File management firm nixes popular free storage

Driveway, which laid off three-quarters of its work force, axes its popular storage service for individual consumers as it turns its attention toward software.

3 min read
File management company Driveway laid off three-quarters of its work force and axed its popular storage service for individual consumers--the latest company to surrender in the tough business-to-consumer niche.

A representative said the privately held, San Francisco-based company had "repositioned" itself as a technology platform provider and will concentrate on developing its Driveway Storage Platform instead of its free online storage for noncorporate customers.

As part of the restructuring, the company laid off 47 people last week. Roughly 18 people remain, including many of the original engineers and developers who founded Driveway in the mid-1990s. The company granted four weeks of severance pay to all workers.

Gina Rubattino, director of corporate public relations for Driveway, said the company simply could not support its work force in its attempt to be a free storage service. The company was attempting to generate revenue for the free service from advertising fees.

"Everybody in this storage space, if they were giving away the product for free, is either gone or drastically trying to reposition their models because the enormous cost of hosting makes a free model unfeasible," Rubattino said. "The dot-com free membership business just wasn't viable. The board decided that...given costs, free storage wasn't necessary for what our core strength was, which was being a software company."

Wednesday, Driveway sent an e-mail to individuals, notifying them that the company is no longer accepting new customer registrations, file uploads or purchases of additional space. Driveway will discontinue all Driveway.com file sharing and storage services March 5, according to the e-mail. After that point, registered customers will no longer be able to access any files stored at Driveway.com.

"We have appreciated your support and use of Driveway," the e-mail stated. "Also, please note that in accordance with our privacy policy, all user identity information and files stored on the Driveway.com Web site will be deleted once services are discontinued."

The e-mail then recommended that people sign up for storage services with the popular site FreeDrive. With more than 12 million members, FreeDrive is the largest online file storage service. In addition to 50MB of free space, FreeDrive offers chat, CD burning, photo albums, and other services that Driveway.com did not offer to individual customers.

Antivirus software maker McAfee.com is also gunning for market share in the corporate and consumer online data storage sector. The Sunnyvale, Calif.-based company announced in November plans to offer to the corporate market the security software that it has been offering to consumers over the Web.

A story of free storage
Backed by investors such as Generation Partners, Chase Capital Partners, RS Investment Management, Sandler Capital Management and Vantage Point Venture Partners, Driveway launched its site in September 1999. Driveway introduced Private Label Storage (PLS) and free online storage in May.

The popular exchange service quickly amassed 6.4 million members, and by August it was adding 20,000 new customers every day. Partners included MSN and Lycos.

Driveway intended to serve the data storage needs of individuals in a secure, online vault. It billed itself as a solution for frantic workers desperate to send data files via e-mail to others in their team working on office PCs, laptops or home accounts.

But as advertising revenue dried up, Driveway began touting its success as a so-called SSP (storage service provider) to other ASPs (application service providers), Internet service providers and portals that do not count storage management as a core competency. Near or direct competitors include StorageNetworks, DataServ, I-Drive.com, Managed Storage International and Xdrive.

Driveway is among a growing number of companies that are trying to reposition themselves away from the business-to-consumer niche and find fatter revenue streams with corporate clients. From Internet start-ups and technology giants to Old Economy manufacturers, Corporate America is unveiling major strategic reorganizations at an increasingly swift pace.

Xerox is trying to reinvent itself as an e-commerce document-management and business-to-business company. AT&T is refocusing on its broadband and wireless divisions, trying to erase its public perception as an exclusively long-distance voice provider. Japanese camera giant Nikon recently partnered with online photo services company Zing Network to launch and redesign photo Web sites--an effort to turn the Old Economy consumer product company into a digital photo provider.