
Dropbox May Not Be LeBron James, but Is Still in the Game - es09
http://www.nytimes.com/2016/02/04/technology/dropbox-may-not-be-lebron-james-but-it-is-still-in-the-game.html
======
Spooky23
> Dropbox is not laying off workers or shrinking; it hired nearly 500 people
> last year, 75 since the start of this year, and it plans to soon move into a
> sprawling, custom-designed office building for which it has signed a long-
> term lease.

Honest question: WTF are they doing?

~~~
zer0defex
Nail on the head right here. The only thing Dropbox has these days is consumer
confidence in it's syncing process. Beyond that, they trail every competitor
feature-wise and frankly, they are succeeding despite their management, not
because of it. Recent product enhancements have been, let's be honest,
mediocre at best across the board and show no signs of that changing anytime
soon. They exist now solely due to brand recognition when it comes to cloud
file sync'ing and the moment one of their competitors cracks the consumer
confidence equation with the brand image to match, Dropbox is done.

~~~
malchow
What if -- hold your breath! -- Dropbox is simply a medium-sized, privately
held, profit-generating company that will end up satisfying a certain customer
segment and paying dividends to investors? The horror!

~~~
subdane
Their investors will revolt. Their investors need 10X returns in the next
couple years to satisfy their fund's existence to their LPs. Funds need a few
big wins like Hollywood studios need a couple blockbusters every year.
Dropbox's investors are counting on them being a blockbuster. Dropbox's
private valuation is an order of magnitude higher than Box's public valuation.
And Box has a bigger sales team, more revenue, and more inroads into big
enterprise than Dropbox. So it's a real pickle and dividends aren't going to
get them out of it.

~~~
malchow
I fully concede your point. I think the private financing markets need to
become more sophisticated out here, such that they enable the type of company
I described -- which I reckon is the type of company Dropbox should be -- to
thrive. There are a few very clever and small investors who already do this.
But they're a minority.

~~~
AVTizzle
I agree with what you're saying.

I'm not an expert - just learning more about this myself over the last few
months, but it sounds to me like the investment style you're talking about
exists inside the world of private equity.

They're not playing the venture game - it's a different model. Buy and hold
for either cashflow/dividends, or do some financial/managerial engineering and
flip the asset.

Outside of the world of Venture Capital, there's a HUGE spectrum of investors
out there doing every kind of investment - just gotta tune into it I've found.

(Great place to start is a podcast called PE Funcast - seems to me they've
been doing this type of investing.)

------
koralatov
Unless I'm reading this wrong, the takeaway from this article is that Dropbox
is a reasonably successful company, with enviable brand-recognition and reach,
that's `suffering' from being overvalued early on and is simply no longer hot
and new. That seems like a reasonably good problem to have, and is certainly
better than being a loss-maker.

~~~
tyre
Better than a loss-maker, but that's a low bar.

For all of the employees that received options based on the inflated $10bn
valuation, not a good problem to have.

This is the danger of VCs wanting everyone to be a unicorn, and structuring
their firms around that mindset. I agree that a $5bn or $2bn company is
fantastic. Until those with capital agree, however, founders are almost
required to pitch a fantasy.

~~~
mattzito
I obviously don't know the specifics of the dropbox option pool, but it's not
uncommon to have employee options issued at a 409(a) valuation instead of the
fundraising valuation.

So even if money was raised at a 10bn valuation based on the expectation of
future value, a 409(a) valuation would probably place the company at somewhere
closer to 10-40% of that, which puts employees in a much better situation.

~~~
jalonso510
You're right that options are granted at the 409a price (the common stock
price) instead of the price investors pay in the financing, but as companies
become more mature, the common and preferred prices usually begin to converge
somewhat. In a seed financing you might see common stock valued at 10% of the
preferred price, but in a late stage, billion dollar company there will be
much less of a discount applied.

