Dropbox vs Box: Which cloud storage service will be left standing?

Both of these cloud companies are clashing over enterprise customers

Storing stuff in the cloud is big business for a lot of companies and none more so than Dropbox and Box, two similarly named outfits currently battling it out for supremacy of a market that will, most likely, change how we store files forever.

Dropbox, the first of the pair, started out as a consumer-facing online storage company offering several gigabytes of space and a cute interface alongside some neat perks for signing friends up.

Box, on the other hand, is a purebred enterprise company having never spent a day of its life catering to consumers. The firm went public last year and currently has a valuation of about $1.2 billion (around £920 million, AU$1.6 billion), which is slightly down from its initial pricing.

Enterprise battleground

The market that these companies are competing for is enterprise customers who want to safely and securely store stuff – files, documents, videos, photos, tax records, and so forth – in the cloud. According to analysts, the market is virtually unlimited for this kind of thing because, well, eventually every company will want to do it.

The economies of scale are the driving force behind the rise of cloud storage as the price per gigabyte drops rapidly. In other words, storage that would have cost a company a lot of money in 2006 now costs a fraction of that in 2016.

Box has managed these trends well, focusing more on adding elements to its offering beyond storage, which is known as a Software-as-a-Service (SaaS) model. Dropbox, on the other hand, is currently juggling two markets – enterprise and consumer – while debating the pros and cons of going public.

Is dropbox destined to be the tech world s first dead unicorn

Is Dropbox destined to be the tech world's first dead unicorn?

Dead unicorn

In a widely read piece from last year, Alex Danco, a Silicon Valley venture capitalist, speculated that Dropbox would become the "first dead unicorn," the name given to private companies worth more than a billion.

"Dropbox does two things that matter: storing your stuff, and sharing your stuff. It's great at both," Danco wrote. "But storage on its own isn't a great business to be in anymore [because] we just don't care about files that much anymore."

This argument – that Dropbox does something good that not many people want – resonated with many. The service is good to have around for the odd file share, but the engagement stops there.

Box, on the other hand, has a different set of problems that are closely associated with being an enterprise company: Customers (all of whom pay a recurring fee) are incentivised by a cheaper, multi-year deal, to use Box products that depress revenue in the short-term. However, over a longer period, the deals expire and more favourable terms (for Box) are agreed.

This, by and large, is what is happening now with Box – but it's taking a very long time. The company went public last year and its stock price has declined since then precisely because the market for SaaS works this way.