I'm somewhat surprised that a file sharing company can get a valuation this large. Don't get me wrong, the product is great, but I'm skeptical that the "file sharing industry" is big enough for valuations like this. Some quick math:
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.
Well, they don't just have the $240/yr plan. And file sharing isn't quite as sophisticated as you might think - it passes the grandparents test.
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.
21 million seems pretty easy to achieve to me worldwide; every one of my social circles and peer groups, both technical and non-technical, in the US and South America, seem to use dropbox. my parents love it. my wife is non-technical to a fault and can't live without it; she just paid for the upgrade to 100gb because it represents safetey to her of her photos. even my under 10 year old son knows that saving in dropbox means he won't lose his homework assignment.
I believe that everybody will have a least one "cloud storage" account. Actually probably multiple "cloud storage" accounts since cloud storage providers will try to specialize and differentiate (i.e., you will have Google Docs account, Dropbox account, iCloud account, etc.).
So 21M is a conservative number.
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?)
Agreed. My first reaction was "way too high". The problem imo is that they don't have a huge edge over the competition. Hell even Ubuntu has a semi comparable product. Not quite as user-friendly, but do a few easily duplicated UI difference really justify billions?
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.
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 ;)
I'm sure hundreds of second and third tier VCs piled on with ridiculous valuations in the hopes that they could add a "hot" company to their website. If this article is correct, Dropbox did the right thing and decided to go with smarter money.
I tend to see the software world as divided between "Tools" and "Platforms"
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?
Just one more problem: as more and more great platforms become available, there seems to be a trend of users storing different kinds of data in their own specialist platforms. Photos on FlickR, music on Spotify, movies on Netflix, simple documents in Google Docs, code on Github, books on Amazon, mail in Gmail, etc. That leaves less and less stuff for Dropbox.
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.
Sometimes I feel like there is a little jealousy among the startup community which translates into I like this, but the valuation is absurd.
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.
The problem with owning shares is that it takes a decade or longer to earn back your investment just through dividends. I'd say it's almost certain lots of competitors will be crowding the space with that time span.
The article isn't celebrating success. But perhaps it should be.
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.
[+] [-] johnrob|14 years ago|reply
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.
[+] [-] frossie|14 years ago|reply
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.
[+] [-] rubyrescue|14 years ago|reply
i think they have a huge, huge opportunity.
[+] [-] olivercameron|14 years ago|reply
1. http://techcrunch.com/2011/04/17/dropbox-hits-25-millions-us...
[+] [-] sdizdar|14 years ago|reply
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?)
[+] [-] Havoc|14 years ago|reply
[+] [-] gduffy|14 years ago|reply
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.
[+] [-] sfoguy|14 years ago|reply
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 ;)
[+] [-] far33d|14 years ago|reply
[+] [-] plusbryan|14 years ago|reply
[+] [-] benologist|14 years ago|reply
[+] [-] dont|14 years ago|reply
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?
[+] [-] sprovoost|14 years ago|reply
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.
[+] [-] alFoX|14 years ago|reply
[+] [-] mtogo|14 years ago|reply
[+] [-] rokhayakebe|14 years ago|reply
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.
[+] [-] sprovoost|14 years ago|reply
[+] [-] fourspace|14 years ago|reply
[+] [-] davidu|14 years ago|reply
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.
[+] [-] pg|14 years ago|reply