Dropbox- an unlikely incumbent?
Is Dropbox is missing out on the benefits of blockchain?
Currently, my impression of Dropbox is that it is losing. While Dropbox had an impressive rise to scale (so much so that we studied it in RC TEM last year), their competitiveness seems to be dwindling. CloudRail, a company that provides integrations to API鈥檚 for developers, published a on cloud storage in March of 2017. According to the report, 鈥淒ropbox massively lost users to Google Drive, OneDrive and Box over the last 5 months.鈥�1 This isn鈥檛 necessarily shocking, given founder Drew Houston鈥檚 thoughts on whether Google was a threat:
鈥溾�hey think that PCs in their current incarnation, with local storage, will disappear as the cloud takes over. But with the grandeur of their vision, trying to move everything to the web, Google is not solving problems that real people have today.鈥�2
It seems that 鈥渢oday鈥� has now become tomorrow and Google Drive is now seemingly addressing the consumer鈥檚 needs. Dropbox is now focused on it鈥檚 enterprise offering to differentiate itself, but this space is also crowded and fragmented- it does not appear to be a 鈥渨inner take all鈥� market.3
To start winning, Dropbox needs to take a different approach to the next technology wave in its domain- blockchain. Blockchain鈥檚 main proposed advantages are increased security, privacy, and decreased cost through removing the centralization of the storage of these files from providers like Amazon. Instead, the blockchain allows for the storage of these files on user鈥檚 own computers, without the need for servers, fully encrypted. 聽When you consider the rise of high profile hacking incidents and the growing market for cybersecurity, removing the lone targets for the hackers makes a lot of sense.
Blockstack, a public benefit corporation whose mission is to 鈥渆nable an open, decentralized internet鈥�(Note a) provides an overview of the concept of their decentralized file storage system, Gaia, in their .
Source: Muneeb Ali, Ryan Shea, Jude Nelson, Michael J. Freedman. Blockstack Technical Whitepaper, , October 2017, accessed January 2018, page 18
While many assert that the technology is still in its early days, there are already several companies utilizing blockchain for decentralized cloud storage- , , , and . Read more about them and their different offerings in Seline Jung鈥檚 .
Given the number of entrants already (and supposedly Storj already landed its first Fortune 500 company4), for Dropbox, they may be too late. After some initial research/brainstorming on the topic I came across on Cointelegraph.com by Allen Scott- written in December 2014. Even three years ago, Storj was already beating Dropbox on the cost metric:
Source: https://cointelegraph.com/news/dropbox-why-the-10-billion-dollar-company-needs-the-blockain
While Dropbox, a company founded in 2007 and reportedly planning to go public this year5 does not seem to be the classic example of an incumbent facing an innovator鈥檚 dilemma6, Shawn Wilkinson, founder of Storj sums it up perfectly:
鈥淵es, Dropbox would benefit greatly from increased security and reduced cost. But at the end of the day they are a profitable billion dollar business so I don’t see them making any major changes in their business model anytime soon.鈥�7
Note a: While the focus of this blog post is on the application of decentralized file storage, many of the players in this space (like ) are focused on a broader goal of a decentralized internet or distributed web. This is basically what in the last season of Silicon Valley.
Footnote Sources:
- Thomas R. Eisenmann, Michael Pao, and Lauren Barley, 鈥淒ropbox: 鈥業t Just Works鈥�,鈥� HBS No. 9-811-065 (Boston: 性视界 Business School Publishing, 2014), p. 11
- Concept reference from Professor David Yoffie鈥檚 鈥淪trategy and Technology鈥� course and book: David B. Yoffie and Michael A. Cusumano, Strategy Rules: Five Timeless Lessons from Bill Gates, Andy Grove, and Steve Jobs (New York, NY: HarperCollins, 2015)
- Concept reference from Professor Clay Christensen鈥檚 鈥淏uilding and Sustaining Successful Enterprises鈥� course and book: Clayton M. Christensen, The Innovator鈥檚 Dilemma: When New Technologies Cause Great Firms to Fail (Boston: 性视界 Business School Press, 1997)
- Allen Scott, 鈥淒ropbox: Why the 10-Billion-Dollar Company Needs the Blockchain,鈥� Cointelegraph, December 3,2014, https://cointelegraph.com/news/dropbox-why-the-10-billion-dollar-company-needs-the-blockain, accessed January 2018
Linked Sources:
- https://blockstack.org/whitepaper.pdf
Thanks for this post. It is thought provoking to see how quickly these types of software startups can rise (and fall…). I like the idea of Dropbox moving into blockchain, and given their brand recognition and reach, I imagine they could gain market share quickly. I think the challenge will be customer education (particularly at the enterprise level) about efficacy and safety of using blockchain for internal documents.
I think it is all but impossible for Dropbox to move to Blockchain, as its current technology is pretty much the antithesis. Dropbox has made its money on an entirely centralized file storage concept. Although it will have distributed storage farms for performance and redundancy, in essence it centralizes all users data within its black box. Dropbox offers no customization or visibility.
If Dropbox moved to Blockchain, it would have to do so gradually, as all current user data could not be redistributed amongst users who have not opted in to sharing their computing resources. This dual approach could not work against companies that are all-in of P2P file storage.
Alternatively, if Dropbox just shut down its cloud service and started from scratch, it would have huge fixed assets that would be sold at a margin of their price and nothing more than its brand as a ‘cloud’ file storage provider. This would leave way for Google/Amazon/Microsoft to pick up Dropbox’s crumbs.
For Dropbox to bet on block-chain would be for it to bet against itself. I agree with Haley; this is a classic Innovator’s Dilemma and one that I don’t see an answer to.