Online storage is back. Last September, EMC bought online storage startup Mozy for $76 million. Last week, Symantec signed a deal brewing since February to buy SwapDrive. A source close to the company says that Symantec paid $123 million.

According to my source, the company made $13 million in profits last year, on revenues of $22 million. That’s up from $5 million in revenues the year before, and the company is projecting $40 million in revenues this year. Those numbers put the acquisition at roughly 10X profits and 5.6X revenues (most likely those are operating profits, but my source couldn’t say for sure).

Neither Symantec nor SwapDrive issued a press release, but if you go to SwapDrive or Backup.com (the other site it operates) they are both identified as now being operated by Symantec. And Symantec’s PR firm confirms that the acquisition took place and offers the following statement from the company:

Symantec has signed a definitive agreement to purchase SwapDrive, a privately-held online storage company to strengthen the services offerings in the Norton consumer portfolio and to help consumers manage data across their devices. This is a small, targeted acquisition and is a very natural move for us because of our close two-year OEM relationship and existing product partnership on Norton 360. The transaction is expected to close by the end of the June 2008 quarter.

Backup.com alone claims to have 2 million users. In an era where you can get 5 GB of storage for free (from Microsoft’s SkyDrive or AOL’s XDrive, for instance), both SwapDrive and Backup manage to charge $50 a year for 2GB of storage ($100 a year for 5GB). Yeah, I was scratching my head too.

It turns out the real growth-driver for the business is as a white-label online backup and storage service. The company, which was founded in 1998 and is based in Washington, D.C., powers the online backup services sold by more than 60 partners, including Iomega, Dell, Intuit, Best Buy, and Symantec. All told, the company is adding 13,000 new customers a day, and has 50 employees. The company raised $2.65 million in a series A round in 2001 from Core Capital Partners and some angels. It raised another round later from Contour Ventures and ASAP Ventures. We are still trying to find out the total amount raised, but it is fair to assume that the investors made a very decent return.

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I just posted on the Swaptree private beta and upcoming launch. You can actually join right now, and there are no limits on signups. Just go to swaptree.com/techcrunch.htm and follow the instructions. Let me know what you think.

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I was sure trading site Swaptree had been abandoned. After a flurry of press about them over a year ago, they went very quiet. Potential investors told me they’d just stopped returning calls completely. My own emails went unanswered as well. They had the smell of death about them.

But it wasn’t so. It turns out Swaptree had merely gone quiet and was focused on building out the product. They are now in private beta and say they will launch to the public in just a few days, on July 4.

Like Peerflix and LaLa, Swaptree is focused on letting users trade certain stuff with other users. Users can trade CDs, DVDs, video games and books.

To use it, you build two lists. The first is a list of items you are willing to trade. You can simply type in the UPC code or ISBN of the item - Swaptree will then add a picture and other important information. The second list is made up of things you want. This list can be created by clicking on items on the Swaptree site, or even easier ways like importing your Amazon wish list or using a plugin to click on items on Amazon directly and have them included on your Swaptree “wish list”.

Swaptree will then look at your demand list and supply list and try to set up trades for you. To make things simple, Swaptree assumes you’re willing to give up any item on your trade list for any item you want. They will then set up a trade, using as many as four users to make it happen. That way, the person with the item you want doesn’t need to want something you have.

The only way the model will work is if Swaptree gets a lot of users who each add a lot of items they want, and are willing to trade. To help things, Swaptree doesn’t charge anything for trades - you only have to pay the outbound postage on the item you are sending. The company will make money from advertising on the site.

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A couple of weeks ago I wrote a somewhat negative post about an unlaunched startup in Boston called Swaptree. Ouriel wrote a follow up post comparing Swaptree (unfavorably) to a French service called SplitGames.

Since that time I’ve had a chance to talk at length with Swaptree founder and CEO Greg Boesel about some of the perceived shortcomings of the service that I pointed out. That conversation, and an eye-popping demo he walked me through, made it clear that I had made some incorrect assumptions about the service.

