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Dropbox, the most valuable Y Combinator startup, is easily worth $5 billion because it has magic economics.There’s only one problem: its use case might just vanish.
Dropbox is a service that lets you backup and sync files in the cloud.
But as über-VC Fred Wilson notes in a post, “files” is a very 20th century paradigm that will probably go away once the cloud is ominpresent.
Think about it: right now, you can use Dropbox to backup all your music on the cloud. Or you could get a subscription to Spotify, where all the music you can have is already in the cloud and accessible.
Same with Google Docs: once your document is in the cloud, it’s not a “file” anymore, it’s a document. You send a link in an email, not a file.
Dropbox is the best service in the world for storing and syncing files. But that’s little use in a world where “files” are increasingly meaningless.
It’s a story that’s almost worthy of a Greek tragedy: live by the cloud, die by the cloud.
Now, this isn’t a death knell for Dropbox, for two reasons:
- It’s going to take a very, very long time for the file paradigm to go away. We’re only seeing the beginnings of it. These things take time: people underestimate the scale of change, but overestimate its pace. Over a billion people have internet-connected PCs. It’s going to take decades for all of them to upgrade to file-agnostic platforms like iOS and Chrome OS. By that time Dropbox will have made plenty of money for all its stakeholders.
- It’s not an impossible problem, just a very hard one. As Wilson writes, “The reality of the market today is that people use files. You need to support that use case, enhance it, and make people’s lives easier. But over time, that use case will go away. And what people will want is a service that doesn’t have files as the atomic unit. And how do you elegantly morph from a file centric model to a document centric model? It won’t be easy, I’m sure of that.” Nope, it won’t be easy. But nothing says it’s not feasible. And, after all, the Dropbox guys seem to understand the cloud better than almost anyone.
Previously: Why Dropbox Is Easily Worth $5 Billion →