Picking Up the Dropbox

4 Apr

At this point in the semester, we all have had some experience with Dropbox. For better or for worse, investors seem to think that the firm is really going to take off. With a valuation at 4 billion dollars, the 100-person company was able to rake in $250 million in venture capital to jumpstart its way to greater growth.

The Company Backstory

Dropbox makes software designed to help its customers store and distribute data among a large number of devices. The company must go up against tech giants like Amazon, Google, Apple, and Microsoft, but faces most of its competition from its rival company Box Inc. Although some security hiccups exist, Dropbox prides itself on security and encryption, as well as its ease of use and quick customer adoption. According to Dropbox’s 29-year-old CEO, Drew Houston, services from the big companies like Apple and Microsoft “work really well on their own platform, but others are an afterthought…no matter what you use, Dropbox will work.”

It’s Good, But Is It Good Enough?

Dropbox’s software certainly has a lot of business applications. It is great for distributing videos of an impromptu speech and sharing documents within a company, but where is the company going to go from here? Dropbox may not be able to innovate fast enough to outpace companies like Apple and Amazon. The larger companies in the market simply have more resources at their disposal. Still, chances are the company will not get bought out. In 2009, Apple CEO Steve Jobs approached Mr. Houston with a buyout offer, but Mr. Houston said “No.”

A major issue for Dropbox going forward is hiring effective staff. After the most recent round of fundraising, the firm purchased a new, 87,000 square foot office in San Francisco that it intends to fill with engineers and marking managers in hopes of accelerating its growth. Bringing so many new people into what is currently a relatively small company comes with risks, and quality employees can be hard to come by.

To compete and become a major player in the cloud-computing market, Dropbox is going to have to play to its strengths. The company should look into developing applications for different types of devices to maintain its position as a user-friendly and accessible tool. It has already taken a step down this path by partnering with handset makers like HTC, but many companies already have deals to integrate their cloud computing with Apple or Microsoft’s products.

Personally, I wish Dropbox the best. I like to see a smaller company take on the giants and win. Good Luck, Mr. Houston, and good luck to your company!

by Michael Zissman

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3 Responses to “Picking Up the Dropbox”

  1. Jacob Trunsky April 5, 2012 at 9:36 pm #

    I really enjoyed your post, Michael! I think you make some great points. A huge opportunity in technology now is open source software. The giants, such as apple and google make proprietary software that only works with their devices, but people have a need to communicate with others no matter what device they are using. Also, dropbox is in a business where network effects are huge. Perhaps they could remain dominant by offering more storage for users and subsidizing their costs with ads. The advertising model is becoming very popular with technology companies (Amazon Kindle, Pandora, etc…).

  2. Mike Zissman April 16, 2012 at 3:02 am #

    Thanks, Jacob! I’d be curious to see if they decide to offer advertising opportunities, do you think that would fit with their company image? I agree that Dropbox is heavily affected by network externalities, and maybe being ad-free could help differentiate them from their larger competitors.

  3. Kyle Seohee Lee April 23, 2012 at 1:55 am #

    A dropbox user myself, I became interested in this software because of its simple user interface, among many things. In terms of security and ease of use, it’s definitely one of the best sync software out in the market.

    I personally think Dropbox should stay away for advertisements for two reasons:
    1. Unlike other websites, Dropbox is 100% personal. All files are private documents (unless shared), so I think putting advertisements might push the company away from its core values.
    2. Since the Dropbox market focuses on individual users, Houston should aim for user growth instead of increase in short term profit. It seems like growing tech companies need the volume first to become a major player in the market.

    As a new and upcoming company, Dropbox certainly has the potential to become a major player in the cloud computing market. Most of my school files are now on Dropbox, so I wouldn’t be surprised if all 100% of my files are on Dropbox soon.

    Thanks for sharing this, Mike!

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