The file sharing and collaboration space is typified by two distinct perspectives on growth. The first says that user numbers are everything and that revenue shouldn’t be a key driver for vendors looking to take advantage of the land grab that currently exists. The second, more conservative approach perhaps has its genesis in the dotcom burst and says that while user numbers are good, deriving meaningful revenue from customers is the most important thing. Proponents of this approach are looking for growth in users, but not at the expense of growing revenue.
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So it’s interesting to see some hard and fast statistics finally start to appear – especially since almost every press release I receive from one of these vendors includes the oft-quoted, but essentially meaningless remark about the product “being used by 95% of the Fortune 500″. Just because a cloud file sharing vendor CEO’s Aunt works within a F500 company and once looked at said product, it doesn’t mean their footprint within the Fortune company is in any way meaningful. So I was fascinated to get my hands on an IDC report published last year that details the user numbers and revenue for different vendors. While the data is only up until 2012, the trends it shows are what is really interesting here.
The report was a competitive analysis of the global file sharing marketplace and looked only at business revenue – Dropbox in particular but also Box has their origin in consumer product – Box pivoted to and enterprise focus after only a few years but for Dropbox the move to an enterprise model has been something of an afterthought. Dropbox in particular struggles to meet the needs of its enterprise customers while still retaining the elegant simplicity and ease of use that has seen it grow hugely over the past years.
The report attempts to segment off the non-business revenue that vendors make. Dropbox is a particularly good illustration of this. in it’s recent fundraising documentation, it was disclosed that Dropbox had total 2013 revenue of some $200M. The IDC report pegs their 2012 business revenue at $46M. Even allowing for decent growth, the split between business and consumer revenue is stark for the company. Anyway, getting onto the metrics, the report segmented off the top four vendors in terms of the number of registered users they have. It will come as little surprise to anyone that Dropbox not only has the highest numbers but is growing more steeply than its competitors. Interestingly Hightail (formerly called YouSendIt) is in second place – they have a significant legacy customer base from their previous product focus (FTP file transfer replacement) and hence we’re seeing historical userbase pull them through into their new product area
Where it gets interesting though is when it comes to revenue. And it’s here that we see a real justification for Box’s laser focus on the enterprise area. Box is far out in front in terms of revenue, and their numbers are accelerating faster than the other vendors. It’s interesting to also not Dropbox’s fairly linear growth and the impact of YouSendIt’s rebrand and shift of focus, since the name and product change, Hightail’s growth has steepened. It would appear the big loser, at least in relative terms is Citrix Sharefile who seems to have lsot ground to the other competitors. What is interesting here is that I’m aware of some of the growth numbers that Sharefile has been seeing which are particularly impressive. If those figures are true, and this IDC analysis is valid, it points to the huge growth the file sharing market as a whole is seeing. It would be interesting to compare total market annual growth rates for the cloud vendors versus the more traditional storage vendors.
Finally, and to further reinforce just how early we are in terms of market penetration of these products, IDC split revenue by region. The pie graph below shows that the Americas accounts for the lions’ share of the growth, leaving EMEA and APAC as largely untapped markets.
All of this points to a couple of things. Firstly that we are very early in what is a massive market opportunity but secondly, the astronomical valuations that both Box and Dropbox have been seeing of late have their genesis in both their outright growth in user numbers, their ability to convert those users into revenue, and the continuing rate of growth they’re seeing in the marketplace.