Subscribe / Unsubscribe Enewsletters | Login | Register

Pencil Banner

Microsoft's OneDrive changes: Follow the money

Gregg Keizer | Nov. 10, 2015
For every 1 percent of the free user pool Microsoft converts to paid, it could realize US$107 million additional annual revenue.

Others were blunter, and called out Microsoft for not shooting straight.

"I don't think I've seen such a badly-communicated corporate message like this before," said Laz in another comment. "If you want to begin charging for storage, then say it as such. Don't wrap it in layers of frankly ******* excuses like 'a few users abused the service,' and the words 'productivity and collaboration.'

Microsoft did not describe in detail how pervasive the abuse was -- it simply characterized the gluttons as "a small number" -- but perhaps Laz was right, that the unlimited reversal was a red herring.

"Freemium" services like OneDrive always carry massive numbers of users on the free books compared to the paid rolls. And fremium-based firms are always looking for ways to convert free accounts to paid -- that's how the model works.

Clearly, the vast pool of free users is the most likely source of any revenue growth. Thus it should be no surprise that the reduction of the free allotment, which will affect far more people than the ditching of unlimited, or the disappearance of the lower-tier 100GB and 200GB plans, was the key decision Microsoft revealed last week.

Without data from Microsoft, it's futile trying to figure out exactly how the change in the free allowance will affect revenue. But educated estimates that illustrate potential revenue gains are possible.

An estimated 445 million use OneDrive for free

In 2014, 11% of European Union residents who used a cloud storage service paid for the space, according to the EU's statistical department. The remainder relied on a free service for storing and sharing files.

Microsoft does not regularly disclose the number of OneDrive users, whether active or not, but conveniently, CEO Satya Nadella did just that last month. "More than half a billion people manage their documents and photos in OneDrive," Nadella said during an Oct. 22 earnings call with Wall Street.

Taking Nadella at his word, and applying the EU's 11% paid portion to a half billion, or 500 million, results in an estimated 55 million paid users of OneDrive, with the other 445 million on the free service.

It may be impossible to confirm that 55 million OneDrive users pay for storage, but other metrics Microsoft provides make the number seem reasonable. In the same earnings call last month, Nadella said that Microsoft had 18 million consumer-grade Office 365 subscriptions on the its roster. Each of those 18 million accounts represents at least one paying OneDrive customer; depending on how Microsoft tallies, some subscriptions may stand for more than one customer, as Office 365 Home provides a 1TB OneDrive account to up to five people.


Previous Page  1  2  3  4  5  6  Next Page 

Sign up for Computerworld eNewsletters.