Interview with SpiderOak CEO Ethan Oberman

Interview with Ethan Oberman

Today I am proud to announce that I had the chance to talk to Ethan Oberman who is the CEO and co-founder of SpiderOak. I recorded the conversation on Skype and added it to my Online Backup Podcast on iTunes so that you can enjoy it on your mobile device. Or listen to it in your browser right below (click the player below and wait a couple of seconds until its loaded, or better yet download it to your machine).

Special SpiderOak Offer Code for Cloudbackuping readers

Also SpiderOak was so generous to give you a special sign up discount for their services. Just the coupon code “Cloudbackuping” to get 25% off the normal price. It is a great service and you’ll also support this website!

What is SpiderOak?

SpiderOak is an online backup, syncing and sharing service for all your data. They started the service back in 2006 with a focus on security and flexibility. You can access your files from any device and all operating systems. To know more about the online backup service read my SpiderOak review.

Interview transcript

(slightly edited)

Hi and welcome back at Cloudbackuping.com and The Online Backup Podcast. My name is Mauricio and today I am very proud to anounce a special guest to our show: Ethan Oberman – he is the CEO of SpiderOak, an online backup, synchronization and file sharing service. Ethan, how are you doing? Tell us something about SpiderOak.

Good. I’m doing great, thanks for having me on. SpiderOak is been around for several years. We started the code in 2006 and officially launched the product in 2007. And we’ve been focused on providing a whole series of online backup features including sharing and synchronization, accessing data from any computer, from your iPhone or Android tablet or where ever you may be. We have always been focused on privacy and making sure that your data is as secure as it could possibly be, what we feel is going to be more and more important as the world gets closer together.

So you are also the founder of SpiderOak?

I am the founder and CEO I suppose. I started the company with a good friend of mine who is much more involved in the tech side and I am more involved in the business side but we’ve been working together before in a previous company and we have a great partnership.

Where have you been working before?

Before this, I have done a series of things from producing a movie, to building furniture, to all sorts of other things. But I also started a software company previously. It was in the e-mail marketing space.

You said, you are not a tech guy, more the business and marketing guy. Probably you can tell us a little bit about your career, did you study something or is it self taught?

No, I studied sociology in college which is a generalized degree. My family business is a software company which my father started back in the late 70s early 80s, so I certainly have been around the idea of software for a very long time. It was a different world back then, but it’s certainly something I grew up understanding and knowing about. And certainly as I have gotten older the software world has become more popular.

How did this idea emerge of creating a backup company?

Well, actually the concept was something a little bit different then backup. At the time, back in 2006, I was really frustrated that I didn’t have one central place to store all of my data. All my data was spread across 4 different machines and I was just aggravated that I couldn’t have one central storage repository for everything. That drove my ideas and then I was also talking with Alan, my business partner, and he wanted to focus on security and privacy and so our ideas met in the middle and SpiderOak was born. The idea initially wasn’t to create a backup company but more a central repository where someone could store data across any of their devices, Mac, Linux or Windows and it would always sit there and always be available and you could access it from any of your machines. That was the initial concept and then we added functionality on top of that, including sharing your data with friends and family and synchronize that data across your various devices. When we launched at the time, Mozy and Carbonite and those guys were just getting started. They created the concept that was called online backup and we lumped into that space. But our idea has always been a little bit different than strict backup.

I think, that is very interesting because you had this idea before Dropbox actually launched. And in 2006 this was a pretty advanced concept.

Most companies are started out of frustration and at the time there wasn’t a product that could take the data from all the different sources and put it in one place online and make that place available wherever you might be. And that was the real goal of SpiderOak.

I read an interesting snippet of your bio on SpiderOak.com and you were saying that you were learning a lot about yourself, and team members because you have a very international team. And also you were talking about limitations and possibilities. I’d like you to elaborate a little bit on a that. What did you learn about yourself and your team member? What were the limitations and possibilities?

