Web storage sites loom as next big thing

When Apple shipped its iMac without a floppy drive, some consumers cried foul, but one entrepreneur saw opportunity.

Paul Festa Staff Writer, CNET News.com
Paul Festa
covers browser development and Web standards.
Paul Festa
4 min read
When Apple shipped its iMac without a floppy drive, some consumers cried foul, but one entrepreneur saw opportunity for a file storage business on the Web.

That Web site, iMacFloppy.com, launched in October and sold as the two-employee, platform-independent NetFloppy.com in May to Xoom.com for $1.65 million.

"I saw a huge need because of the lack of a floppy," said company founder Frank Borges LLosa. "Steve Jobs decided to make a computer without the floppy drive with the thought that the floppy was obsolete. But he stopped one stop short by not explaining how we do without it."

NetFloppy.com is just one small player in an emerging niche of Web-based file storage companies betting that users will want to do with their files what they are already doing by the tens of millions with their email, calendar, and other traditionally desktop-based applications: put them on the Web where they can be accessed from any networked computer.

The migration of applications from the desktop to the Web has been one of the past year's defining trends.

"The idea that we're going to go into the 21st century hauling our most valuable documents and information around in plastic boxes is crazy," said Spencer Reiss, analyst with the GilderGroup. "The proper place for important data is in a mountain somewhere with guys in white coats taking care of it."

The new crowd of document storage Web sites may not be storing documents in subterranean mountain laboratories; but Reiss and others argue that files are safer with a reputable Web site than on a laptop computer prone to theft or damage.

For potential Web-based file storage users concerned about privacy, Reiss speculates that some providers may wind up offering value-added services such as encryption.

Across the board, the file storage sites are mimicking the free email sites in their revenue models: attract a large population of users with a useful free service and then sell advertising, sponsorships, and value-added services like security or extra space. Most providers offer between 15MB and 20MB of storage free.

While document storage on the Web has yet to earn the popularity of other Web-based applications, backers point to the success of email and calendaring as evidence that the trend will flourish.

One file storage Web site hopes to follow in Web email's footsteps through the phenomenon of viral marketing, in which one user passively evangelizes the product and brings in other subscribers just by using it. My Docs Online points to its file-sharing feature as the key to its future growth.

"On average, a self-registered user of My Docs gives out four files, and three of those people are registering with the service," said company spokesperson Carol Smykowski. The site has more than 40,000 users in more than 40 countries since launching in March, Smykowski said.

My Docs also has a patented technology that lets a subscriber track how many times a file is transferred and whether it is deleted, though it does not identify to whom it is sent.

Another firm offering file storage is Visto, which also offers email, calendars, and other utilities.

Both Visto and My Docs are pursuing partnerships with other firms on the Web. Visto's service is available through Compaq.com, Network Associates' McAfee.com site, and Microsoft's Office Update Web site.

Microsoft's relationship with firms offering document storage and other applications on the Web is tricky. On the one hand, Microsoft partners with Visto to provide tools for storing Office documents on the Web. On the other hand, a wholesale defection from desktop applications to Web sites could threaten the growth of Microsoft's desktop software sales and even the importance of its operating system.

Microsoft executives were not immediately available to discuss the company's strategy for Web-based applications in general or file storage solutions in particular. But the company has argued that Web-based applications and traditional desktop applications go hand in hand. Meanwhile, the company has been buying up Web firms including Hotmail and Jump Networks, which offers a calendar and other applications.

Prior to its acquisition of Jump Networks, Microsoft chief executive Bill Gates said the company planned to expand Hotmail to include a number of so-called productivity tools, including storage of text files. Gates said Microsoft's entry into this area would be "aggressive." Hotmail today said there was nothing new to report regarding file storage.

Visto would not say whether its discussions with Microsoft had touched on the topic of acquisition. My Docs said it was not currently in discussions with Microsoft for any kind of partnership, but that it planned to integrate its product more closely with Office 2000 soon.

In a related matter, Visto this week announced its second round of funding. The firm raised $24 million "to continue expansion and branding." Investors include lead investor GE Investments, prior investor CMG @Ventures, and Attractor. Visto has raised $38.1 million since starting up in 1996.

Other Web sites offering free file storage include FreeDrive and Freediskspace.com, which offers 50MB of storage.