What it is: Dropbox is one of the most popular cloud-based services that offers free cloud storage along with subscription plans for more storage space.
Box and Dropbox will soon hit the stock exchange, yet be wary of these companies. Both offer cloud-based storage and that’s exactly their problem. Microsoft, Google, Apple, and many other companies also offer cloud-based storage so there’s absolutely nothing but price to differentiate Box and Dropbox from Google, Apple, and Microsoft. When price is the only unique advantage you have, rivals can destroy that advantage in an instant by lowering their prices.
You never want to be in the commodity business where your only difference is price. The minute price is the only advantage, the market is already gone.
Just look at the PC market where manufacturers keep cutting costs and providing cheaper parts, zero customer service, and near zero customer support. PC manufactures can’t provide decent support and still sell low priced PCs.
Now look at the Android smartphone market where only Samsung makes money, but other manufacturers can develop decent Android smartphones too. Now Samsung is caught between the high-end smartphone market that Apple is winning and the low end smartphone market that Xiaomi and Huawei are winning.
Neither Box nor Dropbox offer anything different. The real problem is that Box and Dropbox totally rely on selling cloud storage subscriptions while Google, Microsoft, and Apple do not. For these bigger companies, cloud storage can be a loss leader to get customers to pay for the company’s other services. For Box and Dropbox, cloud storage subscriptions are their sole source of revenue. Since Google, Microsoft, and Apple can undercut their prices below what Box and Dropbox must charge to make a profit, box and Dropbox don’t have a chance. Their business model will get decimated by free offerings from Google, Microsoft, and Apple.
Never get in the commodity business since that means having to work harder for less money so you can provide less service to cheapskate customers who will switch brands in an instant as soon as a rival offers lower prices than your own. In the commodity business, customers win but companies do not. Be careful of investing in Box or Dropbox and definitely be wary of staying in the cloud storage business that is no different than any offerings by rivals. In a commodity business, nobody wins.