[omarhegazy]

How is Dropbox's core business unsustainable?

The way I see it, Dropbox wants to be the filesystem and personal hard drive of the Internet. Easy enough business, just sell hard drive space. And as always with any software business, with users, you have data, and with data, you have potential advertiser money and a lot of investor interest.

Why can't they rival Google/Apple? Yes, bigger companies have a lot more resources. But that doesn't mean that only big companies can succeed. If small companies have nailed a service that big companies can't wrap their heads around/move quick enough to take over, then they'll outperform big companies in that market. Once upon a time, Apple was a small company, too. But they did personal computer and personal computer software better than competitors long enough to become a large company. Not too long ago, Google was a small company too, competing with large companies. The reason they succeeded to go on to become a big company is their superior product. Yahoo and other search engine competitors just couldn't tap into what Google had, whether it be because they didn't possess the genius/talent/skill/anything-other-than-resources Google employees had that made their product better, or because Yahoo was too large to move strategies fast enough to beat Google to market. Even more recent than Google being a small company, Dropbox was just another Y Combinator application that was shat on by oblivious HNers who thought "Don't people just use rsync and ftp?". But because they could provide a product that people wanted before big companies could catch on in time, they grew in size. Small companies have a chance against big companies. If they didn't, it'd be a pretty fascist society where everyone'd be forced to use the same products and services for all of forever.

How is this "flailing"? Google integrates cloud editing (Docs) with cloud storage (Drive) pretty well and that great integration is what's allowing Google to enroach on Dropbox's vision of being "the file system and hard drive of the Internet." Google has just shown us that integrating content creation tools with content storage tools isn't "flailing" or feature creep or anything; it's a valid strategy to boost content storage. And Dropbox is catching the hints. That's why this acquisition exists. So they can integrate content creation (HackSpace) with content storage (Dropbox). Now claiming HackSpace is going to put up a good fight against Google Docs is pretty absurd, but 1. now they're being backed by Dropbox, which should aid in the fight, and 2. remember what I said about small companies having a good chance if their product is good enough? With proper leadership (Drew Houston and Condoleezza Rice [moral issues aside, she has business and leadership skills that are completely separate from her political views which wouldn't affect anything about her position at Dropbox] -- check), resources (Dropbox -- check), and product design and development (this is the risk Dropbox is taking by purchasing HackSpace -- will DB be able to produce a better product than Docs?), yes HackSpace can beat Docs.

"Acquisitions like this never go to plan, and they are almost always a waste of money."

Why does HN do this? Toss around bold and interesting rhetoric that is completely baseless and has no substance or logic. Like the Michael Bay of writing.

This is so absurd, I don't even feel like I need to argue against it; it's like saying "The idea of companies never go to plan and are almost always a waste of money." It's just so ridiculous and against the way the real world works that it's more on you to prove your radical theories than it's on me to prove them wrong.

If acquisitions didn't work to produce a net benefit, then successful companies wouldn't do them, period.

[xerophtye]

>And as always with any software business, with users, you have data, and with data, you have potential advertiser money and a lot of investor interest.

If dropbox goes down that path, not only would they lose a huge chunk of their existing customers, they would definitely perma-ban themselves from enterprise market. And that is where the real money is.

[omarhegazy]

They wouldn't lose too much of their existing customers. Are you implying that massive data collection and advertiser interest are bad?

Most people really don't give a shit about massive data collection. I mean, sure, everyone's a Reddit slacktivist nowadays, throwing around words like "spying!" and "privacy!" but no one really cares, or else we'd all be using rsync + ftp and BitMessage and all that idealistic free software stuff that RMS peddles. People just want to seem special and cool and smart and advanced when they post about how EVIL the government is for spying on all of us. The art of saying "I don't use Facebook; they sell my info to advertisers", then turning around to use Google products (which are fucking unavoidable on the Internet, by the way, did you know fucking ReCaptcha is owned by Google? You'd have to completely avoid the Internet to avoid Google at this point) , is the 2014 spin on the 1990s art of saying "I don't own a television".

