Over the past few years, personal cloud storage in China has witnessed exponential growth as a convenient replacement for mobile storage devices. However behind the boom are looming undercurrents of concern around security and content management.

As part of the country’s efforts to ‘clean up’ the internet, five national authorities including the National Anti-Pornography Office, the Ministry of Public Security, and the Ministry of Industry and Information Technology, have jointly launched campaign in March to purge everything from pornography to other content that deemed illegal by the government. The event has created a domino effect in China’s personal cloud storage sector, resulting the shutdown of six major services.

  • March 4–Dongguan-based “115” turned off some of their file-sharing features to prevent dissemination of illegal content.
  • March 17— UC Net Disk, the online storage arm of Alibaba Group, said it would terminate its storage offerings entirely.
  • April 25–VDisk, the storage provider backed by Sina, announced that they would close their free personal service by June 30. The file searching and sharing functions were shut down immediately.
  • April 26–KuaiPan, an online storage provider owned by Nasdaq-listed Xunlei, closed its personal storage service.
  • April 27—Weiyun from internet giant Tencent said that they will turn off some of their sharing functions.
  • May 3—Huawei’s storage service DBank will suspend its data sharing feature and stop providing free data service starting July this year. Paid users will get reimbursement.

The purge is shaking out the industry as most of the companies mentioned above are top-ten players in the market. According to a report BigData Research compiled in December 2015, Baidu Cloud topped the list with 37.86 million monthly active users. Huawei DBank and 360 Cloud took the second and third spot with 13.71 million and 6.87 million MAU, respectively, followed by Weiyun (4.17 million), China Telecom-backed ECloud (3.42 million), VDisk (2.4 million), 115 (2.05 million), KuaiPan (1.05 million), China Mobile-backed MCloud (720K) and Xunlei Cloud (240K).

Different from international online storage providers Dropbox and Google Drive, Chinese online storage services work as content search engines and encourage content sharing between users. The openness of Chinese personal cloud services creates a huge concern for the country’s regulators because it is more difficult for them to control unapproved content.

Even with government intervention and policy risk, companies wouldn’t have given up so easily if they considered it a profitable business. The real reason for the shutdown is the lack of clear business models around cloud storage. In 2013, Chinese internet companies flocked to the personal storage sector and their competition for market share is mainly realized through offering larger free storage spaces, or cash-burning, like many other industries in China.

The market grew rapidly. Chinese research company iiMedia Research Group expects the number of personal storage service users to reach 450 million last year, up from 380 million in 2014. That is more than half of the total 688 million internet users in mainland China, according to China Internet Network Information Centre.

Despite the growth, the companies are still struggling to find a clear business model to commercialize their services. Under the combined stress of a monetization bottleneck and rising service cost, companies have lost their patience and interest in the market. The recent crackdown from the government were simply the last straw.

However, there are companies that are standing firm with their cloud storage services. 360 Cloud Disk announced that they would not close their service, while industry leader Baidu Cloud remains silent about their future plans.

Of course, it would be easy for the remaining players to harvest the market shares that have been left out by their competitors. But they still face the problem of monetizing cloud storage with a clear business model – how they will tackle that remains to be seen.

image credit: Getty Images

Emma Lee

Emma Lee is Shanghai-based tech writer, covering startups and tech happenings in China and Asia in general. We are looking for stories related to tech and China. Reach her at lixin@technode.com.

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2 Comments

  1. I’m betting the companies invited the “crackdown” to give them an excuse to bail out of their mistake. I’ll never take a freebie from a chinese company again…. too expensive when the government can show up, at the companies invitation, and lock the door.

  2. > 360 Cloud Disk announced that they would not close their service

    Or…not. Today (20 October) they announced they are closing down; sharing turned off today, uploading 1 November, service completely 1 February 2017.

    http://blogs.oldradio.net/tb/1796

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