Where is the free cloud storage service?

The author of this article, Andres Rodriguez, is Nasuni's CEO. Nasuni mainly provides cloud computing storage services to enterprise users, which is fundamentally different from the operation of Box and Dropbox. The recent listing of Box has sparked the author's thinking, Andres on the future of cloud storage.

Everyone knows that for businesses, free is not a sustainable way to develop, especially for companies that survived the dotcom bubble 15 years ago (dot-com bubble). But in today's cloud-storage industry, this law does not seem to exist. Millions of dollars have been put into the cloud storage market to differentiate between different cloud storage offerings, and only a small percentage of users are willing to pay for it.

Technology companies offering free products to users are nothing new, but it's not so easy to upgrade free users to paid users, or to make money by targeting ads to users like Google, but no cloud storage company has ever been successful.

Venture capitalists have pumped 400 million of billions of dollars into the cloud storage company Box, which is now valued at $1.2 billion trillion. While only one-tenth of the Box's subscribers are paid subscribers, the performance of the IPO still exceeds market expectations. Unlike the Dropbox, which is the leader in the cloud-storage industry, Dropbox is not publicly listed, so its assets are private assets. Dropbox has already received about $1.1 billion trillion in financing, but its market is valued at $10 billion trillion. Similarly, most users of Dropbox are free users.

Convert user to Customer

Box registered users can get 10GB of free space, while also sharing and synchronizing files with other box users. Similarly, Dropbox also has a certain free space, for 2GB, through a certain invitation mechanism can expand to 16GB maximum. In fact, GB is already a very large unit, 1GB capacity can store more than 15,000 files and more than 300 photos.

Under normal circumstances, the function of free products should not meet the basic needs of users, so that users have to upgrade the purchase of paid version of the power. But basic accounts such as box and Dropbox have been able to meet the basic needs of most users, so it's no surprise that only one-tenth of the users in box are paying subscribers. Moreover, Box has spent more money on the web than on paying subscribers. From January 2014 to October, box revenue reached 153.8 million U.S. dollars, but in the same period only in the market to invest 152.3 million U.S. dollars, if added to other costs, box losses more, in fact, in the nine months, box losses of 129 million U.S. dollars. If Box had to spend the money it earned on subscribers to win new users, what would be the meaning of free products? Perhaps a huge user base could attract more investors. After all, the free use of products for users is to attract more users and turn them into paid users, the simple truth is that Box listing is a last resort, just to attract more money to offset Box's huge losses.

Since Dropbox has not yet been listed, its financial data are not disclosed. But based on its similar business model and the amount of money being raised, it is not hard to speculate that there is no big difference between the Dropbox and the box. The only reason Dropbox financing is that companies do need these funds, why do they need so much? See Box.

Why can't you just say no?

From the market point of view, "free" is a relative concept, is to pay the user's excessive. But Box and Dropbox spend a lot of money on free users, they have no way to eliminate these free users, and as these users increase their demand for storage capacity, the amount of money that companies invest is rising, with more free users joining, which leads to an increase in corporate budgets, Form a vicious circle. Last year, in order to attract more paid users, Dropbox reduced the cost per gigabyte by 90%, which is a very clear hint, but also the most unwilling to see: As the market develops, the price of the network disk services will be infinitely close to zero.

So now the question is, how do these free cloud storage services survive? In the long run, the only way to survive is to be bought by a software giant and then integrate cloud storage and synchronization into its own main products. If you still want to operate as an independent company, start by eliminating the free value-added before developing a range of other powerful products.

But that does not mean that cloud synchronization and storage have no meaning. I use Dropbox every day, it really works! But this approach will quickly integrate into other products as a function of time. If these vendors can develop a cloud storage product into a product that integrates all aspects of communication, collaboration, and so on, then survival is no longer a problem. Now that the Box is moving in this direction, Dropbox needs to keep up.

Finally, I would like to say that both Box and Dropbox need a group of customers who are willing to pay for their products, not users. It's easy to repeat the dotcom bubble 15 years ago If you just have a large number of free users. The lesson is heavy!

Note: The dotcom bubble (dot-com bubble): the dotcom-related speculative bubbles that took place between 1995 and 2001, in many stock markets, technology stocks are rising, and eventually they are all a bubble, and many internet companies have collapsed and have been devastated.