Dropbox Caught Between Warring Giants Amazon and Google

An anonymous reader writes: Google and Amazon are both aggressively pursuing the cloud storage market, constantly increasing available storage space and constantly dropping prices. On its face, this looks great for the consumer — competition is a wonderful thing. Unfortunately, many smaller companies like Box, Dropbox, and Hightail simply aren't able to run their services at a loss like the giants can. Dropbox's Aaron Levie said, "These guys will drive prices to zero. You do not want to wait for Google or Amazon to keep cutting prices on you. 'Free' is not a business model."

The result is that the smaller companies are pivoting to win market share, relying on specific submarkets or stronger feature sets rather than available space or price. "Box is trying to cater to special data storage needs, like digital versions of X-rays for health care companies and other tasks specific to different kinds of customers. Hightail is trying to do something similar for customers like law firms. And Dropbox? It is trying to make sure that its consumer-minded service stays easier to use than what the big guys provide." It's going to be tough for them to hold out, and even tougher for new storage startups to break in. But that might be the only thing keeping us from choosing between the Wal-Mart-A and Wal-Mart-B of online storage.

Comments

I seem to remember...

[sd4f]

A while ago some big company offered to buy out dropbox and they declined. Surely it was a sign of the times that the big guns were going to enter the market, and when they get in, they don't muck around. Fair competition isn't something the big companies enjoy doing, as their whole business model tends to revolve around destroying competition then bleeding the market for what it's worth.

I used dropbox for cloud storage, I liked it for collaborative work. Would be a shame to see it get destroyed through aggressive anti-competitive practices.

Re:I seem to remember...

[sribe]

There is nothing "anti-competive" about lower prices or free services.

Using profits from one sector to support selling at a loss in another sector in order to drive competition out of business is ACTUALLY THE DEFINITION OF ANTI-COMPETITIVE.

Re:I seem to remember...

[Rick in China]

What do you consider fair competition, bigger players keeping prices high (like Dropbox, way overpriced limited offerings.) so they DON'T capture more market share? Is that considered fair competition? It sounds more like no competition, more like price-fixing agreements between similar service offerings, no?

When companies compete, prices often drop - in this case drop significantly.. a company is willing to operate at a loss in order to own more of the market share and other companies simply can't compete, is that unfair? Or simply winning the competition? If you manufacture something in the US for $5 and sell it for $10, and I manufacture the same in China for $1 and sell it for $5, you may complain that you can't compete because to match my price you'd have to operate at a loss....well, sorry to say, but sad day for you. Sad day for dropbox. Improve the offerings and make the prices more reasonable or suffer the consequences that most every company has to deal with in their given industry.

Re:I seem to remember...

[ShanghaiBill]

Using profits from one sector to support selling at a loss in another sector in order to drive competition out of business is ACTUALLY THE DEFINITION OF ANTI-COMPETITIVE.

This is only true if they later use that market dominance to hurt consumers. Anti-trust law does not exist to protect competitors, it exists to protect the public interest in a competitive market. If they offer on-line storage for free permanently, that is not detrimental to the public. Plenty of companies offer free services to attract customers, while other companies may charge for the same services. That is not illegal.

Re:I seem to remember...

[NotQuiteReal]

"for free for life"

LOL

Re:I seem to remember...

[Anonymous Coward]

Umm, giving away stuff at a loss while you support the losses with another part of your business is very much anti-competitive.

Re:I seem to remember...

[Pausanias]

What happened to all the penguins---are they no longer on Slashdot anymore? How about these reasons to like Dropbox over MS, Google, and the others:

- Linux client
- Follows symlinks
- Automatic infinite version history (for a fee)
- LAN syncing for faster speed
- Bandwidth controls
- Automatic full resolution photo uploading from mobile
- Sync that just works

It's not all about the price ya know. Some of us like quality too. I currently have 24GB of free storage through Dropbox which I got through a special promotion. It has always worked flawlessly and never let me down.

Re:I seem to remember...

