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>These days, I think we have a pretty good idea of what market rates are for cloud storage. Anything less than market rates should be viewed with suspicion. Ar

by gruez 2y ago

>These days, I think we have a pretty good idea of what market rates are for cloud storage. Anything less than market rates should be viewed with suspicion. Are you talking about their B2 product or their backup SaaS? The former has "fee that scales with usage", and the latter probably has enough normal users (ie. not data hoarders backing up 50 TB on the $99/year plan that they're not losing money overall.

mingus88 2y ago
According to the article they _are_ losing money overall, every quarter since the IPo
- gruez 2y ago
  I meant the unit economics of their backup product, not the company as a whole. They made $69M in gross profit in 2024, with a gross margin of 55%. That turns into a lost only after subtracting R&D ($42M), sales and marketing ($44M), and G&A ($29M). Of course, those expenses can't be ignored in the context of a company that's set out to make money, but at least they're not selling $10 worth of storage for $5, like the OP implied.
klodolph 2y ago
https://www.backblaze.com/cloud-backup/pricing https://www.backblaze.com/cloud-backup/pricing $99/year with no limits on data, as far as I can tell. The context here is someone talking about personal backups, not Backblaze’s broader offerings. We know the market rates for cloud storage, more or less, since they’ve converged somewhat, across the industry. This makes it easy to calculate what kind of usage patterns would lead someone to save money at Backblaze. Cloud services often have a free tier or cheap tier to attract new customers. IMO, this is not it. This is a product. These people are not turning around and signing contracts with Backblaze at work. At least, not many. So it could be that people are just using it below its limits, or it could be that it’s subsidized by other parts of the business. Overall P&L is irrelevant—you want to be able to explain this product as a profitable product, as some viable sales channel, or as marketing. My recommendation is to buy storage products where the company is making money off you, or nearly.
- ricardobeat 2y ago
  The backup plan has no API access (you need to use B2 which is usage-billed), it’s for a single machine, and external drive data is lost after 30 days from last scan which makes it very inconvenient for anything other than.. backing up a computer’s hard drive. Nothing indicates misuse of this plan is causing elevated operating costs for them.
  - klodolph 2y ago
    I’m aware. That isn’t relevant to my analysis.
  - immibis 2y ago
    I believe they're public about the fact they have some users who back up hundreds of TBs and they're still willing to just deal with it to keep the flat price structure.
- gruez 2y ago
  >$99/year with no limits on data, as far as I can tell. The context here is someone talking about personal backups, not Backblaze’s broader offerings. We know the market rates for cloud storage, more or less, since they’ve converged somewhat, across the industry. This makes it easy to calculate what kind of usage patterns would lead someone to save money at Backblaze. So do the calculations? As I mentioned in another comment, their unit economics are sound, with them making more than 50% gross margin. >So it could be that people are just using it below its limits That's how many businesses work. Many low end gym chains operate on the assumption that most users won't use their services. There's no way that planet fitness can equip and operate a gym for $10/month per member, if everyone one of them went regularly. That doesn't mean it's a bad idea to get a planet fitness membership (assuming you'd actually go), or that they're at risk of going under.
  - klodolph 2y ago
    > So do the calculations? Is this some kind of personal challenge? It’s arithmetic for chrissakes, not calculus. S3 IA $0.0125/Gb-mo, ingress basically free, $99/yr÷(12mo/yr×$0.0125/Gb-mo)=660 Gb. Reasonable to ignore egress for backups—you may want to account for it, but it’s reasonable to ignore it. Do your own calculations if you have different assumptions. That’s not hard. The numbers don’t have to be exact. Maybe I just think it’s easy because I’ve run numbers like these for a living. Given X different storage configurations, under which conditions is configuration 1 cheaper than configurations 2 and 3? > That's how many businesses work. Many low end gym chains operate on the assumption that most users won't use their services. There's no way that planet fitness can equip and operate a gym for $10/month per member, if everyone one of them went regularly. That doesn't mean it's a bad idea to get a planet fitness membership (assuming you'd actually go), or that they're at risk of going under. The gym closes I can buy a different gym membership. My cloud storage service closes, it may be difficult to move my data to a different provider, depending on how much data and what kind of rate limits. We’ve seen this before. People with data stuck in an “unlimited” storage service that’s shutting down, trying to transfer it but getting their egress throttled. The economics of gyms are different because the cost is not only the membership, but also the time it takes you to get to the gym. Cloud services are a much more efficient market, which means the margins are much lower.