Trying to understand at what you’re good at and what you’re not good at. And I think it’s actually more advantageous to focus at the things you are really good at and bring in people that can help you with things you’re not so good at. When we started SpiderOak we didn’t know what kind of company we were ultimately going to be. But we always wanted to start a virtual company. And it started because we didn’t want to limit ourselves to the city when it came to talents. We wanted to find the best people were ever they may live. That’s why we started investing in various resources to provide a working environment virtually – and I must say it worked out very well. I will admit, I had these ideas of a loft office and a ping-pong table, and beers at 5 o’clock. And it definitely has been challenging because you’re working with different nationalities that aren’t in the same room. You have to work on communication and not just verbal communication. Obviously we talk on the phone all the time but written communication is as important as oral communication.

And how do you manage that kind of conversation?

We use several online utilities. We have a wiki that we’re religiously updating, we have an IRC channel which we are on every day that we could talk to people throughout the day.

So you’re archiving all the conversations?

Yes, for example during time where on this call, I go back and review our logs in IRC and be able to see what were were talking about and make sure I don’t miss anything.

It is crucial that everybody’s on the same level of information, I guess.

Yes, it is definitely crucial. That is something we haven’t gotten perfect even yet but we are always working to improve. It has certainly proved to be a very good model for us. The core team has been with us for 4 years now. I think that really speaks to the fact that this kind of environment can be successful if you find the right guys, and put in the right infrastructure.

You have expended quite a bit. How many team members are you right now?

We’re at just under 25 right now. We’re trying to bring on a couple of more guys and we need to update our website as well. We are in the process of developing a new project soon.

Let’s talk a little bit about SpiderOak the name. It sounds like if there is some history behind it. Probably you can talk a bit about that.

Sure, as everyone who has started a company in the last couple of years knows that it is complicated to find a domain name that is available. So we started taking concepts that we liked and putting them together and see if they are available. And at the time we didn’t have any money so we couldn’t pay anybody squatting on a name. We started taking different concepts and we liked the concept of spider, spider web, web of data, that kind of concepts we were trying to promote. “Oak” is always a very strong, solid wood to use. That’s why we came up with “SpiderOak”. And I think there isn’t anything else called SpiderOak, so it wasn’t a competitive name. For example you have Dropbox and Box.net which sound very similar. So the fact that we have the name SpiderOak that didn’t sound like anything else and there wasn’t anything around that was named like that, it was good for SEO and finding us on the web in general. The other thing is, it allowed us to do many things under that name, it wasn’t a name like “backupmydata.com” or something like that. If you have that name you are pretty much stuck to do that one thing. We didn’t really know ultimately where SpiderOak would go and we went to pick a name that could allow us to be flexible and move.

And it is really a key differentiator because there are so many different online backup services popping up. They are called something with “backup” in the name and they are basically interchangeable and that’s what called my attention, you have this unique name and I stumbled directly upon that. Also, your design is quite unique for an online backup service.

Yes, I definitely follow the rule that if nothing else, be different. I think there is lot of value in being able to distinguish yourself from the crowd. If you look at the various decisions we’ve made, the name we’ve chosen, even our focus on what we call “zero knowledge privacy”, which has made our lives more complicated in many ways but in essence it has gotten our key differentiator.

You could elaborate a little bit on this “zero knowledge privacy”. What does it exactly and how can a user understand that concept better?

The ultimate idea was, that we wanted to create an environment where we didn’t even have to trust the people that work at SpiderOak. So we developed a system which is called “zero knowledge privacy”, which means, there is no point where a SpiderOak employee, even with direct access to the servers that are storing the data, could access plaintext information. It is just not possible. And the way we do that is we don’t store our user’s plaintext encryption keys. There is never a time where that information is passed to us and therefore there is never a time where we could actually decrypt their data. We feel it is a very important distinction, it definitely has made our lives more difficult in certain ways but at the same time if the government or somebody should come knocking on our door, asking for one of our user’s data, we would have to give them the data by law, but it is encrypted and there is nothing we can do to decrypt it.

And that is also something what differentiates you from Dropbox were there were quite a lot of scandals around the security.

Yeah, that is exactly right. I won’t take anything away from Dropbox. It is a wonderful product. I would bet that most of the people that use Dropbox aren’t really concerned necessarily with the fact that someone at Dropbox could technically look at their data. We do feel there is definitely a sector of the market that does care about that and that’s the core market we’re focused on.

Now that we’re talking about your market. Probably could define a little more your target group. I guess it is targeted at people that love technology and are into the geeky stuff.