Employees granted options recently after the highest valuation financing would
probably be completely underwater if the company is really worth $2b.

~~~
mattzito
Right, but if the 10bn funding was at a high multiple relative to revenue, the
409a will probably still be a lot lower. I'm not saying that it would be at
2bn, but the GP was talking about people being granted options at 10bn, and
potentially they're being granted at a much lower value.

------
disantlor
My dropbox scenario is I have a 2TB HD and 2TB dropbox storage with the 1year
packrat service. I record and edit music on the HD and dropbox is always
syncing my changes. The next day, when I'm at work, I can pull up the website
and listen to the stuff I worked on the previous night. If I go into a studio
I connect to dropbox and sync whatever folder(s) that contains the song(s) I'm
working on. When I get home the files are there.

Once I forgot to disconnect my dropbox and someone at the studio trashed the
folders and they were deleted on my home machine. I remotely disconnected
their connection from the web interface and restored my folders to the
previous checkpoint.

I can't imagine a simpler, more efficient mechanism for keeping things
organized and backed up. I also have a separate backup service on the same
drive of course, just in case.

The only annoyance with dropbox I have is there are certain scenarios where
you can't play audio from the website and are forced to download it, which is
annoying when sharing links.

That and I wish I could give them more money for more space.

~~~
jl6
Have you tried asking to pay for more space? I would be willing to pay for a
package somewhere between the 1TB pro account and the very expensive Business
account.

~~~
toomuchtodo
Not OP, but I've asked for more space and was told the business account was my
only option, so now I've hacked together a Dropbox/S3 hybrid.

------
vlucas
I really don't understand all the negative Dropbox sentiment these days. Who
cares if the investors aren't getting a 10x return? How does that materially
affect you as a customer? Why are you even cheering for that anyways?

I am a very happy paying Dropbox customer. It's a solid product that does the
job very well and isn't stuffed with a bunch of other useless features I don't
need. It's pretty much perfect.

~~~
x1024
Companies that don't satisfy their investors' expectations... they often
resort to moves of desperation. And those moves are more often than not anti-
consumer and even anti-business.

------
pyrrhotech
I'd be shocked if Dropbox is still in business in 5 years. It's kind of sad
because it was the first mover and I loved the service when it was the only
one, but now there are a million options that are probably just as good. Not
to mention they've never made a dime on me personally or anyone I know (and as
I understand it that's true for 95% of their user-base). Our company actually
banned Dropbox.com because we decided we'd rather do everything on Google
drive for free instead of pay Dropbox for corporate use. The whole industry
also has bearish macro outlook as storage continues to get cheaper and yet
people's need for it doesn't grow proportionately.

~~~
azinman2
I pay for Dropbox, and their sync is the industry's best.

They'll be here in 5. 10 is the bigger question mark when files go away.

~~~
jl6
Files will never go away.

~~~
libraryatnight
Probably not for 'power' (does that work?) users, but for people like my mom
they're pretty much already gone. They started disappearing for her when
iTunes was dumping her music into a directory and she had no idea, to her it
was indistinguishable from how Spotify works, so now that everything streams
like magic she pays zero attention to files or the idea of files. She thinks
in terms of galleries, not image files. If I open some sort of file explorer
in front of her, I've just gotten 'techy' on her.

A few years ago when I was doing a help desk job, the sentiment was similar. I
asked a user to navigate to a directory on Windows and he stopped me. He said,
"Hold it now, I'm not a computer person."

So maybe not 'go away,' but perhaps become increasingly invisible and
especially so to average users.

------
zyxley
People stick with Dropbox for a simple reason: they do the syncing thing
faster and more painlessly than anyone else out there.

If Apple ever gets their act together and makes iCloud actually fast and
reliable a syncing service, Dropbox might be in trouble.

~~~
overcast
What's the actual issue with iCloud? It takes three seconds to turn it on, and
select what I want to sync. Done. Backing up, syncing calendars, contacts, and
notes to all my devices with zero problem.

~~~
josteink
> What's the actual issue with iCloud?

I'll admit I haven't tried yet, but I'm going to hazard a guess that if I try
to setup icloud on my Linux machines at home or my Android devices, I'm not
going to get very far.

With Dropbox I get all the way, everywhere, with no hassles. Thus Dropbox has
my business.