[Anonymous Coward]

This is incorrect. The only reason it seems this way is because it takes so long to gather evidence, and the ensuing court cases take so long to eventuate.

Anti-competive practice may be as simple as lowering your price below cost (using any type of funding) for the purpose of driving out competition. Once that competition is gone, you can then raise your prices back to normal (or higher), and have a larger slice of the pie.

The above act itself is subject to anti-trust laws, and not just the fact that prices may have been raised to a higher value after the fact.

Take a look at the Microsoft anti-trust suits. They were not purely about the consumer, as Microsoft was all about expanding market share to boost profit, rather than increasing prices. It was about leveraging one market segment to gain market share in another at the expense of the competition.

Re:I seem to remember...

[ArmoredDragon]

No, it's not. This goes by many names, e.g. the freebie model, the razor and blade model, etc. It is actually infinitely sustainable. It's also very much not anti-competitive.

Google (and I'm wagering Microsoft and Amazon are similar) makes their money on advertising. They get that by attracting more users. They get and keep these users by building a complete ecosystem, and make their products work more efficiently with one another. Google's current cash cows (AFAIK) are search, email, and android. By making these products work more seamless with one another, they complement one another.

In the case of storage: If Google offers a ton of storage, that might be something that attracts them to their Office suite (which they also make money on, just not as much as the other three.)

Why would a user, for example, stick with Google Docs if it offered basically no storage (or the storage was expensive) when Office 365 offers 15GB (or whatever the amount is) for free? Amazon I imagine wants to attract people to its service so that they might buy AWS, EC2, or shop at Amazon. Either way, it works out in the end where you get stuff for cheap.

Also note that ALL of these companies are in the storage business for their own internal purposes. It likewise makes sense that they would lease out their own internal service to external customers at a cheap rate to help offset a cost that they ALREADY have to bear anyways.

And finally, I wish the hippies would make up their damn mind: They complain about how evil corporations are when something is too expensive, and then they make the same complaint when it is too inexpensive.

And Microsoft. And Apple. And Adobe. And...

[xxxJonBoyxxx]

Having worked in this "file sharing" industry, this result is no surprise to me. The platformers, especially those with heavy investments in content suites (Microsoft Office, Adobe Photoshop/PDF, Google Docs, etc.) are tired of letting the middlemen make money off of cloud storage and collaboration. Furthermore, they understand the danger of allowing their customers to congregate around "platform independent" technologies too long. Worse, companies with just a dozen or two people can crank out everything Box, etc. can do in less than a year and sell it as either an on-premise or cloud solution. (There are dozens of clones now.) The result is that companies like DropBox aren't worth anything for their technology anymore - instead, it's a race to see if they can "run out the clock" and sell their customer base to one of the platformers before they dwindle down to nothing.

Yeah, as music artists know, not so fun is it?

[s1d3track3D]

'Free' is not a business model." - Aaron Levie (Dropbox)
Yes, something music artists know all to well...
It's a bummer when your on the wrong side of supply and demand aint it?!

Re: Yeah, as music artists know, not so fun is it?

[corychristison]

I am not artistic in any way. So I may be biased here.

The problem is expecting to get paid every time someone wants to hear the recording you made 3 months ago (or three years ago, or thirty years ago). I understand it is a means to produce more content, but rarely actually happens.

The waitress at the last restaraunt you ate at has to keep doing the same thing (with minor adjustments) over and over again to keep making a wage. I highly doubt she has delusions of serving one table and making a living for the rest of her "career".

I have a brother who enjoys making music. He subs in his friends bands from time to time because he enjoys playing. During the day he works a normal job, has no ambitions or delusions of "making it" and playing an instrument as a career.

I'll be blunt here: if your music really is as fantastic as you think, you'd already be sleeping on a bed made of money. Maybe you should go and reflect on that.

DropBox is hopelessly overpriced

[popo]

It's one thing to blame Amazon and Google for a price war. But DropBox's pricing scheme was always overpriced. (And the same goes for Evernote -- even though theirs is a slightly different offering). What should cost a couple bucks a month is priced multiples higher.