Sure, we definitely started with a high focus on the tech market. Servicing all 3 platforms Mac, Windows and all major flavors of Linux. We have a commandline interface and we definitely speak to that tech environment. But that said there is also a growing number of people who really do care about security and privacy and also certain flexibility in the product. We are starting to cater more to those markets. An example would be the legal industry. We are starting to sign up a lot more law firms where that data privacy is crucial. We are starting to sign up a lot more companies in general. We are moving into the enterprise space. To them the privacy is a huge factor but it is also the flexibility of the application to do certain things. We will never lose our consumer product; that is always going to be around. But we are definitely shifting our gears a little bit to more of the enterprise and business market.

I was actually going to ask you that. What is going to be your focus in future? And apparently you are going to enter the business market in the next couple of months or weeks. How soon are you going to be launching your next business product?

We would never plan to get rid of our consumer product. We always expect to have it. The other parts of our business that we are starting to grow is our partnership programs which have been very successful today and we are going to continue to do those. Our resellers range from affiliates to white label partners. And we are really excited to push into that market as well. Also, we have signed up three very large enterprises already that use our service as a backbone. We do expect to see a lot of good growth in that market. Again, playing out our strength which are privacy and flexibility, and those are key differentiators in that market.

And I imagine that there are a lot of challenges along the way. You mentioned the multiplatform availability, so you are in all the major operating systems, basically. How did you solve all those problems? How did you manage the merging of technologies?

Thankfully, I would say that there are lot of geniuses behind the product. I’m not one of them. We have several guys who fit that bill pretty well. When we launched SpiderOak we decided from day one that we wanted to serve all three platforms. Every time we put out a release, it is going to be across all platforms. We have really stayed true to that. I think now that we have so much of this infrastructure in place to do this it is actually not as hard. It was really aggressive when we started, but we are using a GUI language that is called PyQt and then we use Python. The beauty of those languages is that they are cross-platform by nature. We didn’t have to rewrite all of our code. We didn’t write in .NET and having to pull all of our code over. It was all about the decision initially. We wanted to support all of the platforms so what languages can we choose? And that is really what we’ve done, I think it has been great and it allowed us to open up avenues that otherwise we would not have been able to.

Can you share some stats of how many people are using your service on the lakes, Windows and Mac?

We have several hundred thousands of users using SpiderOak. I would say Mac is still the most. I guess 50% to 60%, Windows is about 25% and Linux is the rest but proportionally speaking, we have a pretty large percentage of Linux users in proportion to the world. So we definitely have a disproportionate number of both of those groups.

I don’t know a you can talk about that but can you share how many customers you have or are how much of growth rate has been in the last couple of years?

Definitely our growth curve is upward in a healthy growth mode. The online backup and synchronization space, cloud storage etc. is one that is getting bigger and bigger. I think all providers in that field are certainly growing. We certainly had a good year in 2010 and we are having a very good year in 2011. I can’t share specifics but I can certainly say that we are definitely experiencing very healthy growth, and we are only expecting that to get better.

And another interesting question that can add a little bit to that: can you share the conversion rate you have? How many of your free users convert to paying users eventually?

Obviously, we always wanted to launch a free product. That was very important to us. Throughout our lives we will always use open-source libraries and in some ways it was a way for us to give back a little bit and we thought that this was very important for us to share with the community. Our conversion rates have gone down a little bit as we have grown. But I understand that’s normal given the fact that our markets expanding. So in terms of conversion rate we are in the 8% range.

That’s a lot. It’s great that there are companies like you that offer free products. Most of the people only need small space, like 2 GB or even less as they only want to share and sync some documents. And it’s great that they don’t have to pay for such services and also that storage space has become so cheap and available for anybody. I think that is a fascinating development which leads me to another question: how do you think the cloud space in general is going to develop? Where are we heading and where is the future?

My crystal ball doesn’t always work but we are launching a product that is called nimbus.io. It is raw storage. It actually competes a little bit with Amazon S3 but it is really focused on the archival class storage market which is very different than the market S3 serves. I definitely feel we are moving toward a place where all data isn’t equal. There is data that you use frequently and all the time and there is data that sits in an archive and you only needit in various points in the future. People are going to start understanding data differently in terms of how they interact with it. I think, over time there is not going to be one class of data. There is going to be several classes of data and those will have an impact of how that data is stored and thus, ultimately, what you are paying per gigabyte for that storage.

