chart today are ElephantDrive and Carbonite. ElephantDrive won’t let you back up a file over 1GB (Home Edition) and 2GB (Home Plus Edition) even though they advertise an unqualified “Unlimited Storage.” Carbonite, whose Dave Friend is the undisputed and freakishly likable king of “unlimited,” won’t back up external hard drives. Among many other limits it spells out, their loquacious Terms and Conditions of Use (Oct 15 2009 revision) says they “backup only certain types of files.” Dave is my hero.
In February of 2011 one of the largest online backup services dropped their “unlimited” plan altogether. I wrote about it here.
I think “Unlimited” was an unfortunate choice of word by some marketing geek who isn’t bothered by partial disclosure. It’s one of those “absolute” words that shouldn’t be followed by the phrase, “oh, except for…”
To be fair, customers should want their Online Backup Provider to stay in business, so they shouldn’t complain about the Fair Use Policy. Such policies are necessary, in my humble opinion, to prevent one user, or a raft of malicious users, from ruining it for the rest of us.
The dubious use of the word “unlimited” aside, Online Backup companies need a way to protect the vast majority of their users from the possibility of abuse by a few.
Fair Use is just fair; and “unlimited,” it turns out, is not.
Of course the average end-user is going to read “Unlimited Backups for $5/Month” and simply believe it, not checking further to see if there’s a Fair Use Policy. So, it’s up to YOU to compete with these guys on something more than price.
These $5 services spend the equivalent of the first year’s gross price for their service ($60 or so) in advertising to acquire each customer (according to David Friend, CEO of Carbonite). Customers stay with them an average of 4.5 years (also according to Dave), so each customer is worth about $3.89/month in gross profit. But, Carbonite has $67M in venture capital to spend on advertizing and petabytes of storage, and you don’t.
In case you haven’t guessed by now, I recommend that you NOT offer an “unlimited” service unless you have several million dollars in reserve to buy more storage arrays on very short notice.
Remember at the top of this article I said, “They don’t, and you shouldn’t try?” I’ve just explained how they don’t. Now I’ll explain why you shouldn’t try.
If you offer Online Backup services regionally (within your own city or area) you have some things those $5/month companies can’t offer – personal service, quick tech support, a friendly voice on the telephone, a quick visit to install the software, and especially if disaster strikes, personal service to restore data fast.
Big national companies will never be able to offer that level of service, and you can charge more for it – much more. Some of my service providers charge as much as four and five times that of the $5/month services for exactly the same service simply because they are local; and this is for personal Online Backup accounts, not business accounts. You should charge much more for business accounts.
After a few years of watching these $5/month companies, and seeing how customers react with them, and after reading all the blogs and tweets, I can tell you this with certainty: Unless you tell them otherwise, end users think all Online Backup is the same. You can get their business if you can convince them yours is better, even if it is more expensive. You can get a substantial amount of Online Backup business by simply being the first to offer it in a community.
Rob Cosgrove, CEO Remote Backup Systems
Rob Cosgrove is the President of Remote Backup Systems, founder of the Online Backup Industry, and a vocal advocate for maintaining the highest standards in Online Backup software. His latest book, the Online Backup Guide for Service Providers: How to Start and Operate an Online Backup Service, is available online now, on Amazon.com, and at bookstores.
Remote Backup Systems provides brandable, scalable software and solutions to MSPs and VARs enabling them to offer Online Backup Services.
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