We also operate some online storage service, which it's not good for me to disclose the name... We had a profit model a year ago, but now with more companies entering this market, the business model seems not working anymore. Suddenly some companies are offering free services, which attracted a lot of users, e.g. Box.net, but there is no way to recover the cost for me (and for them?). It looks like we are back to the dotcom era, where companies losing more money are considered better and more successful? But how long can these companies last?

DriveHQ does have very competitive products. But can you guys make money on this business? Thanks.

Yes, business is always tough. The advantage of DriveHQ is we have the best products and technologies (which is because we have the best people in this industry). This differentiates us from the low-end free service providers. Ultimately, businesses need to generate positive cash flow; and good customers don't mind to pay for good services.

When a company starts to offer free service, usually it is because it cannot compete in the real market place. They thought by offering free services, it will help them gain competitive advantages. This is very risky and more likely will fail. The reasons? the company will lose revenue stream, and it has to scale down spending. However, the cost will sky-rocketing due to the increased free users. Eventually, the service quality will degrade, and company simply cannot afford to lose money forever.

So DriveHQ's business model is simple. We have always been a technology and service oriented company. We spend little money on marketing. You cannot easily find us on search engine or anywhere. We leverage on our good products and technologies, we rely on our existing user base, we rely on our partners. We are still little known, but we have become one of the largest online storage service providers. The largest digital media software company, Sonic Solutions/  Roxio (NASDAQ: SNIC), is our co-branded partner. We have signed up more and more partners. At the core of our business, we want to create value to consumers and businesses; and we are very willing to work with partners.

If business is tough? yes, sure it is; more than 90% of companies in this sector will be out of business in a couple years. We are confident that we will be the last few companies to survive. If you don't have competitive advantages, then exit this market now might be a wise choice for you. If you have access to big user base or big marketing channel, then work with us, leveraging on what we have. You can make a lot more profit! contact me at bizdev@drivehq.com.

It is interesting a lot of people have asked similar questions. Google would be a formidable competitor should it enter this business very seriously. However, like any other public company, Google has to generate profit. Google is already a $5- billion-revenue company. Online storage business is too small to be significant to Google. Google has a lot of other bigger businesses to do. Google hasn't been successful in Google Finance, Google Talk and Google Spreadsheet, etc. Those are much more important than GDrive.

Secondly, there is no innovation in GDrive. Google is playing technology catch-up in the online storage business. Google has not released anything yet; but companies like us have been in this business for a long time. Virtual Drive, drag-n-drop, local caching, big storage, sharing, everything is already available on DriveHQ, and we also offer free services.

Google will for sure use online advertisement to offset its storage cost. To end users, unfortunately it means a lower quality service with privacy concerns. Also, Google won't offer a good backup tool like DriveHQ WWWBackup, as it won't generate advertisement revenue. For users with very important and / or sensitive data, DriveHQ will always be the best choice.

This being said, Google will put a lot of pressure to those lower-end service providers like Box.net and Streamload. Unfortunately, they will have a very hard time to differentiate themselves from GDrive.