Brand power vs. product power

Published December 16, 2019

David Friend
Contributor

David Friend is the CEO of cloud storage company Wasabi, and co-founder of cyber security company Carbonite, recently bought for $1.4 billion. Wasabi is his sixth startup.

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Most tech companies — particularly B2B companies — either don’t understand the power of a brand, or do a really poor job of creating one.

An informal survey of a dozen of my young CEO friends showed that, given the choice, 10 out of 12 — 83% — would rather spend an extra dollar on product development than brand-building. It is dangerous (or at least foolish) to assume that the ROI on product development is greater than the ROI on brand building.

As a serial entrepreneur and CEO, I have had to make this choice many times. In 2006, I co-founded PC backup company Carbonite . I left the company five years ago after taking it public and I no longer have any financial interest in it, which is why I can write about it now — it was just sold for $1.4 billion to OpenText. There were many other backup products on the market at that time and many more appeared over the first five years of the company’s life. I would argue that Carbonite was slicker than most of the others, but essentially every backup product accomplishes the same result.

Unlike Carbonite’s competitors, we focused on our brand. That meant raising more money than we would have if we were just investing in R&D. But, after five years of investing in our brand, we had eleven times the brand recognition of any other consumer backup company and we dominated the market.

Here’s why: a study by Kettlefire Creative showed that 59% of people prefer to buy brands that they have heard of. Since none of our competitors had widely recognized brands, we got most of that 59%. Of the remaining 41%, we fought it out on other criteria and won most of that as well. Put yourself in the shoes of a potential customer looking to back up their PC. What do you worry about? Well, before we even launched the company, we asked PC owners to choose the five most important attributes of their ideal backup company from a list of ten possible attributes, and we found the following:

1. Trustworthy: you won’t look at my files or allow anyone to see them (1127 votes)

2. Peace of mind: when I go to retrieve my backup, it will always be there (811 votes)

3. Reliable: it backs up everything and doesn’t stop (696 votes)

4. Helpful: if I lose my computer, I want to talk to a human who can help me (446 votes)

5. Easy: it should be simple and require little attention (444 votes)

The attributes that didn’t make the top five:

6. Fast: backups happen quickly

Carbonite to acquire endpoint security company Webroot for $618.5M

Published February 8, 2019

Carbonite, the online backup and recovery company based in Boston, announced late yesterday that it will be acquiring Webroot, an endpoint security vendor, for $618.5 million in cash.

The company believes that by combining its cloud backup service with Webroot’s endpoint security tools, it will give customers a more complete solution. Webroot’s history actually predates the cloud, having launched in 1997. The private company reported $250 million in revenue for fiscal 2018, according to data provided by Carbonite . That will combine with Carbonite’s $296.4 million in revenue for the same time period.

Carbonite CEO and president Mohamad Ali saw the deal as a way to expand the Carbonite offering. “With threats like ransomware evolving daily, our customers and partners are increasingly seeking a more comprehensive solution that is both powerful and easy to use. Backup and recovery, combined with endpoint security and threat intelligence, is a differentiated solution that provides one, comprehensive data protection platform,” Ali explained in a statement.

The deal not only enhances Carbonite’s backup offering, it gives the company access to a new set of customers. While Carbonite sells mainly through Value Added Resellers (VARs), Webroot’s customers are mainly 14,000 Managed Service Providers (MSPs). That lack of overlap could increase its market reach through to the MSP channel. Webroot has 300,000 customers, according to Carbonite.

This is not the first Carbonite acquisition. It has acquired several other companies over the last several years, including buying Mozy from Dell a year ago for $145 million. The acquisition strategy is about using its checkbook to expand the capabilities of the platform to offer a more comprehensive set of tools beyond core backup and recovery.

Graphic: Carbonite

The company announced it is using cash on hand and a $550 million loan from Barclays, Citizens Bank and RBC Capital Markets to finance the deal. Per usual, the acquisition will be subject to regulatory approval, but is expected to close this quarter.