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Dropbox Caught Between Warring Giants Amazon and Google

Posted by Soulskill on from the rsync-is-still-pretty-cheap dept.

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.

29 of 275 comments (clear)

  1. I seem to remember... by sd4f · · Score: 4, Insightful

    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.

    1. Re:I seem to remember... by geek · · Score: 4, Interesting

      Would be a shame to see it get destroyed through aggressive anti-competitive practices.

      Fuck off. Everything you posted IS COMPETITION. Dropbox refuses to compete. They offer 2 tiers and ridiculous prices. If they had offered me a 30GB plan I would have jumped at it but my money is no good to them. Instead I would have to beg for "extra" space and game the system. So FUCK dropbox. They wont offer what I want so I've gone elsewhere. Thats called competition.

    2. Re:I seem to remember... by ShanghaiBill · · Score: 3, Informative

      aggressive anti-competitive practices.

      Cut the crap. There is nothing "anti-competive" about lower prices or free services. There are very few barriers to entry in this market, so if they later try to raise prices or cut services, someone else will step in and take their customers.

    3. Re:I seem to remember... by sribe · · Score: 4, Insightful

      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.

    4. Re:I seem to remember... by exomondo · · Score: 3, Informative

      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.

      How are you separating gmail and drive profits? They are both just methods of accessing the same block of storage. Should they be making you pay more if you want to access that same storage in a different manner?

    5. Re:I seem to remember... by Rick+in+China · · Score: 4, Insightful

      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.

    6. Re:I seem to remember... by ShanghaiBill · · Score: 3, Insightful

      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.

    7. Re:I seem to remember... by NotQuiteReal · · Score: 3, Insightful

      "for free for life"

      LOL

      --
      This issue is a bit more complicated than you think.
    8. Re:I seem to remember... by Pausanias · · Score: 5, Insightful

      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.

    9. Re:I seem to remember... by Anonymous Coward · · Score: 5, Insightful

      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.

    10. Re:I seem to remember... by ArmoredDragon · · Score: 5, Insightful

      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.

  2. Dropbox use AWS by a.koepke · · Score: 5, Interesting

    Amazon have never chased the consumer business, they don't want that. Their focus is fixed on supplying IT services which companies can then build their solutions on. Dropbox is powered by AWS, they are the wholesale provider.

    Amazon reducing their prices should only be a good thing for them as that will reduce the operating costs of Dropbox.

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    1. Re:Dropbox use AWS by Solandri · · Score: 4, Interesting

      I was going to post that too. But while googling to make sure Dropbox still used Amazon S3, I came across this article. Apparently the problem for Dropbox is the price volatility. Amazon can lower or raise its prices on a whim because they don't have much competition. Dropbox doesn't have that luxury.

    2. Re:Dropbox use AWS by Voyager529 · · Score: 4, Interesting

      That said, perhaps DropBox could sell a self-hosted version of their software and bring over their ease-of-use.

      That's already been done.

      The challenge DropBox faces with a self-hosted iteration of its software is that it stops being 'simple'. Existing Dropbox clients would have to be completely rewritten to go from asking "username and password, please" to "username, password, server address, and port, please". Even if we hand-wave away that problem by assuming that users can either correctly type a server name and port number, or that Dropbox will still have 'accounts' but essentially become a DynDNS clone and simply handle network traversal and matching users to their data repositories, we then have to deal with the Dropbox Server software. There may be a market for Dropbox to sell drives like these, but I don't see Western Digital wanting to partner with Dropbox to provide redundant functionality to their existing apps, and I don't see consumers paying more for a Dropbox branded drive if they're already in the "self-contained NAS" market - a handful might, but now Dropbox, for all intents and purposes, finds itself with all the challenges of being an external hard drive vendor...with the added bonus of directly competing with the vendors from whom they're sourcing their parts.

      The obvious alternative to this would be for them to sell their software and let it run on a LAMP/WAMP stack, on whatever hardware is on hand, and market it to the enthusiast/enterprise market, like UnRAID or Nexenta. That might be a short term win, especially if they do some fancy stuff with LDAP/Active Directory integration. Conversely, I see it potentially being a support nightmare based on how it deals with storage. Will it install on an Ubuntu desktop containing a hodgepodge of hard disks? Would it be more like FreeNAS where it makes its own software RAID, but requires hardware to be dedicated (or its own VM)? Even at that, how do they bill for the software? One-time use seems like it wouldn't be a good long-term plan, but I don't see too many users being okay with Dropbox charging them an annual fee to use their own hard drives. CALs could be a useful method (arguably the most workable one), but they'd have a hard time managing their consumer-friendly image on one hand with Oracle-style licensing on the other.

