The tsunami of cloud computing started rising up in the late nineties. First, the wave hit the data shore, crushing products like Siebel and giving birth to companies like SalesForce. Next, it destroyed FTP and companies like Box and Dropbox were born.
There is no doubt that data and business processes that promise a bright future to companies like SalesForce are here to stay. On the other hand, the future of file storage and sharing services like Dropbox, in my opinion, doesn’t seem to be as bright because of the competition.
The reason file storage market has no future is that the future has no files. That is a ballsy claim, which I’ll support in the article below.
Photo, video, audio, software and document files altogether would make for a bulk of the stuff we’re currently storing in the cloud. But let’s look at what has been happening with each of these file types over the last decade.
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Audio
We used to “own” music in a form of a file. Nowadays, this “ownership” makes absolutely no sense unless you’re a big time hippy-collector. You can “own” the entire world of music with a subscription to Pandora, Spotify or Soundcloud. On top of the variety, streaming services offer a bunch of other perks that beat the random shuffle of downloaded songs. Here are a couple of examples:
Using machine learning and AI all major streaming are getting better and better at suggesting the right song based on the context you’re in: morning, running, etc.
With streaming, you can play the music liked by your friends and they can play the music you like. You don’t have to use gigabytes of storage in your phone with streaming. Music is delivered to you in real-time.
That is why in 2015 the popularity of streaming services has grown 83 percent. At the same time, people purchased and downloaded nine percent fewer music files comparing to 2014. That is why I believe that the future of audio content has nothing to do with files and everything to do with streaming.
Video
What is happening with movies? We don’t own them, we stream them. Nielsen reports that video streaming has skyrocketed by 102 percent in that same year of 2015. Moreover, The U.S. video streaming market is now worth $6.62 billion, with 85 percent of broadband households boasting at least one subscription. Similarly, to audio files, the days of purchasing expensive “movie” files are gone. Thanks to streaming, renting a movie got a lot easier and cheaper. And, generally speaking, who needs to “own” a movie once it is watched anyways?
Photo
Photo creation, storage, and sharing are getting conquered by three major players: Facebook, Google and Apple. Each has a flagship service: Instagram, Facebook Moments, Google Photos and iCloud. They offer additional perks other than just storage. Here are a few of them:
- face recognition
- easy sharing
- algorithms that remind us of past memories
- gifs created out of a series of silly photos
- smarter storage organization. (In Facebook Moments and Google Photos pictures are automatically organized by places and people, which is something you can’t get out of a cloud file storage service.)
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Those services are either entrenched into your device or a social network you use daily. As a result, there is no extra layer of friction aka “another app you have to go to” that you have with third-party storage services like Dropbox.
With all the additional perks these services have to offer, I don’t believe there will be a lot of room for the traditional cloud storage products to play in this market. Yes, Dropbox has more than 500M users; but how many of them are going to stay as storing photos via iCloud or Google Photos becomes easier and cheaper or sharing photos via Facebook Moments becomes more convenient?
Software
Software is eating the world the same way cloud applications are eating desktop applications. Almost every software we had to install on our desktop computers is now available via a browser screen. The trend was even picked up by device manufacturers. File-less future is being established by major device manufacturers such as Google and Apple. Take a look at Chromebook Pixel or iOS. Both systems have no file managers expecting the users to either run software out of a browser
Documents
As the CEO of a document automation company, I feel like I have specific insight into documents as a whole, and why online automation is a must. Documents are the last file fortress. The main reason behind is, pretty much, Microsoft Office, which remains the dominating office productivity suite. As of 2015, the number of its users equaled 1.2 billion people.
However, even Microsoft realizes that the future of office productivity is in the cloud because of cloud-only advantages: real-time collaboration, easy sharing and disaster recovery, automatic software updates, and documents version control. Just recently in May, Microsoft launched a venture capital fund that will invest in companies improving Office 365. Under CEO Satya Nadella, Microsoft continues to radically remake itself as a mobile- and cloud-first company that has pivoted away from its traditional licensed software model.
Google is seen to have some inherent advantages as an Internet company but it doesn’t release revenue or user figures, making it hard to compare Google Apps success to that of Microsoft Office. Nevertheless, data provided to Computerworld by SurveyMonkey Intelligence shows that Google Docs had 24.6 Million monthly active users.
Conclusion
The present still has a lot of opportunities for the file storage companies and the next five years are going to look great for the cloud storage players like Dropbox and Box. The customers and revenue will come from businesses switching from old on premise Enterprise Content Management dinosaurs that will eventually go extinct. However, I believe that the disappearance of files will happen. It might happen faster on the consumer side, which is bad for Dropbox, and it will happen slowly, which is bad for Box.
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If files are gone, the only way for Dropbox and Box to remain afloat and grow is to build products that are able to compete with MS Office 365 or Google Docs. That is doable, but difficult to achieve. Both companies will have to become a place where web documents are born. File storage may always have a place in some consumer’s hearts, but companies that move forward now will have a much more promising future.