And that is especially important for businesses because they have huge amounts of data that are not going to be accessed every day. Probably they have data that they only need to access once a month or once a year.

Yes, and there is no need that they have that data sit on high-availability servers. The classification of data is going to be something that will become more important and also we have talked about that several times in that call, I think privacy is a growing issue. Consumers and businesses aren’t really aware of all the various things that are going on with their data as soon as it is going out of their firewall. And it is a growing concern. This idea that a government agency can come and get the data without the user knowing, it is frightening. Truthfully, that is something in Europe that you guys are much more concerned about. It’s certainly something that we hear a lot from our European users.

You must have huge success in Germany because we Germans are by nature very privacy and security concerned. If I tell my friends I am using Dropbox, they say: how can you use dropbox! They are insecure! I hear that all the time, they are very reluctant to trust any service with their data. That’s why I think a service like yours is going to be quite successful in Germany.

Like I said, it was harder to do what it is that we have done because we had to take a lot of measures to ensure security throughout the entire process. I do feel that this is going to be a growing concern and I always use the example in the States: wireless networks. People used wireless networks that were open all the time. No one used to encrypt a wireless network. And now everybody encrypts the wireless network. You can barely find an open wireless network anymore. I think there is a segment of the population were security isn’t going to be an issue. But in the business world, as businesses start to come out and start trusting the cloud, they are really focused on making sure things are secure, first and foremost. And to that point we’re also noticing a lot of growth in universities. I think we have over 10 universities now and one or two every week is signing up. You have professors, researchers at these universities who are really worried about data breach. In that sense we are really seeing this type of privacy movement. And I think it is certainly as important in Europe.

You are posting quite a lot on your blog. Could you tell us about how your communication strategy toward the public is and how do you approach that?

In some ways it has gotten a lot easier. One of the harder things about being one of the first companies in this space there is no real comparison, there is no dialogue, there is no defined setup of the definitions used to describe certain things. It was very hard when we launched. Messaging has gotten a lot easier, in part, thankfully to companies like Dropbox, who have helped to define our industry a little bit. We are releasing a new website, I would say before the end of the year. It is going to distill our message down. And we are going to focus on the security part of what we do. Our product is a little more technically savvy but we also offer some great flexibility in which we feel like for the users is very important because they care about that. As industries mature it certainly in many ways has gotten easier to talk about what it is we do and it had allowed us to focus on the things that really make a difference, as opposed to talking very general about what it is we do. It has been better for us instead of worse and it’s gotten easier for our messaging moving forward.

I love companies that share information on their blogs, because the company gets a face if it shares personal information. For example, I read that you have a dog. And not many CEOs share that on their company blogs.

Usually, I am a private guy but one of the things we do here all the time and I really enjoy is, that we are a very open company. Our customers say, it seems that we are dealing with real people. I find that to be one of the biggest compliments as a company we can get. We definitely try very hard with it. We are living in a virtual world and we are a virtual team scattered around the world and yet people can still identify us as being real people and really helping them with problems and fixing their backup issues or what ever the case may be. I think that’s important. Things like saying “please” and “thank you” which seem like small things, make a big difference and certainly adds a lot of personality online which can be difficult. And thanks to my hard working team we are doing that.

Many companies now start doing personal blog post, blogging about their offices and sharing photos of coworkers. You see that a lot in American companies but now you can see that trend in Germany as well. Even larger corporations start to be even more personal, having a Facebook page where they post their Christmas party. This model of an open company is swapping from the United States to Europe and Germany. It is very interesting to observe that kind of development on a market. This more open communication strategy allows us on the other hand to learn.

At the end of the day we are all human beings and we put our pants on in the morning. All these companies are run by humans we haven’t figured out how to run a company with a machine yet. We are all going to make mistakes and going to have fun at company parties. And I think to recognize that this is important. We certainly have a lot of things to learn from Europe and Germany and it seems like every once in a while we do things right on our side and you guys could learn from us as well.

I read an interesting story that you shared about an affiliate fraud. Probably you could talk a little bit about that with our listeners and readers.

