

Dropbox Could Be A Bargain At An $8 Billion Valuation - ankitoberoi
http://techcrunch.com/2013/11/18/dropbox-could-be-a-bargain-at-an-8-billion-valuation/

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casca
This seems like a very convoluted way of coming to the valuation. Revenue !=
profit. I can easily create business that generates $1bn/month in revenue by
selling dollars for 90 cents. Dropbox may be worth $8bn, but surely it makes
more sense to assess the valuation based on the growth in profitability?

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eliben
Indeed. Especially given that Dropbox uses Amazon for the actual storage and
the massive scale, I wonder what % of that revenue ends up in Amazon's
pockets.

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jedc
Do they still? I would have thought that by this stage they'd have started
building their own (at least mini-) data centers.

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msoad
Their traffic is not even close to Netflix and yet, Netflix runs on AWS.

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awj
Netflix also has a very different use case. Building a data center that can
meet the storage needs of Dropbox seems _much_ simpler than building one that
can meet the compute/bandwidth needs of Netflix.

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skj
hah

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chatmasta
The Dropbox board obviously feels that an $8 Billion valuation is appropriate.
As rational actors, they want to raise money at the highest valuation
possible. They have more information than any TechCrunch blogger, so I highly
doubt Dropbox is undervalued.

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dchuk
It's incredible how cynical everyone is in this thread about the valuation of
a company that actually MAKES MONEY and how optimistic people were about the
Snapchat valuation in the thread from last week, a company that hasn't made a
dime.

It seems the only way to really get a massive valuation as a "company" is to
make sure you don't start making any actual money, otherwise people will stop
harping about "growth is the only thing that matters, this valuation is
accurate" and switch to "profit is the only thing that matters, this valuation
is ridiculous."

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awj
Well, when you have no profit to speak of there's nothing to anchor the
discussion. The hopeful talk about "growth" with the hazy implication that the
company has a "profit" switch they will eventually flip into the "on"
position. The cynical see a storm of speculation with no concrete anchor and
walk out on what they see as a waste of time.

Which, I guess, is a long way of saying "I agree with you". I think my theory
does at least fit the patterns of conversation, though.

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argumentum
By that standard, how do you justify Amazon's $170B market cap, given it's
notoriously low profit margins?

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awj
I don't think your comparison makes sense. When Amazon was at the stage
Dropbox is at now investors were taking a risk I thought was insane. That risk
paid off, but there are countless examples that didn't. Amazon now practically
owns their space and has inexplicable license from the market to reinvest in
infrastructure or outright avoid profit. Few other companies are in this
position, so comparing valuations of Amazon and Dropbox is assuming many
things I wouldn't agree to.

My point was about _why_ people get cynical about a company that is actively
making money but are more lenient on ones that aren't. When profit is an
uninteresting point in the discussion, it tends to not be discussed.

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argumentum
> That risk paid off, but there are countless examples that didn't

If every risk paid off, there's no such thing as a risk. These investors are
making the calculation that DB has some % chance of being in a similarly
dominant position as Amazon is today.

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staunch
Twitter's and Dropbox's business models couldn't be more different. Heck,
everything about their businesses is dissimilar. This comparison is idiotic.

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a8da6b0c91d
With all of twitter and dropbox and youtube I think about how with ubiquitous
IPv6 they might get replaced with P2P protocols. A fancy OceanStore client
could eventually do everything dropbox does.

All these operations seem so vulnerable to innovation that is quite likely in
the next eight years. I'm skeptical about the super high valuations.

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MichaelGG
IPv4 and UPnP allows most of the P2P scenarios IPv6 does. Please clue me in as
to how a P2P system is going to maintain always-on backups/storage of my
personal photos.

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a8da6b0c91d
> how a P2P system is going to maintain always-on backups/storage of my
> personal photos.

A client to something like OceanStore.

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MichaelGG
I read the first paragraphs of the overview[1]. It sounds like a federated
service that the end-user would still pay for and treat like AWS. The P2P
aspect is inter-company federation of storage (so like AWS and Azure could
cooperate).

This isn't P2P in the common sense (end-user devices aren't talking to each
other). And it doesn't eliminate the need for AWS-esque providers, even if
their backend happens to be federated among multiple companies. To the end-
user, there's zero difference.

1:
[http://oceanstore.cs.berkeley.edu/info/overview.html](http://oceanstore.cs.berkeley.edu/info/overview.html)

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a8da6b0c91d
There's no need for anything like AWS or any payments. You offer some of your
bandwidth and storage to the P2P network and get bandwidth and storage in
return. Any machine on the network can participate. It has nothing to do with
cloud providers. It's quite analogous to bittorrent.

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MichaelGG
Right, so in other words, it doesn't help most users in any way, shape, or
form. It's no replacement for AWS or Dropbox or anything of the sort. I'm not
going to run it on my tablets. My kids aren't going to run it on their
laptops.

Edit: Even the overview says "The providers automatically buy and sell
capacity and coverage among themselves, transparently to the users." It's
clear from the overview that it's meant as a way to achieve a better
availability than a single company, not as some magical free P2P replacement.

