As the founder and CEO of Livedrive, people often ask me whether I am worried about competition from the likes of Google and Microsoft. The answer is no – and I’ll explain why.

Livedrive focuses on the prosumer and small business user. We like to think of ourselves as the “professional man’s Dropbox”. It’s a (huge) gap in the market and business is booming. Let me explain how it works…

Freemium is great, if you’re a free user…

…but not so much if you’re paying! The fundamentals of a freemium model are such that the paying users need to pay for the free users.

For example, with Livedrive Briefcase you get 2TB of space for just $15.95 per month. Dropbox, for the same price, offers just 100GB.

Paid-for services like Livedrive can offer far better deals to paying users because we don’t have the cost of servicing millions of free users. When you have a freemium model you have to set the usage bar for paying quite low to make the numbers work… and the price has to be high because only small percentage of users will chose to pay.

Paying for Dropbox, SkyDrive or Google Drive is like paying tax. Our message is simple – by all means enjoy a free service if it meets your needs, but if you’re going to pay, then come to a paid for service like Livedrive.

Are you a PROsumer?

VCs and marketers often talk about prosumers. Common descriptions for prosumers include ‘discerning, smart, advanced, professional, knowledgeable, early adopting’. I guess on this basis we’d all like to be considered prosumers as opposed to a mere consumer.

Personally I think when people use the term prosumer they normally mean ‘early adopting’ or ‘ahead of the market’. It’s not that prosumers are smarter or have more money – it’s just that they are more knowledgeable in a certain market than the majority.

The widening gap

Back to that gap in the market I was talking about.

We’ve already established that many consumers use the free services. Large corporates will use custom solutions provided specifically for enterprises.

So who do small businesses use and professional users use? Mainly the free services.

Why? Because despite there being millions of small businesses worldwide they are unloved in the Cloud Storage market. Uncared for. Left on the street, trying to squeeze their business around a consumer solution.

Few cloud storage companies have taken the time to build good value, feature rich, easy to use services for this market. That’s why small businesses use the free services, because they are more accessible and there’s limited other options.

That’s where Livedrive fits in.

The precedents are clear

I started my career in web hosting, back in the 90’s when most small businesses and individuals did not have a website. When I started Fasthosts in 1998 most people thought web hosting would be a free service – the likes of AOL and Geocities were offering free hosting and it wasn’t unusual to find professionals and small businesses alike using them. Then, as the market matured the word on the street was that ‘only prosumers will pay for web hosting’. What actually happened is that as the Internet grew people’s needs grew and users had all sorts of preferences – in the case of web hosting that meant things like support, speed, domain names, server features etc. Now, even a home user who just wants a website to rent out his holiday home will most likely be using a decent, good value, paid for service as opposed to a one size fits all freebie.

Cloud Storage is a fast growing market. I believe eventually all data will be online and the question of who’s your cloud storage provider will be as common as “who’s your ISP?”. And by the way, ISPs are another good example of a service that started out as free and then matured into a proper service once the market grew up. (Anyone remember Freeserve?)

Conclusion

Right now, if a free service meets your needs then Dropbox, Google Drive or SkyDrive may be a good bet. However, if you’re going to pay or you’re a business then Livedrive – which offers a lot more space for the money with a feature rich, supported product – is where the smart users go.