Yes! It was a fascinating problem. We started getting a lot of complaints about people writing in and they were asking who we were. They had not remembered signing up for a service named SpiderOak. The truth is, every once in a while, it does happen were there is a consultant that will sign a company up for SpiderOak and the responsible person won’t know what SpiderOak is. It is not unreasonable that this kind of situation could have happened. But we started noticing it a little bit more. And I started reaching out calling the people directly and asking a few more questions. I started digging a little deeper and noticing that the people that were reporting the problems were brought in by specific affiliate accounts. And all those affiliate accounts had interesting Chinese characters and were all based in Vancouver. Ultimately, we started connecting the dots realizing that people were stealing credit card numbers and signing up accounts with SpiderOak. And what we would end up doing is paying them as affiliates. This was essentially a way of laundering the money. I think it was a very clever scam, but thankfully for us it only cost us a couple of hundred dollars. But certainly I felt bad for all the people that were affected. Getting your credit card stolen is pretty awful. We try to get in touch with all of the users that were affected and told them to cancel their credit card.

And certainly it has affected other online backup companies as well. I guess you were not the only ones that were affected by this kind of fraud.

Yes, that’s right. I called some of our competitors and let them know as well that they should be aware that this type of thing is happening. I think all but one had experienced a similar problem. It was definitely something our competitors were seeing as well.

Now that we are talking about your competitors, probably you could tell us a little bit about other aspects that differentiate you from your competitors, like Carbonite and Mozy.

This goes back to little bit of what I was talking before. The idea of SpiderOak was to serve as a central storage repository, that is de-duplicated across all your devices and sits in the center and allows you to access your data from any place. De-duplicated means quite simply if you have a folder of photos on one machine and you add another machine to your SpiderOak account and re-upload the same folder of photos. SpiderOak doesn’t re-upload all those photos because they were uploaded once. We just make a note that those photos are also on that computer and it saves you a lot of upload time and essentially that de-duplication process works such that we are able to know what data you have already uploaded such that you don’t have to re-upload it again. I hope that explanation makes sense. It’s basically a way to make sure that you’re only storing one copy of something, as opposed to several copies of something if that copy is actually the same version.
If you take a photo and you spread it across your different machines you are not storing the photos four or five times to SpiderOak, you’re only storing it once. I have actually written several blog post about de-duplication if you’re curious to know more you can go to our blog and there are a couple of posts on that. So we are essentially differentiating us from our competitors that’s what we were building that central repository. That’s a different approach from Carbonite and Mozy where you have one computer and you can back it up to one location. If you add a 2nd or 3rd computer you have to create two or three different accounts and those accounts can’t talk to each other.
In SpiderOak you can add all your computers and put all your data in one place and you can access any of the data from any one of those computers. That’s definitely a big differentiator. And then on top of that have the ability to share portions of your data with friends and family. If you have to work at three different computers and you upload all that data and you want to share a folder from one computer and then share a folder from another computer in a same “shared room” you can do that. SpiderOak can create as many shares as you want and share as many different types of folders across any of your machines in a single place. Also, you can synchronize the data across multiple devices. Certainly a lot of our competitors in the backup space don’t offer sync. You can access your data from everywhere you are be it a mobile phone or a tablet. Those are probably our core differentiators. We are understanding the world a little differently in a sense that we are trying to create a central place for all of our data to live and then provide functionality on top of that as opposed to just being an online backup company or just being a sharing company.

For people who are probably listening to this podcast for the first time and don’t know what online backup is what recommendation could you give them? What would you tell them right now?

There are a lot of advantages to all who will upload data to an online backup provider. Other than just the benefit of making sure that if your computer crashed or you lost, or was stolen, you still have all the data that you have collected on your machine. But in addition to that, most services today provide a lot of advantages to you such as providing remote access to your data. If you are traveling half around the world and want to pull up a document, you can do that with many of these companies, including SpiderOak. If you want to share things with friends you can do that very easily in an online environment. There are definitely a lot of benefits. You can synchronize data across various points. And this space is certainly going to be growing over time.

Thank you Ethan for the interview it has been a pleasure!

Tagged as: de-duplication, SpiderOak, synchronization