      Levie is right; 'free' isn't a business model. Dropbox's 2GB number is only sustainable because they're betting that a certain number of those users will go for a paid tier. Either every Dropbox customer will pay, or they start advertising, or they data mine. To my knowledge, those are the three business models that have sustained themselves on the internet. 'Everyone Pays' may be a viable model if Dropbox can do things like sell gift cards for their service (for users unable/unwilling to fork over their Mastercard) and come up with the right formula of how much customers are really willing to pay for storage+ubiquity+simplicity. Although Levie must certainly be feeling the pinch from Microsoft's 1TB of OneDrive for $60/year, the one client we attempted to migrate to that service went back to dropbox VERY quickly because the desktop client was utter crap; I'm left to believe that Dropbox's simplicity still has an edge just yet. Conversely, I don't think that $50/month for 500GB is worthwhile, either - That's only slightly less than it'd cost to buy a 500GB hard disk outright from Newegg every month.

      Dropbox is still a well-recognized brand that I'm certain many consumers are still willing to pay a premium for, and Microsoft and Google are competing not only with more storage for less money, but with integration as well - editing a spreadsheet in Sheets or Excel and seamless saving of attachments is not the kind of thing that Dropbox can effectively compete with.

    3. Re:Dropbox use AWS by Amouth · · Score: 4, Interesting

      We tried ownCloud first, ended up with a complete mess of files as the client is very dump and only works if there is a perfect clock sync between all clients and everyone is on a low latency high bandwidth client.

      Considering we are working with multiple people on the road in spotty net connection areas with laptops from different companies whose clocks differ a small bit we ended up with a gigantic mess of conflicts and 0 byte files which lovingly got propagated.

      Needless to say our testing of ownCloud showed it to be far from ready for production use.

      Also their documentation and reliance on community forums was very sad to say the least.

      --
      '...if only "Jumping to a Conclusion" was an event in the Olympics.'
  3. Sneaky by Tokolosh · · Score: 4, Informative

    A drive-by Dropbox installation turned me off.

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    Prove anything by multiplying Huge Number times Tiny Number
  4. And Microsoft. And Apple. And Adobe. And... by xxxJonBoyxxx · · Score: 4, Insightful

    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.

  5. Yeah, as music artists know, not so fun is it? by s1d3track3D · · Score: 4, Insightful

    '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?!

    1. Re: Yeah, as music artists know, not so fun is it? by corychristison · · Score: 5, Insightful

      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.

  6. DropBox is terrible by goruka · · Score: 5, Interesting

    Unlike Google which uses ownership to determine size used, you can run out of space in DropBox by someone sharing you a large folder. DropBox also make is impossible from the web interface to see the sizes or usage of files to make room or clean up. I ended up paying Google for 100gb because their service is simply better.

  7. DropBox is hopelessly overpriced by popo · · Score: 5, Insightful

    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.

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  8. Re:Dropbox sucks by spire3661 · · Score: 3, Insightful

    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.

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    Good-bye
  9. No linux client from google by Bram+Stolk · · Score: 4, Insightful

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

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    Bram Stolk http://stolk.org/tlctc/
  10. Re:AntiTrust by Anonymous Coward · · Score: 3, Insightful

    Anyone who thinks we need stronger government meddling is crazy.

  11. Re:BTSync by Noah+Haders · · Score: 4, Interesting

    i was super jazzed about bittorrent sync because I learned about it around the time Dropbox bent over for NSA and welcomed Condi on board. I don't support companies like that. but my work started blocking bittorrent ports and I'm afraid I'll hit some automated logging system becuase I'm running on a bittorrent client on my computer.

    so I'm still looking for a good alternative that's not dropbox. I'm trying out sync.com, it's based in CA so it's immune from normal stupid warrants. but I might go to spideroak and get the full encryption. if it's good enough for snowden it's good enough for me.

  12. Its all about privacy protection and nothing else by mlwmohawk · · Score: 3, Interesting

    Dropbox had a great claim, originally, that your data was secure not even "dropbox" could see it. Well, it turned out that was a lie.

    The bigger issue is privacy protection. If I upload non-public information to one of these services, which one can I trust to keep that private? If there is no clear answer, then price is the only differentiator. Who's going to protect your privacy when presented with an NSL? Answer: no one. After that, who cares?

    I believe that if a storage company wants to stand out and charge a premium, it needs to hire lawyers, a lot of them, to defend the rights of its customers. When you store your data on your property, you are protected by the 4th amendment, the warrant requirement, and the legal right to a defense, when you store your data in the cloud, you have little, if any, protection, and the service provider has no duty to protect your data from government requests.

    Criminals, lawyers, and the general public have the same needs. If you can't protect criminals, you can't protect the general public. Data storage has never been about the bits. It has always been about the meta requirements: security, longevity, recoverability, and yes, cost. The google/amazon threat is about cost, what about the other requirements?

  13. Re:Fighting for all of our stuff by ShanghaiBill · · Score: 5, Interesting

    It's nice that all these huge companies are so interested in control of everyone's data.

    Just encrypt your files before you put them in your shared folder. Or just set the folder to automatically encrypt. There are dozens of "how to" webpages that explain how to do this with DropBox and TrueCrypt, and it isn't hard to do it with other services.

  14. How do you tell when competition is fair? by Camael · · Score: 3, Insightful

    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.

  15. Grandfather Clauses vs Hostage Negotiations by retroworks · · Score: 4, Insightful

    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.

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