Morepheus Research, a new corporate/financial research firm, has posted an in-depth article about Backblaze. To say “it doesn’t look good” is an understatement.
Backblaze: A Loss-Making Data Storage Business Mired in Lawsuits, Sham Accounting, and Brazen Insider Dumping Link to Article
Backblaze is well thought of in the TidBITS community, as well as the larger tech community. So, the accusations in this article should be of interest.
I haven’t finished the article, so I’ll edit this post when I do.
Ouch. Serious allegations, albeit from a company that is clear about how it is shorting Backblaze’s stock.
I really need to look into CrashPlan again, since the company has been sold and split out a few times since it canceled CrashPlan for Home in 2017, and there is once again a user-level service.
I just don’t know. I used to use CrashPlan, until they got rid of their user-level plan. I keep considering BackBlaze, but for some reason it never “felt right” even though many of my peers used it. I’ve been using Arq to back up to some of my various cloud storage plans, but they keep imposing limits.
I need to find another option, but I’ve been busy and haven’t pursued it. I was playing around with tarsnap for a while, and it’s definitely secure (“Online backups for the truly paranoid”), but it’s kind of expensive to “back up everything”. I need to work on a strategy to only back up specific critical information, at which point it would be more cost effective.
Hmmm. Thanks for posting this. I had no idea about any of this. I use ARQ with B2, and also have a client backing up to B2 from Synology NAS units, so I may look into switching everything over to AWS (I use glacier storage for some of my ARQ backups) or to Wasabi.
I don’t use Backblaze or own its shares. But I do see how often BB comes up as a cloud storage service and I like looking into companies I don’t know much about.
So after a quick glance at some stats about BB’s stock (BLZE) and the company, here are some initial thoughts:
BB has not been profitable for multiple years.
BB has had negative cash flow for mutiple years. This means—essentially—BB is spending more money than it takes in and if the trend continues, BB will be forced to either find lenders or attract new investments to continue operating.
BB has been increasing its sales revenue over the last few years.
BLZE is a micro-capitalization stock (Market Capitalization = price per share x total number of shares issued)
This means as a stock, BLZE is an attractive target for traders engaging in short selling. Micro-cap stocks are easy to manipulate using memes or negative press releases. In any case, BB’s business does not seem to be going well, even before taking Morpheus’ allegations into account.
I’d say, then, that BLZE is a poor fit for most buy-and-hold investors. However, I don’t believe BB’s customers need to immediately find a replacement for its services. It would be a good idea, though, to begin looking at alternatives and to make copies of data stored at BB in order to be prepared in case BB suddenly ceases operations or is acquired by another company whose policies or pricing are unsuitable.
I skimmed through the article. It’s very heavy on investor-speak, with very little attention given to how this will affect customers at all (and that mostly the large enterprise customers that they’ve been courting). While I understand that investors are those with the most skin in the game, how the business is run will inevitably affect customers, and how customers are affected will determine whether it’s even possible for them to turn things around.
Once you lose a certain fraction of your customer base because of mismanagement, you’re not coming back from that without a total overhaul and restructuring at every level—or a miracle. I’ll be very surprised if this report doesn’t lead to an SEC investigation, and based on the information presented here, such an investigation has high odds of resulting in penalties that the company simply cannot survive.
I’ve been using Backblaze for several years. I had had some issues with them many years ago, before I upgraded to my current 2019 MBP, but no significant issues since then. I’m going to keep an eye on competitors, but I’m not in a hurry to switch, considering that my most recent two-year subscription just renewed earlier this month. My current backup is over 8 terabytes, and that will take months to upload from scratch to a new service.
As a share holder (not many shares) this is not very good. I am six months into a two year renewal. I am pleased to see Crashplan back in the personal space. I never wanted to leave Crashplan in the first place.
I used to use CrashPlan. When they cancelled the home version I went with BackBlaze due to recommendations from many Tidbit users.
I’m just a home user but want my data backed up online. So any recommendations would be great. I’ve not read the article yet. I’ve printed it out to read it offline.
Adam, I’d love to hear what you find out after looking into Crashplan and what you intend to do.
Wasabi works very well with Arq. Highly recommend, especially if you fit into the minimum 1 TB requirement; excellent starting consumer value, with few competitors offering similar reliability guarantees.
However. I’ve never been very happy with their marketing “No hidden fees”. The biggest hidden fee of all is the minimum object lifetime, i.e. for whatever reason there is no economic benefit to deleting objects sooner than 90 days. And it’s not ideal for egress. So you need to be clear about what you’ll use it for. If your goal is primarily backup, then, yes, it really is an excellent deal, so long as there isn’t too much churn in your data, and you’re primarily expecting transit to go unused. This, happily, is typically the case.