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tn13
The analysis sounds a bit absurd to me. It does not matter if Dropbox is
making $1B or $0.5B, what matters is how much profit are they making and if
that method of making profits is scalable.

If a company that is making $1B in yearly revenues is raising a paltry sum of
$250m through investments I am not sure if they see themselves in good
financial situation.

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ankitoberoi
True, a better way to ascertain value is by factoring in the profits, which is
why you have the P/E ratios. However, it is not uncommon to use revenues to
calculate value as well.

It is also important to note that they are not making $1B yet, but have just
hit a run-rate of $1B. Having $250M in cash is a different thing.

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bhauer
I don't know much of anything about company valuations, but in terms of what
the following two companies mean to _me_ and what I believe they means to the
_world_ : if Dropbox is valued at $8B, I no longer have any reservations
whatsoever with Tesla's valuation based on its stock price. (I do recognize
that its price is being corrected this month, but I suspect it will eventually
trend back upward.)

From my point of view, Tesla brings me at least ten times the value of
Dropbox. I don't even think Dropbox represents a problem that should exist
long-term assuming a re-disintermediated Internet, which is where I am
optimistic we're heading eventually. Storing and sharing my data using someone
else's service is retrograde.

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hardtke
Social networks are winner take all markets, whereas Dropbox is not in such a
market. Twitter, Facebook, and LinkedIn are all trading at 20-40 times revenue
based on the fact that they enjoy strong network effects.

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ghshephard
Dropbox is very social. Go see how a lot of students in University share files
with each other. A lot of them just assume that the other person has a Dropbox
account. It's certainly how teams keep their projects aligned.

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Nate75Sanders
Anybody have any idea what the distribution is here for consumer vs business?

I've literally never heard of anyone, company or individual, paying for
Dropbox.

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awj
You're right to doubt your personal evidence at this point. Almost everyone I
know who _has_ a Dropbox account pays for it.

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Nate75Sanders
Ok, are they businesses or individuals? What are they using it for?

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ghshephard
Once you start to share files with a lot of other people, you very, very
quickly use up the initial quota that you get with your free account.

That's the Dropbox strategy - if you use it as an individual, you probably
won't use that much. But, once you start using it in a social way - you
quickly need to pay for a pro account.

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onedev
They give out so much free space, right now I have 55GB of free space for
life. Then again, I'm not the typical user; I've visited Dropbox HQ a couple
times, gone to their recruiting events, and know some Dropbox engineers.

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ghshephard
Yes - you would be atypical. I'm guessing that 99% of Dropbox Users have < 5GB
of free space based on my rather geeky attempts at adding free space to my
account and eventually ending up with 1.51 GB free space in addition to the
initial 2 GB.

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aiowdhiwoa
>install dropbox on VM

>snapshot

>10 minutes of referral link + revert

>???

>45GB of free space for life

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awj
And you believe this is something a _typical_ user is capable of, let alone
that they would do?

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SeoxyS
Valuing any company by comparing it to Twitter, a company many consider to be
crazily overvalued, seems somewhat inaccurate... I'm sure the Dropbox board
has a better idea of what the company is actually worth.

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dcc1
Considering that Dropbox are completely dependant on Amazon for their service
and overnight Amazon could sink them "ooops your instances just got deleted,
oops"

8 billion is a bit of a joke

Now if they owned their own equipment in their own datacenters...

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rwissmann
That would however permanently damage Amazon's AWS business, which Bezos
believes could become their largest revenue generator. Amazon and Dropbox
aren't even competitors at the moment. Very unlikely.

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dcc1
You would think an 8billion dollar business would be able to afford a server
or two (or datacenter or two) and not be reliant completely on someone else

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lifeisstillgood
Are there not several DropBox clones on GitHub?

And several competitors already there (and something called Box that is less
consumer orientated?)

Add in the switching costs are low to non-existent (it is just git isn't it?)
- surely their competitive most is almost non-existent - in which case their
profits are going to constantly eaten by competitors.

What is it I am missing?

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ghshephard
The lock-in with DropBox is huge - I have eleven shared folders that I use to
keep other people up to date with files, and I have never had a request to
share files with anybody on anything other than Dropbox.

I trust dropbox. Dropbox has a great track record (with me). Dropbox is
installed on all my tablets/smartphones/desktops/laptops. And, at $100/year,
it's cheap enough that I'm not really inspired to bother price shopping.

This is clearly a case where Dropbox came in and won - and now it's time for
them to invest aggressively, and make sure nobody else enters this market.

Now - I am not saying that people aren't using other systems - obviously
Microsoft and Google have their products, and both Google Drive and Microsoft
Skydrive are excellent products, that are technically comparable to what
dropbox is offering. Apple's icloud is just annoying for knowledge workers, so
I'm not going to include that in the same class - but, in terms of a
generalized folder Sync Product - Dropbox has won.

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rabino
Can we please redefine what bargain means?

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NickSharp
When was the last time techcrunch posted something worth reading?

