Dropbox sees huge potential in Europe

When Dropbox's Johann Butting, European head of operations and online sales for the San Francisco company, announced last month that Dropbox would start hiring "aggressively" for its fledgling European headquarters in Dublin, it was a clear sign that Dropbox sees plenty of market potential over here.

Of the 175 million users claimed by the company, Butting says a third are in Europe. "Obviously there are more potential international users than 175 million users, so there's a huge opportunity for growth in Europe – and everywhere else."

Many investors and analysts apparently feel the same, as fast-growing Dropbox – which has both Bono and The Edge as second-round investors – has become one of the California tech companies to watch, with a $4 billion valuation at the time of its last investor round.

Ever since its founders indicated at its early summer DBX developers conference that they were moving to turn the little app into a full-blown platform, ideally targeting the paying business market along the way, Dropbox has been claiming plenty of column inches, including a big spread in Wired magazine.

The aim is to make Dropbox – which enables users to synchronise content across devices, store and selectively share it – the "spiritual successor to the hard drive", Drew Houston, DropBox's chief executive told Wired. Whether it is a file, a picture, a video, a slide presentation, data sent to an app, Dropbox will take it, store it and make it available across all a person's computers and devices, or to other people if given access to a user's Dropbox folder, and potentially, with permissions, to other services.

Houston co-founded the company in 2007 with fellow Massachusetts Institute of Technology student Arash Ferdowsi. It was nurtured in the famed Y-Combinator start-up accelerator in Silicon Valley and has sucked in over $250 million in funding to date. In the past 18 months, it has spent $100 million on acquisitions, to beef up abilities in areas such as handling email.

“If you take into account what you heard at DBX, then something that was obvious became even more obvious,” Butting says. “A highly scalable product became even more scalable.” That’s why DropBox came to Dublin, he adds, “to have access to talent to support and build a scalable product”.

He might have added to build a scalable company, as well. It is still a surprisingly small company for its valuation and number of users – about 300 people, of whom about half are engineers.

But its intention, stated at DBX, to open up Dropbox to outside developers so that they can enable apps and services to connect easily to Dropbox, is, as Butting acknowledges, a fast way to build capabilities and expand users – if the strategy works.

Dropbox cannot exist on its free service alone, though, not even one with the coolness-coupled-to-usefulness factor to have made the company an early, but unsuccessful, target for Apple's Steve Jobs.

Business-level service
Dropbox won't say how many are paying for its business-level service, which it says has two million users, and (if paid for) starts at $795 a year for five users. Nor will it release user figures for its Pro service for individuals, which gives added storage and other features, starting at $99 a year.

But pushing people to sync ever more devices and content to Dropbox’s cloud storage is likely to push ever more people towards the point where they exceed their free space and need to buy more.

However, it is the business market aspirations of the company that stand out in recent weeks and promise the most lucrative return. Dropbox has claimed that individuals at over 95 per cent of Fortune 500 companies already are using Dropbox.

With companies of all sizes having security concerns about cloud-based services, though – especially services employes might be using for company projects without a formal okay – Dropbox sees the opportunity for offering greater controls and enterprise-level security.

If employees are already using Dropbox, goes the thinking, and businesses worry about having business work mixed in with a person’s personal files on a consumer-targeted application, and what rights they might have to access business work held on an employee’s personal-use application, then why not enable businesses to move employees on to a paid for, business-strength Dropbox?

Recently, Dropbox poached Salesforce. com senior vice president Ross Piper to head up this more concentrated move to sell the Dropbox platform to the business sector. With Salesforce.com having pioneered cloud-based computing and built an extensive business on it, Piper will likely bring reassurance to wary executives.

In addition, Dropbox was said last week to have hired in one of VMWare's top engineers focused on business-strength virtualisation, Matt Eccleston.

Yet possible problems with relying on the Dropbox (or any) cloud were apparent earlier this year when Dropbox’s cloud service became inaccessible. For those who use the desktop Dropbox client, content was still stored locally on the device hard-drive, so the problem was one of inconvenience. For companies needing access to cloud-only content, though, such a situation could swiftly turn into a crisis.

In June 2011, it also suffered a serious security failure that allowed an unknown number of users to log into any account using any password. The other big issue for Dropbox was summarised in an online comment from a reader of the Wired story: "No mention of privacy concerns with this cloud-storage utopia?"

Stored in the cloud
If ever greater amounts of business and consumer data is stored in the cloud, obvious questions arise as to who has permission to access that data and for what purpose. Although Dropbox encrypts all data uploaded to its service, the company is subject to the same US laws that have caused a furore after the extent of American data surveillance through programmes such as Prism, was revealed by whistle-blower Edward Snowden. In a statement earlier this summer, Dropbox has said that it was "not part of any such program".

The company has many smaller competitors, some of which offer open-source, user-controlled encryption that would offer greater security against prying state eyes. It also is going up against big firms like Apple, Google, Microsoft and Amazon and any others who might wish to offer a sync, store and share business offering.

Its advantage for now, though, is a large, global userbase that already knows and loves Dropbox – making it potentially less painful for a business to migrate employees from consumer sharing, to a more enterprise-focused service– and, from a selfish Irish point of view, almost surely bringing ever more jobs to its Dublin HQ.