Continuing the tradition of selling bad Web businesses for less than they were bought for (in the vein of Cnet selling Webshots for $45 million three years after paying $70 million for it), AOL is trying to unload online storage service Xdrive. Three years after buying Xdrive for a rumored $30 million (never officially disclosed), the price it is now trying to fetch is $5 million, and going south, says a source. Maybe AOL should put it on eBay.
It is a sad ending for Xdrive, which now will be best known for giving birth to MySpace (both Tom Anderson and Chris DeWolfe worked there). In an e-mail to staff explaining why AOL is powering down Xdrive and other businesses, EVP Kevin Conroy explained (bold added for emphasis}:
The changes described below are in no way a reflection of the hard work and creativity of the people who built and maintain them.
- Personal Media: Bluestring, Xdrive and AOL Pictures will be sunset. These consumer storage products haven’t gained sufficient traction in the marketplace or the monetization levels necessary to offset the high cost of their operation. We have found that building media management applications within the context of a social experience is a more rapid and effective way to grow the business. For example, today the Bebo audience is uploading over three million photos per day. To effectively grow the XDrive online storage business we would need to focus on subscription revenues vs. monetizing through advertising revenue, and this business model is not in strategic alignment with our company’s goals. We are exploring plans to migrate our users assets to ensure the best possible transition experience.
Subscription businesses are so AOL, circa 1999.
What happens to the paid subscribers?
I wonder if some of the other online storage startups would gobble this up.
Sometimes these companies don’t think before they buy something. They are scared for the competition to snatch it first so they take the plunge. Now they want to get out. Hilarious. A company that is hot today based on buzz and stuff, doesn’t mean it’s a valuable investment. Sometimes it’s good to sit back and watch.
Well, I wish them good luck on their sales.
Mardix
http://www.givemebeats.com
Tina Turner where are you now. You can add powerset and digg to the bunch.
WeHaveEnoughtoWorkWith.com
RealityLocator
As I matter of fact I might want to buy Xdrive. Who has Kevin Conroy’s contact info?
great! i”ll buy it~
$5 million?
rofl
http://trends.google.com/websi.....amp;sort=0
umm. this pretty much leaves SkyDrive without any real competition but box.net and diino. the guys at box.net must be very happy with the fallout of all the competition in the storage space:
streamload/mediamax/thelinkup = dead
xdrive = dead
divshare = dead
This leaves the space up for grabs to box.net considering the other dozen hosting solutions cannot be counted as a competition to box.net even if they were counted together if one can believe google trends, alexa, compete, etc on the numbers.
While box.net should do better now i doubt they will try to compete with skydrive and raise the bar to 5 gigs unless they get more funding. the risk is too high for sudden moves.
http://elephantdrive.com
I’m amazed that AOL is selling off a business that they could probably use internally to host their own files.
Course there is a tradition of yearly layoffs at AOL, however they usually occur at Christmas time. Gotta get that year end bonus. The company is driven by VPs who can’t grow a business so they just shed off assets to make them look better.
I’m not sure if I can name a business that AOL bought and hasn’t f’ed up.
Expect those layoffs sooner that x-mas time! Much sooner. So sad.
Erick said:
>> Subscription businesses are so AOL, circa 1999.
So, Erick, what do you have to say about World of Warcraft, LinkedIn, SmugMug and so many other subscription based operators out there? They may be AOL’ish and 1999′ish… they’re making money like mad and aren’t lashed to an ad market susceptible to rupturing without notice.
Let’s follow this through… could turn into a more interesting conversation than the above re. XDrive.
@ Gerald
Linkedin = free fyi (at least for the majority of users)
Well yes, this is true. But subscription businesses still work, particularly for the online storage industry. (Look at Mozy, for example.) I think it could have worked for AOL if they’d had the right team in charge of what XDrive could have been.
What caused XDrive’s downfall was that it sucked. Hard.
I don’t think a small player can compete in the online backup/storage industry. It requires the resources of a large company to do effectively, and that’s what Mozy (child company of EMC) has.
30 million to 5 million, thats bad business
I think google should buy this and add this to their gmail as a folder for files. Google is already giving about 7 GB. Why not give 2 GB for drive storage.
Xdrive gave birth to MySpace!? It’s anyone’s guess who the Father was!?
Holy toledo!
I think there’s mozy out there, which so far I’ve heard has been successful.
AOL seems only interested in pandering to advertisers and sticking it to users. I was subscribing to AOL because I had web forms there that I was too lazy to convert to php, but you can’t even give AOL money, and one day the forms just stopped working. What kind of business model is that where you refuse money from users while nitwits at the top run around like chickens without heads?
They act like it didn’t with their business plan, when in fact Xdrive was simply VERY unreliable and slow.
