Why I think future Online Data Storage companies will Pay You to Upload Data

I have a theory, and I want to get public opinion.

While at a major Storage Vendor for three years, part of my charter was to be on point to watch the Online Data Storage market. I carefully watched many of the players emerge, indexed and listed many of the vendors, and at one point made some personal predictions of the future of online data storage.
Anil Gupta and I are having a friendly debate about the future of Online Data Storage. In my last post on the topic, I suggest that Online Data Storage Companies will eventually go through the following changes.

My Predictions of the Online Data Storage Industry

1) Online Data Storage is cheap
Today, users pay a nominal amount for Online Data Storage, it’s pretty inexpensive.

2) A price war will lower costs even further

In the near future, a price war will erupt between the large Online Data Storage companies, perhaps between companies like Amazon S3, Anticipated Google storage service, Seagate’s eVault, OmniDrive, Box and others. Considering there are hundreds of players in this already crowded market, finding a competitive edge will be a challenge. likely coupling the service with other offerings will make it enticing.

3) Commoditization will go upstream

Online Data Storage will be similar to ‘free checking’, some web companies will offer online data storage as an additional ‘value add’ service. This model will start at the consumer level, move into small business, then elements will climb into larger business segments. It’s unlikely in my mind this will happen for all storage, some data is way too valuable to be released, profiled or shared.

4) Online Data Storage companies will pay users to upload data
One smart company will figure it all out. They will realize that the user data that is in their systems accounts for a tremendous amount of user intelligence for analysis. They will analyze the metadata, create new, (perhaps use microformats) and build rich user profiles.

5) Marketers will take this data and serve highly contextual advertising

This is a Marketers gold mine, this information yielded by the correct company can provide highly accurate and predictive models for advertising. As a result, the competitive edge will be to pay users to upload data in return for contextualized marketing. Since the Storage Cloud will have elements of social sharing, this model can start to get very powerful as it expands to individuals of similar interests, it will be easy to identify others.

Business Model Summary:
The amount Marketers will pay for rich contextual information will be less than the cost to maintain the Online Data Storage infrastructure.

Weigh in, what’s your opinion?
This is all speculative of course, but I’m just putting together my Web, Marketing and 3 years at a Data Storage company and here’s what I envision happening. In addition to the Online Data Storage vendors above, I’d love to hear the opinions from the Storage Community such as Toigo, Anil, The Monkeys, Storagezilla, thought leader Michael Arrington and Security Expert Martin McKeay.

Update:
Jan 2007: Google/YouTube will start paying those who upload data.

  • http://allforyou.wordpress.com Brian Keith

    Thoughts:
    1. There already is free email, in some cases along with contextual advertising.

    2. Some SEO companies will offer free data space to improve our efforts. The more data we have direct access to, the better our optimization algorithms. Assuming privacy was done right, I could see us leasing information from a data storage company simply so we could index it and look at word usage. We are a small company, and that would be worth a lot to us. What about a global firm like aQuantive?

    3. We have an arrangement like you talk about in #5 already with one client. She writes content for a site we built, and we keep most of the ad revenue. When the traffic gets large enough, it’s conceivable we could not charge her anything for storing/maintaining the site itself.

    I see two barriers to adoption: a company with the deep pockets and the guts to try offering free storage, and a client willing to believe in the too-good-to be true deal.

  • http://andirog.blogspot.com Anil Gupta

    Online storage is not cheap and you know that better having worked for storage vendor like HDS.

    Contextual ads can only be delivered on data that is amenable to analysis for context. Even Google hasn’t figured out a way to do contextual ads for data that is

    1. not text or
    2. not in common readable formats or
    3. not generated by their apps or
    4. doesn’t have metadata like tags, description.

    Look at their challenges in delivering contextual ads for images and video.

    Add encryption on data before uploading, like JungleDisk, and it is garbled 0′s and 1′s and useless for context analysis by best of SEO algorithms.

    Remember the subtle difference between “information” and “data.” Information is “data with context” and any data without context or a way to interpret the context is just 0′s and 1′s.

  • http://www.nik.com.au Nik Cubrilovic

    Jeremiah,

    Interesting thoughts around indexing data for advertising purposes, we tried a few things around this but we don’t feel that users are ready for it yet.

    Also, I think the category needs to be broken down – rather than just the generic ‘online storage’. I think we will see this happen steadily over the next year or longer. I wrote about this on my blog.

    At Omnidrive, we consider ourselves a storage aggregator. The difference is that most of the products you list are ‘yet another’ place to store files, whereas with Omnidrive you are aggregating and consolidating all your different storage points, and at the same time making this data available to be shared and published. This solves the real-world problem of users and organizations having many sources of data, between different desktops, servers and now web applications.

  • http://www.web-strategist.com/blog/ jeremiah_owyang

    Nic

    Thanks for the explanation, I now see your company in a different light.

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  • http://www.webbythoughts.com Mike

    The encryption issue would be tough for online data storage to deal with. You obviously cannot contextually monetize that. But, I wonder how many people will care to bother encrypting their data. There aren’t that many people that understand the difference between SSL transmission type encryption and PGP file type encryption. Most average users are not going to bother with PGP file type encryption since that is another step for them to bother with. If online data storage companies want to monetize the data, they should target normal everyday nontech people. People that just want a place to store their grocery lists and novels in progress.