~~~
overcast
That's like saying well I'm not going to get very far running a Playstation 4
game on my Super Nintendo. You can't count software that isn't even supported
on a system. Yes, DropBox has a client for many systems, but saying DropBox is
better because iCloud doesn't even exist on Linux make no sense.

~~~
riq_
> but saying DropBox is better because iCloud doesn't even exist on Linux make
> no sense.

makes sense for me. I don't use iCloud because of that. It doesn't have the
features that I need. Although "Better" is subjective. Dropbox might not be
better for you, but it "makes sense" for some people

------
subdane
Dropbox really proved out how valuable "it just works" in the cloud can be.
Their first few years of execution were phenomenal and the product provided a
real value. I remember discovering that I could mock up iPhone apps in
photoshop on my desktop, save jpgs to dropbox and open in the app to see what
the screens would look like immediately on my phone. Delightful. And then...
none of their acquisitions or product initiatives stuck and they added a
questionable board member. Anyone have insight in the last couple years of
stumble? I'm at a loss.

~~~
vecter
It's not often that companies nail one thing really well ... and then nail a
second and third thing. Dropbox is amazing at cloud storage and syncing. Why
do people expect them to develop great products beyond that?

------
rikkus
Reasons it's still in the game:

1\. It works, with fewer problems than any other sync / cloud storage that
I've used.

2\. It has enough people using it outside of work that it's getting paying
business customers (the Linux effect?)

If either of these falters (if 1 falters, 2 does too) then they'll be gone.
There are plenty of competitors and some even do sync well enough that people
will use them.

I'm rather upset that they've dropped Carousel, as it's probably the app my
girlfriend and I use most on our phones, but I'd only leave Dropbox if they
didn't fold enough of the Carousel features back into the Dropbox client - or
there wasn't a third party app that could provide similar functionality using
our Dropbox storage.

~~~
isaiahg
I agree. I actually use Dropbox, Drive, and OneDrive. I've only used OneDrive
once to share some download links once. The only real reason I use Drive is
because of Google Docs. For everything else I use DropBox because I trust them
more. I've never ever had a problem with it. Also DropBox hasn't had major
scandals and for the most part stays out of the news. When a company is
basically holding your private stuff for you that's a huge plus.

~~~
appleflaxen
Hiring Condeleza Rice was scandalous to me, since I care about privacy.

Obviously, this is a non-issue for the general public, but it's a bit tone-
deaf for "power users".

------
graeme
I very happily pay for Dropbox. I haven't found any of the alternatives as
easy as Dropbox. The syncing is seamless.

~~~
cjensen
I agree and I'm also a happy customer of Dropbox.

But how long will it be until OneDrive or iCloud Drive catch up? I have 1TB of
OneDrive space for "free" with Office. I have plenty of spare space in my
iCloud storage plan. If either of those two options catch up to Dropbox's
reliability, why would I stay with Dropbox?

Long term, why will Dropbox survive?

~~~
Scarblac
Dropbox is much cheaper than either Office or an Apple device.

~~~
thesimon
>Dropbox is much cheaper

[citation needed]

Office: [http://www.amazon.com/Microsoft-Office-Personal-Year-
Card/dp...](http://www.amazon.com/Microsoft-Office-Personal-Year-
Card/dp/B00HV9IM58/)

$57 for 1 year of Office + 1 TB of storage

Dropbox:
[https://www.dropbox.com/plans?trigger=homefoot](https://www.dropbox.com/plans?trigger=homefoot)
$9.99 for 1 month of dropbox with 1TB (=> $120/year)

------
hspak
Only reason I still use Dropbox is because 1password integrates so nicely with
it.

~~~
rokhayakebe
Now imagine there are many other people who have this one other reason they
still use XYZ. That's how many companies stay in business. I worked at a
company where customers would call angrily and shout "The only reason I am
still with you guys is because of the designs you guys have, but your service
sucks, blah, blah, blah...," and this conversation usually ended with "OK,
4125-5623-8451-XXX...Expiration Date XX-YY... OK, Thank you!"

------
gizi
I stopped using Dropbox after the Snowden revelations broke loose. Dropbox
does not use end-to-end encryption. You have to encrypt by yourself.

That is not particularly hard, but it still means that you are storing your
files in a honeypot from which the NSA regularly draws a juicy feed.

Especially users outside the USA should never use a cloud service that lacks
automatic end-to-end encryption.

As a non-American, you would also reveal your identity (along with your data)
to a host of American surveillance agencies by paying by credit card. So, that
is another non-starter. Along with unencrypted data, that is just an accident
waiting to happen. They would store your dropbox data alongside Angela
Merkel's digitized private phone calls to her husband. "I love you honey!".
Seriously, I pay for cloud services only with bitcoin.