AOL to me is a company like Ford. They need to not release anything new that has any association with the brand. It’s the same as any car Ford releases. Obviously it looks horrible, but the fact that it has that damn logo, means i wont even consider it. Thats what yoiu’ve done to yourself AOL. At least it took Ford 100 fuckin years to do that to themselves. XDrive was trash anyways, never deserved 30 million, but it could have potentially held it’s value had they paid attention to it.
Eh, we’re selling http://www.Video.org for far less than that.
It’s a shame that AOL & CNET are having to have these firesales.
$5M for XDrive? Sigh..
Anyone wanting YDrive for north of $30M (for which price, no web software, no windows software, no mac software, no hardware, no service obligations, ie., super clean), send me email — said just to help put the potentials into perspective, despite this sunset by one player in the market.
Another way put, recall GDrive, which will eventually come.
And there are other drives (eg., IDrive? don’t know..) making good moneys (presumably).. The industry need to be more healthy than that ($5M).
Sincere regards,
ac at ydrive.com
(and of cos, I don’t really expect i’ll receive any inquiry; it’s more like a comment rhetorically put..)
I say XDrive will probably sell for 5 Million. If I had the capital, I would buy it and turn it around.
Say, why doesn’t Chris DeWolfe buy it back?
He’s the one who may have irreparably hurt it by spamming 8 million the customers.
http://en.wikinews.org/wiki/Bl.....g_websites
I think they can afford it.
http://www.techcrunch.com/2007.....the-money/
Executives never feel responsible though do they?
Ebay? That might hurt their eBay reputation. Try Craigslist. I second the dislike of subscription online businesses.
We’d pay $3 million for them. Complete UI redesign, different distribution model…
They also announced that they’d be holding postings on a number of blogs that were mostly unnamed.
I realize I’m posting this on a “competing” blog but, does this mean Engadget is going on hiatus too?
“Subscription businesses are so AOL, circa 1999.”
So today’s businesses are offering services for free and eventually failing within a year because of flawed business models? I think I’d rather be back in 1999.
I remember EMC buying Mozy. They may take these xdrive customers and combine with mozy.
Quick: Someone notify Brad Greenspan! Tell him another failing web biz is up for sale. I’m sure he can forgo paying his employees on time (again) for a chance to get his hands on yet another “bargain”.
5 mil? Ok, let me just pull out my checkbook…
Learn the strategies of the big 4 internet monsters… http://www.gothamtechminute.blogspot.com
Did anyone still use Xdrive?
i’d never heard of it… Box.net FTW
I spoke with AOL Xdrive people about their API to their storage service at TC 2007… they seemed very confident and smug about their work as if Amazon S3 simply didn’t exist. They could not articulate why Xdrive was/is better than S3. I thought they just seemed out of place pitching startups as their backend. However, TC being capitalist, they turn down no green.
I’ll take it. Will they take a check???
Bias alert: I’m invested in a small, online backup and storage company.
One thing that makes these storage businesses difficult to run profitably is modeling your operational costs well. When doing research for our company, we found that many of the other competitors (many now defunct) accurately captured their headcount, storage, and bandwidth costs. What they missed was accurately modeling the data repair necessary due to any hardware or administrator failures. At scale, this cost is easily on-par with bandwidth and storage and can easily ruin a business model if your technology can’t efficiently address the data repair issue.
I believe (though have not confirmed) that the more successful companies (like Mozy) did model this cost and design their solution to deal with it.
Fascinating…
I would like to acquire X:Drive as a back-up for my brain. It’s overtaxed running all of the systems on the planet.
Do they take Federation credits?
Key quote:
“We have found that building media management applications within the context of a social experience is a more rapid and effective way to grow the business.”
Well…duh! Anyone can provide a storage area in the cloud, the key to making the money is allowing them to interact and collaborate in real time with their friends (the social experience part) while doing it and giving them the tools to control precisely how they are sharing their content. We still don’t have an offering that is doing this efficiently from both sides of the problem (the business side needs to be efficient and scale and the consumer side needs to provide the collaboration that keeps them coming back and the stickiness that brings more fish)…maybe some day…
whoa…thats strange! I really liked XDrive and thought they were doing well…
AOL runs another great acquisition into the ground. Pathetic. Is anyone held accountable over there? Or do Execs just draw up lists of hard-working people to lay off to keep paying the tab for their screw ups?
XDrive as a business looks solid. The price is ridiculously low because AOL doesn’t want to be a storage company. Once the bids start rolling in that “advertised price” is likely to grow. Xdrive started as a high priced per MB storage offering back in the good ole days when online storage was exotic and new, but S3 has ripped the heart out of the high priced sector. The per GB price is now around 15 cents per GB wholesale and 20 cents per GB retail. My guess is XDrive had costs that were baked in at a per MB pricing level and when they switched to per GB pricing the numbers came our pretty ugly for long enough for some bean counter to hit the off switch.