  • http://www.zoliblog.com Zoli Erdos

    Nik’s point about users (not) being ready is key.

    I wrote about a seemingly different, yet related issue: The “Hidden” Business Model in SaaS: Benchmarking. Jeremiah talks about storage while I talk about applications, he talks about advertising while I talk about benchmarking, but in the end it’s really the same:  hosted user data being  processed to deliever business services. 

    Clearly, this has been an implicit, huge business potential that many in the business see yet don’t talk about it, and it’s all about user readiness.  In the early years of SaaS when the key issue is still fear, lack of trust ..etc, talking about “mining your data” could have killed the entire value proposition.  I think Saas now has a strong enough foothold for the industry to face this issue now.

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  • http://bencraigo.wordpress.com Ben Craigo

    Nik and Anil bring up great points.

    The challenges…

    - “Online data storage” is too broad a brush.
    - Microformats appears to only work in somewhat structured content by piggybacking on standards like HTML. What about all the other data that exist in disparate, and some proprietary, formats?
    - Data quality for analysis will be a big issue. Different standards and needs for keeping quality data (which is subjective). Different ways of “tagging”, or associating, meaning with data.
    - Data quantity for analysis will be a big issue. There’s no guarantee you’ll get enough of a cross section of a specific type of information in a specific format by a specific demographic.
    - No guarantee the data will be readable or analyzable.
    - Gaining the trust of the owner of the data.

    However, you’ve got an exciting line of thought in this post. I can imagine there are definite opportunities once you focus on a specific type of user, specific type of data and in a specific format.

    For business data, I can imagine analysis tools that look for specific data for specific applications, analyze how that’s being used, and recommend specific products/services for a problem the user might not know about.

    For individuals, analyzing the patterns of when files for specific applications are updated can provide a window into a type of click stream analysis. That can be used to pattern folks into existing or new demographic profiles – which in turn can be marketed to.

    Interesting opportunities and challenges.

  • http://storagezilla.vox.com Storagezilla

    I’m not ignoring this, it’s just that a lot of what I’d have to say has been said. When I have an original thought I’ll post it. ;)

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  • Atad Egarots

    ODS is one element of protecting data. Other components such as archiving, discovery, recovery COMBINED with ODS could provide companies with a broader value proposition that would negate Jeremiah’s theory about ODS being ‘free checking’. Thoughts?

  • http://www.web-strategist.com/blog/ jeremiah_owyang

    Atad

    It’s already assumed that Backup and Recovery, Archiving and all other fail safes are included in such an offering.

    In fact, most of the ODS companies offer this as a default service.

    IMPORTANT NOTE: This post is reflective of consumer and personal level data primarily, secondly followed by Small biz then up the stream.
    I highly doubt this model would apply to enterprise data.

    I’m not trying to diminish the data storage industry nor it’s excellent professionals. I am trying to demonstrate a new business model that could work.

    All: Please read my post carefully without the defensive hackles up

  • http://www.web-strategist.com/blog/ jeremiah_owyang

    Google (which now owns youtube) has announced it will start paying members for uploading data to their video platforms.

    Google will benefit from contextual advertising and traffic to their properties.

    http://blog.outer-court.com/archive/2007-01-29-n11.html

  • Lisa Demoney

    In the end, a company’s decision to move to ODS will hinge on three things – cost, reliability and security. For SMBs this option will be attractive. For fortune 100s, the risk is much greater. It will be interesting to see how this unfolds.

  • Lisa Demoney

    …make that four things. performance will be part of the equation. It’s hard to imagine enterprises using ODS for intelligent storage, but perhaps for a data warrehouse tier.

    But this will be very appealing at the consumer level. I agree with Jeremiah on the “free checking” concept as it applies to the consumer.

  • http://www.web-strategist.com/blog/ jeremiah_owyang

    Lisa, we agree. In my post, number three states:

    “This model will start at the consumer level, move into small business, then elements will climb into larger business segments. It’s unlikely in my mind this will happen for all storage, some data is way too valuable to be released, profiled or shared”

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  • Phil

    How would you mitagate the bandwidth contraints? Forget just for a moment how much the provider has to pay for it. As a potential consumer, do I really want to keep my cable modem maxed out busy for 18 straight days uploading 50GB of data (at 256kbps)?

    What does the model look like when you are mainly storing videos, pictures and mp3s? Big storage space and relatively little usable data. Compare this to free email, that is text or HTML-based.

  • http://www.web-strategist.com/blog/ jeremiah_owyang

    Phil

    Great question, there are two answers

    1) Which was answered by Jeremy Zawodny (Yahoo’s top blogger) suggests that the upload process happens quietly and slowly in the background, perhaps a auto-synch type feature

    http://jeremy.zawodny.com/blog/archives/005820.html

    2) My theory is that a lot of video that you may want to have online may already be shared by someone else’s, and an “intelligent” cloud will be able to identify duplicate content, and not replicate, but rather share (providing permissions and rights are checked) thus negating the need to upload music that others already own.

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