Box, the simply named cloud storage provider, filed its registration statement to go public back in March. Dropbox, a competitor, is always in the rumor mill to begin its IPO process. But if you've been waiting to invest in either, you might have failed to see the storm clouds develop on the horizon for either cloud storage company.

Cloud storage was a growth business, but technology moves quickly: prices are collapsing and competitors are solidifying their services. Unless a company can offer high-margin services on top of traditional storage, you should stay away from an investment in the business. Here's why.


Microsoft bundling Office 365 with its OneDrive cloud storage. Source: OneDrive Blog

When Dropbox launched in 2007, cloud storage was young and it had few competitors. At that time, a 500 gigabyte hard drive cost about $100. Today, Microsoft (NASDAQ:MSFT), Amazon, Google (NASDAQ:GOOG), and Apple (NASDAQ:AAPL) all offer cloud storage services. Today, you can get a 3 terabyte hard drive for $100. With increased competition and a decrease in storage costs, cloud storage providers -- except Dropbox -- have slashed what they charge users repeatedly:

  • Microsoft doubled the free storage offered with OneDrive from 7 GB to 15 GB, cut prices for paid plans by 70%, and if a user subscribes to an Office 365 plan (starting at $7 a month), they receive 1 terabyte of free storage
  • Apple announced, along with its traditional free 5 GB, that it will offer 20 GB for $1 per month, and 200 GB for $4 per month.
  • Google cut prices in March, and offers 15 GB free, 100 GB for $2 per month, and 1 terabyte for $10 per month.

Comparing services is difficult as firms offer a variety of packages, but it's evident the smaller Dropbox and Box think they can offer services to justify a premium.

  • Dropbox offers 2 GB for free, 100 GB for $10 per month, 200 GB for $20 per month, or 500 GB for $50 per month with discounts if paid annually.
  • Box offers 10 GB for free, and 100 GB for $5 per month.

Just what features come with the more expensive Dropbox and Box?

Dropbox released Carousel, an app to view and share photos and videos, in April. However, Apple's photo solution backs up photos, allows viewing across devices and friends, and is built into the operating system of iPhones and iPads. Google has a similar solution with roots in its Picasa software. And the first item advertised on Microsoft OneDrive's website is photo and video backup. Box, more focused on enterprise, offers a variety of photo services through third-party apps built on top of its service.

Dropbox is also touting a coming Microsoft Office collaboration service called Project Harmony. Of course, Microsoft's OneDrive already provides similar real-time collaboration, Google Drive has had this for those who use Google Docs, Apple increased collaboration tools with its latest iWork suite, and Box offers Box Notes for quick and simple collaboration, along with more third-party apps for other features.

Feature rich is the standard
Perhaps because of this weaker value proposition for its users, Dropbox has stuck with private markets where they raised $350 million earlier this year and opened $500 billion in a credit facility.

Box, which had its financials scrutinized earlier, has yet to IPO after being eligible to list shares in April.

Neither seem like a place to store your investment dollars when the time comes, or your files based on the premium price and middling features.

A new Apple device that will need to sync to the cloud
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Dan Newman owns shares of Apple. The Motley Fool recommends, Apple, and Google (C shares). The Motley Fool owns shares of, Apple, Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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