Freetimers Blog » Dropbox’s Market Dominance Challenged

Dropbox’s Market Dominance Challenged

Cloud computing services that work to organise files and documents between various devices are fast rising to become a major market force. Dropbox is the first major market leader of the sector. Since 2010, when its users numbered a reasonably impressive 5m, the industry has boomed, and Dropbox now has 175m users.

Two years ago there were few serious competitors; Apple’s MobileMe flopped on launch, and Google’s much speculated-upon GDrive was seemingly abandoned. Now, however, Dropbox is being attacked on all sides as more increasing numbers of consumers are storing music and photos on cloud services. A US survey late last year found that back-up or storage services had been used by 14% of online adults, with Dropbox the most popular, claiming more than a quarter of the market, closely followed by Apple’s iCloud.

By prompting to sign in when they buy an iPhone or iPad, Apple has raised iCloud’s user total to 300m. The recently released Goole Drive and Microsoft Skydrive services – the latter of which has 200m users – both boast more storage space than Dropbox. Kim Dotcom, former head of the recently closed down Megaupload website, has already succeeded in winning 3m users for his new service, Mega.

As home usage of cloud storage has grown, so has its usage in business. Companies such as Box and Huddle are competing with claims of better security and more controls for IT managers, targeting different markets to the companies mentioned above.

“We are forecasting to grow over 100 per cent this year,” says Alastair Mitchell, Huddle’s chief executive. “It’s a fast-growing space.”  Within enterprise cloud services, just 1-2 per cent of the $25bn software market has moved into the cloud, Mr Mitchell says, offering plenty of room for growth.

“We are still in the very, very early stages of enterprise adoption of these tools,” says Aaron Levie, Box’s chief executive. “Every new device category is an accelerant to our growth rate. It is forcing IT buyers to think about what is the next generation of their IT strategy.”

Dropbox has gained a foothold in this sector as well, surpassing specialists like Huddle and Box for sheer number of business customers. Yet the question posed of it to Dropbox founder Drew Houston by the late Apple CEO Steve Jobs looms large: is Dropbox a feature or a product?

All of Apple, Google and Microsoft tend to embed cloud storage and its cost in larger products rather than selling it as a standalone service. Huddle, which added cloud storage to its online collaboration tools for business teams and partners, appears to be moving towards the same approach. Dropbox, in response to this, is also diversifying its range of products and services. It reportedly paid $100m in March for the email app Mailbox, which had launched a month earlier to rave reviews from technology blogs. Mailbox offers a simple media player and photo viewer for mobile devices. As well as refining its virtues as a product, Dropbox is equally ensuring that it remains a popular feature, partnering with applications such as Yahoo Mail which cannot creat cloud storage solutions of their own.

“There is not much loyalty” between cloud services, says Mr Mitchell of Huddle, which has users in more than 100,000 organisations worldwide. “Many people use all of them and they are all broadly similar.” Forrester Research analyst Frank Gillett is upbeat on Dropbox’s prospects for winning over developers, citing its fast growth and easy-to-use tools for developers. “The combination makes Dropbox a company to watch and a potential market disrupter,” he says.