Dropbox Chooses Investor Group, Valuation Set at $5+ Billion
techcrunch.com
techcrunch.com
A 5 billion valuation implies earnings of at least 250 million/year. Assuming paying customers are worth 240/year and represent 5% of the user base, dropbox would need roughly 21 million users. Maybe 5% is high; if 4% is better then the number jumps to 26 million, etc...
There may be billions of people on earth, but how many are sophisticated enough to really need file sharing? Also, there are other players such as box that will claim some of those users.
Dropbox is awesome, but I can't understand the numbers on this one.
i think they have a huge, huge opportunity.
That said, Dropbox is a great product and the free version is good enough for the small number of documents that I have that are not somewhere else in the cloud.
I wish Dropbox would have a smaller priced tier (like $5/mo). The free plan is more than ample for my needs, but I like to pay for premium service from companies I use to support them. But $10/mo is a bit steep in comparison to, say, the value I get out of Netflix streaming for $10/mo.
A large (paying) customer base would. But, just like johnrob, I'm not sure dropbox has that many users.
But I also don't understand why MS and Apple are not pushing their own services more aggressively. And Google could add that in a month (I guess they still have the GDrive code somewhere)... good for dropbox ;)
And don't forget companies of all sizes are going into cloud: so replace 21 million users with 21 millin users via their employeer. (Ever tried sharing documents using MS SharePoint?)
In short, I think Dropbox got on to something big early on, but they will eventually be like the early Netscape of this area.... Other competitors are pretty much guaranteed to come in and erode their value with "free" (enough) alternatives that exist to prop up other business models.
Early on? Just the opposite. The space was so saturated that new entries into it were considered a cliche joke. http://www.joelonsoftware.com/items/2008/05/01.html
The other great example of successful late entry into a saturated space, of course, is Google.
Claiming the existence of those older services diminishes the value of Dropbox (or current Live Mesh, etc) is like saying that the iPad is no big deal because Fujitsu was making tablet computers almost 20 years ago.
Dropbox's simplicity is it's own undoing in the long run; it's too easy to commoditize. They'll be forced to lower their price to the cost of storage and that's when Apple and Microsoft will just subsidize their own offerings and kill them, unless a regulator notices it on time.
Google is not a good counter example; it seems simple to the user, but as Bing has shown, it's very hard to replicate. Dropbox on the other hand is trivial to clone. Any IPO event would just increase the likeliness of big companies noticing and putting some effort into it.
However, it might be that as cloud services become a critical for businesses and individuals will not be going for "free" solutions. Reminds of "Starbucks dilema": wanna a cup of coffee for 50c and have diarrhea or Starbucks coffee for $4? And how hard could be to make a good coffee?
1. http://techcrunch.com/2011/04/17/dropbox-hits-25-millions-us...
2. http://tech.fortune.cnn.com/2011/04/18/reviewing-dropboxs-vi...
3. File sharing is, like, what the Internet was originally invented for. Quite a few people use the Internet (>1billion), and it's still hard to share a photo album with your family.
The numbers I threw out there were just guesses (including the 20x P/E ratio); I was trying to understand the basis of such a valuation. There are some good explanations in this mini thread, yours included, but I still struggle to imagine there will be this much money in a such a service. It seems like competition would drive the free offerings to the point where the paid usage gets pretty low.
I guess what I'm really saying is that file sync/backup as a service doesn't feel like a 10s of billions industry. I don't have much real data to back that claim though ;)
Platforms are systems that enable a large number o similar behaviors -- Google is the search platform, Amazon the shopping platform, Windows is a platform as is MS Office. Platforms tend to be a winner take all business, as there are significant advantages to scale as well as strong network effects.
Tools on the other hand do one thing and one thing well. Most products start off as tools - then there are 2 ways to go, either become a platform (eg: facebook) or get bought by a platform (eg: flickr).
I don't see how dropbox is going to be worth $5B as a file sharing tool, nor do I see any platform buying them at that price.
So my question really is -- what is the dropbox platform gonna look like? What do the investors know that we don't?
In particular, it leaves less gigabytes for Dropbox, because the big stuff is taken care of. So with the price of storage and bandwidth dropping exponentially and the amount of "other" data dropping, it's going to be hard to sustain a freemium model just based on a storage cap.
The secret sauce is dropboxd which is not open source.
Dropbox could be worth that much, I believe. Some say their business is not defensible because anyone else can build a similar product for free. Well until someone has, nobody has.
That said, my comments were definitely not targeted at Dropbox and I applaud that team for building a great product and providing great value.
Either that or we should all get excited with a press release from Dropbox saying they reached 10 million users. But that doesn't excite geeks (do you care if Apple sold 20 million iPhones this month? No, you care about the iPhone 5).
Building a great company where the success you have achieved thus far is recognized in the form of a favorable valuation which increases shareholder value (which includes all the hardworking employees) and adds capital to the enterprise is certainly a positive milestone worth recognizing.