We use Chrome and Gmail and Facebook and OS X and Amazon and what-not, because the net benefit of having really convenient software developed by teams of hundreds (thousands, even, in huge cases like Google/FB) talented professionals that are putting in $120K / year's worth of effort beats the net cost of having to pay for that $120K by letting Facebook give advertisers all your user data to make up for the costs of developing and operating such convenient software (and whatever profit FB is hoping to make -- people don't start businesses out of the goodness in their hearts). I mean, what's the alternative? Paying for the $6 per user per year that Facebook makes? Would you really rather pay for these services than just aid in letting the advertisers know that 67% of young (18-34) males in New York City prefer Macy's over JC Penney? Is it really that significant, your tiny, indistinguishable contribution to our advertising overlords that isn't even tied to your personal identity? It's not like they know that specifically Omar Hegazy and Xerophyte clicked on this ad over that ad in A/B tests; they don't give a shit about the specific identities and that would be truly creepy. No, they obviously care more about aggregate statistics, like overall click through rate and what-not. And when you're just another brick in the wall of statistical analysis, is it really all that creepy? Do they really know all that much specifically about you?)?

So, people don't really care about privacy, and Dropbox wouldn't lose a huge chunk of their customers. Or else, Facebook and Google and Apple and what-not would've lost a huge chunk of their customers.

I agree, though, about the enterprise market. Enterprise is smaller than consumer-facing, because the set of all professionals in a certain vertical is much smaller the set of everyone. That means that spying on the enterprise market is much more personal and tied to identity than spying on everyone as a whole. So it really does lose you customers in enterprise. Also it's much easier just to charge people directly for money in enterprise; usually verticals have a greater demand for a proper solution than horizontals, cause they're a much more specific market to target and so their biggest pain points are easier to solve. People really would pay $6 a year, and even more, for a product that truly understands what their specific problem is.

But I disagree that enterprise is where all the moolah is. I just think that it's much, much harder to make moolah in consumer-facing software, and all the moolah in consumer-facing software goes to a select few very well-known winners. But if you become one of those winners, then you have much more money and historical recognition than any boring old enterprise company will get you.

It's really very hard to nail down "What's a problem that everyone is having but no one has solved?" -- but when you do nail it down, oh boy, you just solved everybody's problem, and it gets you the quickest company to reach $150bn valuation in ever and the founder becomes the youngest billionaire in the world. I think, if Drew Houston and Co. went down the consumer-facing route, they'd be playing their chips on the assumption that they really struck gold with answering that seemingly unanswerable question. And given how far Dropbox has gone in the consumer market, I wouldn't hold it against them for taking that risk.

That being said, they do seem like they're saving some of their chips for the enterprise route. So if they really were worried about ruining enterprise trust by being yet another consumer-facing company that gobbles all your data and feeds it back to advertisers, they'd just do the other thing I suggested - sell hard drive space. But something tells me Dropbox is trying to be more.

[xerophtye]

But i agree, it's not necessarily unsustainable. They just need to focus on PAYING customers more, and they'd find most of them in the enterprise market. So yes, tying content-creation with content-storage is an EPIC move, but they need to keep in mind that this needs to be done with the focus on the enterprise user.

[nrao123]

I think the OP may have been referring to the massive expected price declines in the storage market. Price cuts like this: http://readwrite.com/2014/03/17/google-drive-pricing-plans-d...

Dropbox would ultimately have to start matching them & then slowly starts a downward spiral. However, if they move into the applications layer, the pricing pressure is less intense.

[omarhegazy]

Eh. If price declines become a problem, Dropbox will be just like every other seemingly free consumer-facing service.

Sell data to advertisers.

It's making Facebook $6 per user per year, and as company databases get more and more massive (Did you know Facebook has 300 fucking petabytes of user data? And 5 years ago, Google was processing 24 petabytes per day.) and machine learning / data statistical analysis gets more and more advanced and software companies have more and more cultural capital and industry reliance (Software is eating the world, etc. etc.) that number can only go up higher. Mix $6 per user per year revenue with the massive increase in users you'd get from consumer-facing vs enterprise (everyone vs. a single business vertical) and you got yourself a consumer-facing company that makes so much more moolah than the equivalent enterprise company.

But I agree there's more pressure. There are much fewer winners in consumer-facing than enterprise. But Dropbox is just betting they'll be one of those winners.