
Sorry, Box, but free is not a business model - antoinec
https://gigaom.com/2015/01/24/sorry-box-but-free-is-not-a-business-model
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win_ini
This whole post seems like contrived bullshit...clearly he doesn't understand
the concept of SaaS and recurring revenue. Investors are betting that box can
generate a large amountof recurring revenue and THEN reap profits based on
those recurring revenues in the future (as marketing and sales costs drop).
Free customers also basically cost almost nothing - no support, sales or
marketing costs. Sure, some "storage" cost, but really - almost nothing.

Also - Box does not sell "storage" they sell collaboration, auditing, and
security assurances (ie: HIPPAA compliance is NOT something Dropbox ever
offers).

>>If Box has to spend almost everything it makes from current customers to win
new ones, what is the use of giving its product away for free, aside from
boosting the size of their user base to impress investors?

Uh, so people who are not paying users who are outside the organization can
“see” and collaborate on those files? This also indicates his clear
misunderstanding of the benefit of creating corporate users who will not churn
- thereby recouping their CAC within 12 months.

>>And, more importantly, Dropbox and Box still have to support all those non-
paying customers. There is simply no palatable way for them to eliminate free
users, and the costs associated with them will continue to rise as the need
for storage increases. As more free customers are added into the system, those
costs continue to grow, creating a death spiral.

then three sentences later….

>>Dropbox reduced the price of a gigabyte of storage by 90 percent. That is a
clear indicator that, over time, the price of cloud storage will continue to
reduce to zero.

So how does something dropping to the cost of “zero” equal “..As more free
customers are added into the system, those costs continue to grow, creating a
death spiral."

My favorite part is the ending: "Andres Rodriguez is CEO of Nasuni, a Natick,
Massachusetts-based cloud storage-as-a-service company.”

Yeah, good luck with that.

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InfiniteRand
The whole idea of a free service is to generate good will and potential
customers. If you have a crappy free service, it generates bad will and
discourages potential customers. So you are forced to maintain a decent free
product, at least comparable to those of other people offering free products.
An important thing to remember is that if you are offering a free service,
your potential evaluation customers are likely to try out the free service
before calling you, so if it is bad, you probably will not get the call. And,
in general, maintaining decent quality is not free, although admittedly how
expensive it is really depends on the details of the situation.

I do agree that this analysis is wrong. It is common for companies trying to
grow in market-share within a highly competitive end up losing money, if Box's
problem was that it could only grow by losing money, it could just pick a
"good enough" point and then scale back market share growth and instead
concentrate on inside sales.

I suspect that Box has other problems, and free business models often do have
holes in them (people usually underestimate the costs of a free service that
does not scare away customers), but there is far better analysis of free
business models on the web than this article.

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nailer
There's a rumour (so take with a grain of salt) that both box.net and Dropbox
are haemorrhaging users from companies using Google Drive - many companies
first experience of 'the cloud' is their office suite, so it that comes with
free storage that's better integrated into their productivity tools then
they'll never get onboard with other storage providers.

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manishsharan
My company subscribes to Google Apps and I hate using Google drive : it is
slow and its performance is unpredictable and it still does not natively
support Linux. On the other hand, Dropbox is always fast and it supports
Linux. I have never tried Box.

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dagw
Box, in my experience falls between GDrive and Dropbox in suckyness. However I
understand from people who have evaluated both that Box has much better large
scale corporate level integration and management tools than Dropbox.

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rogerbinns
I find it curious that Box does not support Linux. That has immediately
eliminated it from the small companies I have worked at over the last few
years. Google Drive (except for Docs) is the same problem. This has been to
Dropbox's benefit.

