>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.
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.
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.
>$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.
> 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.
There's no way that planet fitness can equip and operate a gym for $10/month per member, if one of them simultaneously used all machines at all locations.
> 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.
>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.
This includes AWS's margin, which could be quite handsome. Bandwidth costs for the top 3 hyperscalers have converged to around 9 cents per GB, but nobody seriously thinks that's anywhere close to to the actual cost of bandwidth, or that hetzner/ovh is going to go under because they're offering 1TB ($90) of bandwdith for their $5/month VPS.
Even taking the 660GB figure at face value, that's plausibly within the range of what I'd expect the average person to have backed up, especially when you consider that the pricing is per machine, and the standard desktop/laptop comes with around 500 GB of storage.
You've also failed to address my point about their gross margins. The reliability of their books have been questioned, but even the short report didn't accuse them of cooking that metric.
>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.
It's a backup service. It's not even trying to compare itself with the likes of dropbox or onedrive. You should have at the very least a second copy locally.
> This includes AWS's margin, which could be quite handsome.
It could not be.
Storage costs are more or less race to the bottom. Storage business model is that it’s cheap and commodified, but sticky. Your data is stuck in S3 because it’s a pain in the ass to migrate. The margins come from non-commodified parts of the cloud (higher-level SaaS products) and I suspect egress costs (I don’t have the details).
There’s three parts to my understanding here. One part is my understanding of the business model, which explains why storage is a race to the bottom, why it’s not subsidized (or not subsidized much), why from a strategic perspective, the margins are getting eliminated. The second part to my understanding is the technical aspect—the calculations for how much it costs to stick hard drives in a data center and run storage systems on top with the desired accessibility and reliability, and I have some fairly deep expertise in parts of this. The last part is my personal experience working for cloud providers.
I can elaborate on the first two parts but for obvious reasons some of my knowledge is proprietary and I can’t share it.
> Bandwidth costs for the top 3 hyperscalers have converged to around 9 cents per GB, but nobody seriously thinks that's anywhere close to to the actual cost of bandwidth, or that hetzner/ovh is going to go under because they're offering 1TB ($90) of bandwdith for their $5/month VPS.
Bandwidth is not commodified like storage. I know that storage cost is close to operational cost because I’ve done extensive calculations and comparisons—and some projects are cheap enough that you have to revisit your theories about how they work on a technical level.
I don’t know why bandwidth is expensive. I’m not an expert on bandwidth or CPU or 90% of the other stuff. I only happen to have expertise on storage.
There are services you can buy where egress is the major cost and egress is significantly cheaper than egress from AWS, GCP, or Azure. Either egress is a complicated product or the margins are high. Probably some combination. Storage is less complicated and the margins are lower.
> You've also failed to address my point about their gross margins. The reliability of their books have been questioned, but even the short report didn't accuse them of cooking that metric.
I guess I don’t understand what point you’re making, or how that point about gross margins makes sense. It doesn’t make sense to me so I’m not sure what I’m supposed to respond to.
According to the article they _are_ losing money overall, every quarter since the IPo
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.