Dropbox Slashes Its Price As the Cost of a Gigabyte Nears Zero

The Dropbox office. Ariel Zambelich/WIRED

When I talk to folks at Dropbox, they’re eager to tell me about how different people are using its file-sharing service: the musician, the photographer, the professor, the startup founder. They like to talk about new features, like password-protected links and the remote wipe tool that lets you remove files from a lost computer.

But what they save for the end of our meeting, almost like an afterthought, are the two numbers that traditionally meant the most for a data storage service: how many gigabytes you can store, and at what price.

As it turns out, these numbers look at lot better than they used to. On Wednesday, the company slashed the price of a gigabyte by 90 percent on Dropbox Pro, the paid version of its signature consumer product. Up until now, users paid $9.99 per month to store up to 100 gigabytes of data. Now, for that same price, they can store one terabyte.

The cut brings Dropbox in line, once again, with rival services at its gargantuan competitors: Google and Microsoft. But Dropbox’s decision to bury the lead signals something more important about the business it’s in: in the competitive market for file storing, syncing, and sharing, gigabytes don’t matter quite as much as they did in the past. The game is all about what you can do with them.

“It’s how you get the content in and out and how does it let you do the work you want to accomplish,” says ChenLi Wang, Dropbox’s head of product. “We want people to rely on Dropbox as the home for all their stuff as opposed to thinking of it as a fixed storage limit.”

What Dropbox Is Selling

In 1981, a hard drive that held 10 megabytes cost nearly $3,000. Buy 100 of them and you could store a gigabyte for merely $300,000. Today, on Amazon Web Services, storing a gigabyte costs as little as a penny per month—now what Dropbox is also charging. This means the companies that charge you to do the storing have to offer a lot more to earn their monthly fees.

So, if Dropbox isn’t really selling storage, then what is it selling? Services. Dropbox’s namesake folder is so deceptively simple that it’s easy to forget that you’re interacting with a heavily engineered interface on top of a storage backend. Syncing files across devices is a very different problem than simply backing them up. And Dropbox likes to claim its syncing algorithms are faster and more reliable than anyone else’s.

The competition becomes squarely about what each competitor can do, rather than how much users can upload.

On top of its basic functions, Dropbox has built a range of features, from file-sharing to photo galleries. New features announced Wednesday for Dropbox Pro include a view-only option for shared folders and optional password protection and expiration dates for shared file links. Dropbox Pro will also now include the ability for users to log into their Dropbox accounts via the web and wipe data from their Dropbox folders on individual devices if they’re lost or stolen.

But it’s hard to see how any new features could have sustained Dropbox’s business in the long run if it continued to charge so much more than the competition. Google Drive and Microsoft OneDrive offer similar features to Dropbox, but until Wednesday, they were charging one-fifth the price. Each offers its own version of storing, sharing, and syncing across desktop and mobile devices. (It should be pointed out here that many cloud-storage products aimed at business customers, including Dropbox for Business and rival startup Box, already don’t bother to cap the amount of data stored at all.)

With such a great price disparity on the consumer side, part of the advantage Dropbox has nevertheless enjoyed is pure name recognition. Its brand has become synonymous with the service it provides, like Kleenex or Xerox. This fuels new signups. Existing users, meanwhile—they number 300 million, according to the company—are likely loathe to make a switch that involves moving and re-uploading so much data. Inertia has been Dropbox’s friend.

The Winner Is the User

But the price drop gives Dropbox new momentum. One terabyte now costs the same on Dropbox as it does on Google. The competition becomes squarely about what each competitor can do, rather than how much users can upload.

That’s been the approach Microsoft has taken, says Michal Gideoni, director of product management for Office. Gideoni describes storage for Microsoft as just one aspect of its “holistic” approach to the cloud, an approach anchored not by file-syncing but by Office 365, the online version of its iconic productivity software. As at Dropbox, Gideoni talks in terms of workflow, of data on the move, not just of a box for holding data in place.

“Storage is just one piece of the pie,” Gideoni says. “We actually think we’re offering a lot more.”

Dropbox

What that “more” looks like is now the centerpiece of the competition among cloud storage services as the price per unit of data becomes a non-issue. Yes, a terabyte from Microsoft costs even less than one from Dropbox or Google: $6.99 per month as part of an individual user subscription to Office 365. But that $3 per month may not mean much to users who like Dropbox’s great photo-viewing app Carousel or what Dropbox says are the 300,000 third-party apps built on top of the service. (Dropbox for Business also offers deep integration with Office files, but so far those features are not available with the consumer version.)

In the end, the winner here is the user, at least for now. One terabyte is enough space for most of us to keep all the files we would ever use on an even occasional basis. With space a non-issue, Dropbox and everyone else have to seek competitive advantage elsewhere. This forces companies to focus on design and user experience. In other words, they have to make their products better, not just bigger.