------
teambob
Not to mention the top reason I dropped Dropbox: with Condolezza Rice on the
board I feel they are a bit too chummy with the government and the NSA.

------
jl6
As an otherwise-happy Dropbox customer, it does concern me somewhat that there
has been very little innovation in the core product for several years. They
seem focused on building a halo of lock-in services instead.

~~~
vlunkr
I don't know, their core product is so solid. It's one of those things I can
install and never think about again, it just works. Maybe there's no need to
innovate there?

~~~
nacs
There's need for innovation because Google/MS/Apple and such are integrating
cloud-sync right into the operating system (and its only a matter of time
before their sync tech is good enough or better than DB's sync tech).

------
gedrap
>>> Dropbox signed up 13 large companies with more than 1,000 users each

So let's say the average employee count is 2k and they negotiated to pay
$100/user/year. 13 * 2000 * 100 = $2.6M. Even if we double the average
employee count and assume they pay standard $150/yr, it's $7.8M.

Assuming that business offering is their strongest bet to get as strong as
some investors might like (i.e. justify the valuation), how many of these do
you need to justify $10B valuation? And how big is the market?

I am not sure that it all adds up.

------
ipozgaj
It's very hard to be optimistic about their future when their main competitors
are Google (Drive), Microsoft (OneDrive), Apple (iCloud), Amazon (CloudDrive),
Box etc. Virtually every single one of big players nowadays offers cloud
storage. I cannot see Dropbox succeeding in the long run, especially with the
amount of innovation they've put in their product in the past two years (close
to none).

~~~
bluedino
For my uses, DropBox is the best solution by far out of all of those.

------
inthewoods
I think they missed their opportunity - namely what they're doing with Paper
now. I like Dropbox a lot, but most people I know work with Google Drive/Docs.
The whole idea of "files", to me, is becoming more and more abstract and
remote. I'd probably find more use for Dropbox if I was using Office 365, but
then there is OneDrive for that.

Bottomline, I have less need for Dropbox outside of backing up photos. And
there are any number of services for backing up photos that are frankly better
from a usage PoV (though not from a syncing PoV where they are clearly
better). I have an iPhone - I used iCloud to download the pictures to my MBP
and then have Google Sync running to push them to Google Photos. iCloud's
photo service is still pretty terrible - but using this method I get all the
goodness of Google Photos (e.g. let me find all the pictures of my dog or my
kid).

------
InvisibleCities
Dropbox has the same problem a lot of the moderately successful unicorns have;
it's a good product managed by smart people that would be much better off as a
right-sized stable lifestyle business a la 37 Signals / Basecamp than as an
attempt at a world-beating massive-growth juggernaut like Google or Facebook.
Unfortunately for them (and Evernote, and a whole host of others), once you've
signed that deal for the huge late-stage VC cash infusion at a fantasy-land
valuation, there's no going back.

~~~
sharkweek
The problem being, how many of these businesses would have won any market
share without early VC investment enabling the companies to dump money into
customer acquisition at a loss?

Probably a few of them, but I'm guessing some other company with a similar
business model would have come along with VC backing and eaten their lunch
(sure, that company might then be in the exact same place as the current over-
valued late stage companies).

Damned if you do, damned if you don't?

~~~
morgante
> The problem being, how many of these businesses would have won any market
> share without early VC investment enabling the companies to dump money into
> customer acquisition at a loss?

The problem isn't with early VC money. Dropbox's early backers would have
still made a gigantic return on Dropbox setting at a $1bn valuation.

Really, it's not even a problem with their series B ($250M at $4bn). $4bn is a
reasonable eventual valuation for Dropbox.

The problem is that they didn't stop there. They raised another $850M in 2014
(in two rounds), which was basically sold on the promise of it being necessary
to "win" the storage wars and acquire a monopoly.

By 2014, Dropbox was already a stable company with hundreds of millions in
revenue. The only reason to raise money was to shoot for hitting
Google/Facebook status (owning a lucrative monopoly). If they had instead
accepted that their eventual outcome was a $3-5bn software company, everyone
could have won: employees, investors, founders, etc. (Atlassian is an example
of a company which _did_ eventually raise substantial VC, but instead of
gunning for a monopoly IPOed at a $4bn valuation.)

The problem is that founders ultimately have huge egos and want to be the next
Mark Zuckerberg or Larry Page: commanding monopolies so lucrative that they
can spend billions on zero-return "cool nerd shit."