I just switched to AWS for the client today. I was already doing some stuff with AWS for them so it was pretty simple to set up three new buckets. The backups keep daily for a week, biweekly for a month, bimonthly for a year for most of their backups (one is set to 5 days) so I have a reminder set for May 1 2026 to delete the B2 buckets.
This way I don’t have to worry about what will or won’t happen - AWS will definitely still be around. They are paying about $9 a month to B2 so a few dollars more won’t matter much to them.
I use iDrive. Not the friendliest, but cheap. Perhaps I’m getting what I paid for. I’ve never had to recover from it, aside of a test recover. I’m just using it as a backstop for my local backups.
I read the Ars Technica story and took a quick look at BB’s required public-company filings at sec.gov .
I’d say there are definitely some concerns investors should have about BB. It recently switched auditors, from BDO to Deloitte. While both are major firms, such a move could be a sign that BDO disagreed with something BB was doing. Or, to be fair, it could also be due to a contract ending. But when coupled with a disclosure in BB’s 2024 10-K (a much more dry and technical version of the annual report that is sent to shareholders) that BB was required to implement “Remediation of Previously Identified Material Weaknesses in Internal Control Over Financial Reporting”, it does seem that Morpheus’ allegations are not unfounded.
However, the problems “reported” by Morpheus have been in the public domain for at least a year. So, I view Morpheus’ actions as opportunistic and an attempt to manipulate BB’s stock price by scaring retail investors. Institutional investors have been aware of what’s going on at BB for quite some time.
I’m inclined to agree with Halfsmoke here about the financial and investment questions. My primary concern here as a home user is the company’s long-running lack of profitability. Investors won’t wait forever for the company to turn a profit, and the allegations in the lawsuits have been making investors that much more twitchy; the Morpheus report just augments that.
If the company can’t turn a profit soon, it won’t be able to stay in business; you can’t lose money indefinitely. The more the news of their money hemorrhage and potentially illegal financial actions spreads, the more both investors and customers get cold feet, which just makes it that much harder for them to achieve profitability. A financial shutdown, such as a bankruptcy, puts my several terabytes of backups at risk of being sold to a company not of my choosing or disappearing altogether.
So the ultimate question is, at what point should customers decide it’s time to abandon the sinking ship?
I have to say that if Backblaze were to go under, I would miss the quarterly / annual drive test reports that they provide. It’s a valuable service back to the community to provide real world health data across brands and drive sizes. When I was involved in buying hardware at the corporate level, it was useful as a data point. Much less so when buying for personal use, but still interesting at a geek level.
I’d say there are a few things individual customers of BB can track to help make a decision about when to leave BB:
Set up a newstracker that follows news about BB. Google Alerts is an option, as is Apple News.
If you have a stock brokerage account, set up news and price alerts for BLZE. Good metrics to follow could be the 90-day and 200-day moving averages and daily trading volume. If BLZE’s price goes under the moving averages on consecutive days and/or the trading volume goes way above its usual level, it could be a sign institutional holders of BLZE are liquidating their positions.
Keep track of what the major holders of BLZE are doing. One place to do this is Backblaze, Inc. (BLZE) Stock Major Holders - Yahoo Finance . Due to the lag in reporting, though, this won’t be a good tripwire. However, if a major ETF or mutual fund operator, such as Blackrock or Vanguard, makes major cuts in its holdings, that can be a warning sign about a company’s future.
For what it’s worth, I maintain three local backups (Time Machine, and separate Carbon Copy Clones to a USB-C enclosure and M.2 NVMA [n.x.y OS releases) and a Thunderbolt 3 enclosure and M.2 NVME [n and n.x releases]), as well as using Backblaze for network backup.
Without knowing anything about the accuracy/seriousness/impartiality of the Morpheus claims, it’s worth noting that Backblaze’s IPO contained very clear warnings that the company was quite unlikely to be profitable in the short or medium term. While they offered very small buy-in opportunities for customers (in my case, a maximum of $1K), most of the IPO was clearly going to be purchased by banks and VCs. I viewed the $1K investment the same way I used to view a friend’s requests for $20 loans when I was younger — if I ever got repaid, it was found money; if I didn’t, I was showing that I valued his friendship, as I value what Backlaze has offered to individuals (I’m much less familiar with B2), in my case, for the last 11 years.
Keep in mind, though, when reading the Risk Factors in both the S-1 and more current filings, a lot of it is boilerplate that is used by a lot of companies, from large to small, mega-cap to micro-cap.
ETA
If those were “friends and family” IPO shares (shares, usually priced at the institutional IPO price, made available to selected people before the stock begins trading), it can be very lucrative to participate. To take an extreme example, Netscape’s IPO price was $28 and shares closed at $58.25 on its first day of trading. Not bad for a day’s work…