Swaptree will allow users to swap media items (books, CDs, DVDs and video games) with other users without the use of cash. Swaptree will not charge a transaction fee, relying instead on contextual advertising revenue that will be placed on the site. For a new user, the idea is that you type in a few items that you own and are willing to trade (using the UPC or ISBN code) and you’ll see thousands or tens of thousands of items that people are willing to trade for your stuff.

My assumption was that Swaptree was going to have a difficult time creating a demand curve. Getting a new user to type in a couple of things they are willing to trade is easy. Getting them to type in things that they want and associate them with things that they already have to trade would be much more difficult. At the end of the post, I suggested that actual money served as a very nice stored value currency, and that’s why eBay has been so successful.

It turns out that Swaptree actually has a fairly interesting and much simpler way to build the demand curve of items. In addition to maintaining a list of items that a user wants to trade, they simply build a long list of items they want to own as well. This list can be created by clicking on items on the Swaptree site, or even easier ways like importing your Amazon wish list or using a plugin to click on items on Amazon directly and have them included on your Swaptree “wish list”. When I saw the demo, I was convinced that large numbers of users could be enticed to do this. If there is a match, any match at all between an item that you have and an item that you want, Swaptree suggests that a trade occur to both parties. If both accept, the trade is confirmed.

There are a number of really nice touches as well. Swaptree will analyze have and want lists and try to organize trades among as many as four users, so the possible number of trades increases exponentially. They also allow you to print out an address form and postage directly from your printer. They actually lose money on postage sales after credit card charges, but they felt is was important service to offer. They also have envelopes available and will send you new ones automatically as you use up the old ones. The list continues - basically Swaptree has done a very good job of thinking through the details and making swaps occur as easily as possible (Frankly I wish eBay offered these kinds of services as well).

Sometimes, I love being wrong.

The service is still some time away from launching a private beta, which I will eagerly participate in. Sign up on the Swaptree home page.

Screen Shots:

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The model behind new startup Swaptree, which will launch later this summer, is to allow people to trade media - books, music, dvds and videogames - directly with other users. As Rafe Needleman notes, here are other services out there that offer this - lala.com for music and peerflix for dvds. But those sites are specific to music (Lala) or DVDs (peerflix), and both charge users a small fee per transaction.

Swaptree will be different. First of all, any media can be swapped for any other kind of media. So I can trade the book I just finished for a DVD, or whatever. And Swaptree isn’t charging transaction fees. The site will support itself from page views. Users are responsible for their own shipping charges, however.

Swaptree is making it as easy as possible to conduct trades. To trade an item, all you have to do is enter the UPC or ISBN code on the back of the media and Swaptree fills in the details. And once you find someone to trade with, Swaptree will allow you to print out postage and shipping information right on the site.

Swaptree presents a compelling case for trading on their site, too. They say all you have to do is enter the item you want to trade, and you’ll be presented with “thousands” of items you can receive in trade. Their algorithm will also set up trades with up to 4 people, increasing the likelihood that you’ll see something you like.

So all that’s great, but something doesn’t smell right to me at Swaptree. First of all, trying to make a living on pageviews and advertisements will be tough. Lala and Peerflix don’t seem to be generating enough page views to support a company on advertising. I can see how Swaptree could be much more popular than either of those sites, but it may not be enough. Mitigating this, however, is the fact that their customer base will be primed for high end advertising - these people will obviously be ready to click over to Amazon and buy something on the spot.

But that leads me to my second, greater concern. Entering in an item and being presented with thousands of swap choices sounds great. I’m sure I could find things that I’d like to trade. But just how is that demand curve for my item generated? It seems to me that at some point in the process, I’m going to be asked what I am willing to trade for that item (if no one does this, there’s no way to create a market). And if I have to decide what I want and wait for that item to come on the market (assuming, with a stretch, that the person will want what I have to offer), well, it’s probably easier to just sell it on eBay and pick up whatever it is I’m looking for while I’m there. So what I see happening is that lots of people may be willing to enter their stuff in for trades, I don’t think that many people will take the time to say what they want to trade it for.

Maybe this is just a long winded way of saying that money does serve quite a nice purpose in our society, and eBay seems to have perfected the swapping market using that long proven currency of trade.

Sign up for the Swaptree beta on their home page.

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