~~~
sharkweek
There has been a major shift as of late where IPOing at those mid-late rounds
just isn't the trend anymore. Public markets are a cruel beast where companies
are living and dying by quarterly reporting so these skyrocketing growth
startups have less incentive to let the public judge them. They also don't
want to leave too much growth opportunity on the table when going public
anymore.

So it makes sense why companies would want to stay private if someone is
willing to give them the cash they think they need. Problem is, those
investors also want to make a huge return, so a 20B valuation is going to come
with some nasty liquidation preferences/ratchets etc. to protect the money.

------
pfarnsworth
$5M valuation isn't exactly suffering. The problem is that the failure of Box
as a thriving company has put a ceiling on how much Dropbox can make in the
public markets.

If Dropbox does need more money, if it can't get profitable with the funding
it already has, then it will be in for tough times. If it is forced to go
public before it's ready, like Square, then its employees will suffer much
like Square's employees have with its stock price.

------
zekevermillion
I have used Egnyte, almost since their beginning. Surprised no mention here.
Pretty good enterprise offering, including hybrid cloud or self-hosted
options. The only complaint I've had is they unilaterally tried to double my
subscription price to match their competition. I negotiated a compromise and
now I have some weird custom tier.

------
jonathanpeterwu
Actually really love using Paper for simple product specs, cleaner simpler
than google docs and uses markdown.

~~~
Numberwang
I really really wanted to like it. But it feels so cluttery and disorganized.

------
nassirkhan
Completely commoditized service with a few core parterships scattered here and
there. Not able to take on the better capitalized players i.e Microsoft,
Google, Apple, heck even facebook. Long term odds are not great, unless they
merge with a complete ecosystem player like the above

------
yyin
I use rdiff as an open source, simpler alternative to Dropbox for syncing
files across a network. Dropbox uses the same library of functions as rdiff:
librsync.

------
bigbadgoose
online consumer storage businesses are dead-ends; consumers will own data
appliances in their homes that are as easy to use as a fridge, with massive
symmetric piping, port control, redundancy, etc.

------
new299
In my mind Dropbox became a company not worth supporting when Rice joined
Dropbox's board ([http://www.drop-dropbox.com/](http://www.drop-
dropbox.com/)). I don't know what their future holds. But personally, with a
board member who advocates warrentless surveillance it seems unlikely that we
share similar views on the security of my data, and I wont be using their
service.

I'd hope their customers are also looking at the security of their data in
light of this and seeking out alternatives.

~~~
ljk
what's your take on this? - [https://blogs.dropbox.com/dropbox/2016/01/future-
of-diversit...](https://blogs.dropbox.com/dropbox/2016/01/future-of-diversity-
at-dropbox/)

~~~
smt88
Why do you ask? I don't see how the two are related.

~~~
ljk
they're not related, was just wondering is all

------
tdkl
I wish they had more choice regarding purchasing more space. I'm not
interested in 1TB and find 10$ per month too much if I wont even use 10% of
it. Although if there is a cloud provider I'd trust that sync would never fuck
up, I'd be Dropbox.

Google Drive still thinks it's normal to re-download the cloud folder instead
of letting me install Drive in the same location after a system reinstall,
where all the files already exist. And to trust them 1TB with that behaviour ?
Hahaha.

~~~
T-hawk
Your first concern often comes up in Dropbox threads. Of course they could
easily offer a plan at 0.5TB / $5 or some such. They just don't want to.
They'd lose more revenue from existing customers dropping from $10 to $5 than
they'd gain by new customers going from $0 to $5.

It's not that Dropbox can't offer less space, it's that they're not interested
in making the baseline price anything lower than $10. Put another way, Dropbox
is perfectly happy to get along without customers who think the difference
between $5 and $10 is something to care about.

------
bobby_9x
The problem is that Dropbox isn't that complicated. They were able to win in
the beginning because they were a novel idea. Now that they have proven the
business model, it will invite competitors (which has already happened).

A bigger company with more resources will eventually be able to put them out
of business.

It would have been better to cash out. Unless they truly have something
proprietary with a higher barrier to entry, it will be a difficult road ahead.