by gruez 2y ago

mingus88 2y ago

According to the article they _are_ losing money overall, every quarter since the IPo

gruez 2y ago
I meant the unit economics of their backup product, not the company as a whole. They made $69M in gross profit in 2024, with a gross margin of 55%. That turns into a lost only after subtracting R&D ($42M), sales and marketing ($44M), and G&A ($29M). Of course, those expenses can't be ignored in the context of a company that's set out to make money, but at least they're not selling $10 worth of storage for $5, like the OP implied.

klodolph 2y ago

https://www.backblaze.com/cloud-backup/pricing https://www.backblaze.com/cloud-backup/pricing $99/year with no limits on data, as far as I can tell. The context here is someone talking about personal backups, not Backblaze’s broader offerings. We know the market rates for cloud storage, more or less, since they’ve converged somewhat, across the industry. This makes it easy to calculate what kind of usage patterns would lead someone to save money at Backblaze. Cloud services often have a free tier or cheap tier to attract new customers. IMO, this is not it. This is a product. These people are not turning around and signing contracts with Backblaze at work. At least, not many. So it could be that people are just using it below its limits, or it could be that it’s subsidized by other parts of the business. Overall P&L is irrelevant—you want to be able to explain this product as a profitable product, as some viable sales channel, or as marketing. My recommendation is to buy storage products where the company is making money off you, or nearly.

ricardobeat 2y ago
The backup plan has no API access (you need to use B2 which is usage-billed), it’s for a single machine, and external drive data is lost after 30 days from last scan which makes it very inconvenient for anything other than.. backing up a computer’s hard drive. Nothing indicates misuse of this plan is causing elevated operating costs for them.
- klodolph 2y ago
  I’m aware. That isn’t relevant to my analysis.
- immibis 2y ago
  I believe they're public about the fact they have some users who back up hundreds of TBs and they're still willing to just deal with it to keep the flat price structure.
gruez 2y ago
>$99/year with no limits on data, as far as I can tell. The context here is someone talking about personal backups, not Backblaze’s broader offerings. We know the market rates for cloud storage, more or less, since they’ve converged somewhat, across the industry. This makes it easy to calculate what kind of usage patterns would lead someone to save money at Backblaze. So do the calculations? As I mentioned in another comment, their unit economics are sound, with them making more than 50% gross margin. >So it could be that people are just using it below its limits That's how many businesses work. Many low end gym chains operate on the assumption that most users won't use their services. There's no way that planet fitness can equip and operate a gym for $10/month per member, if everyone one of them went regularly. That doesn't mean it's a bad idea to get a planet fitness membership (assuming you'd actually go), or that they're at risk of going under.
- klodolph 2y ago
  > So do the calculations? Is this some kind of personal challenge? It’s arithmetic for chrissakes, not calculus. S3 IA $0.0125/Gb-mo, ingress basically free, $99/yr÷(12mo/yr×$0.0125/Gb-mo)=660 Gb. Reasonable to ignore egress for backups—you may want to account for it, but it’s reasonable to ignore it. Do your own calculations if you have different assumptions. That’s not hard. The numbers don’t have to be exact. Maybe I just think it’s easy because I’ve run numbers like these for a living. Given X different storage configurations, under which conditions is configuration 1 cheaper than configurations 2 and 3? > That's how many businesses work. Many low end gym chains operate on the assumption that most users won't use their services. There's no way that planet fitness can equip and operate a gym for $10/month per member, if everyone one of them went regularly. That doesn't mean it's a bad idea to get a planet fitness membership (assuming you'd actually go), or that they're at risk of going under. The gym closes I can buy a different gym membership. My cloud storage service closes, it may be difficult to move my data to a different provider, depending on how much data and what kind of rate limits. We’ve seen this before. People with data stuck in an “unlimited” storage service that’s shutting down, trying to transfer it but getting their egress throttled. The economics of gyms are different because the cost is not only the membership, but also the time it takes you to get to the gym. Cloud services are a much more efficient market, which means the margins are much lower.