Besides, DropBox has entertained MULTIPLE exit opportunities and rejected them all.

If they disappear now, they will have only themselves to blame for not choosing any one of the multiple exits that were on the table.

The landscape changed rapidly around the early leaders. And yet, those leaders did not change their models rapidly to match the changing landscape. Knowing when to quit, and how best to exit are essential parts of management. While we may applaud unbounded grit and unshakeable tenacity -- those qualities in a CEO are more frequently disastrous than beneficial.

Re:Dropbox sucks

[spire3661]

This is why i run my own 'cloud' service using Synology NAS boxes. I cant stand how much file manipulation all the big consumer cloud vendors do. I want my cloud files to feel EXACTLY like a folder in a share over a slow link. Stop scanning, interpolating, deduplicating etc, jsut store my files.

No linux client from google

[Bram Stolk]

It is dropbox for me:
There is no linux client for Google Drive.
I think years ago it was supposed to be 'soon'.

Re:AntiTrust

[Anonymous Coward]

Anyone who thinks we need stronger government meddling is crazy.

You're not the customer, you're the product

[taustin]

Free is, indeed, a fine business model when the real purpose of providing cloud storage is to data mine it for targeted advertising, which has always been Google's business model, and is increasingly Amazon's, as well. 95% of Google's revenue is from advertising, and getting you, and me and everyone else, to store all their documents in Google Drive is well worth the cost to increase ad rates. Amazon's business model is a little different, but is getting more and more like Google's lately, with their announcement that they're working on their own ad network to replace Google's.

Everything that both companies have done lately - and that Google has ever done, has been to stuff that profile database as full as possible on everyone human being on the planet.

How do you tell when competition is fair?

[Camael]

While I broadly agree with your ideal that fair competition is good for customers and specifically with the example you gave, there is more to cheap prices than meets the eye. For example, not that long ago Walmart got into trouble for predatory pricing.

The complaint accused Wal-Mart of selling butter, milk, laundry detergent, and other staple goods below cost at stores in Beloit, Oshkosh, Racine, Tomah, and West Bend. A bottle of laundry detergent that cost Wal-Mart $6.51, for example, was sold for less than $5 at several stores> . The company’s intention, according to the complaint, was to force competitors out of business, gain a monopoly in local markets, and ultimately recoup its losses through higher prices.

I think most people will agree this kind of competition is bad from the consumer's point of view. The problem is, it is very hard to prove intention. That very same marketing tactic, i.e. selling products at or below their cost price, is also a popular marketing tactic known as loss leading.

It’s a classic retail technique: Attract shoppers by lowering prices on certain items, with the idea that once customers are in the store, they’ll buy full-priced items as well.

From the merchant's point of view, he is willing to take a loss on some items to earn traffic for his other goods. To his competitors selling the same loss leader items however, this is unfair competition. My point is, it is a very thorny issue deciding when certain competitive strategies are fair or unfair and much depends on the facts of each case.

Grandfather Clauses vs Hostage Negotiations

[retroworks]

I have a non-profit association which uploaded dozens of videos of repair geeks in several countries on Viddler.com, a "free" video storage back in 2007, 2008. Viddler, like Youtube and Vimeo, was in the video storage space, and had trouble making any money vs. Youtube. First thing they had to do was to drop "source files" in 2010, when all the original quality was lost to make space. Then last April they gave members about a month to either pay up monthly or lose all their videos.

This was really disturbing and it's my main concern about dropbox. If they suddenly change the price, and we have years of space stored, how realistic is it to download? Viddler did not offer any mass-download, we had to do it file by file. They cut us a break in the end but it would have been very appreciated if the EULA agreements allowed for something other than retroactive storage negotiations. At this point we choose where to put files not just based on monthly price, but the future monthly price and the ease of moving out. The latter is the most important, I'd never put material on the cloud again which took 2 minutes per file to get back off.