’s Zocalo Is Huge, but Not for the Reason You Think

Well-defined, easy-to-manage cloud storage is a long-term need that’s bound to be served by several companies.

Jul 17, 2014 at 1:00PM (NASDAQ:AMZN) fired a big salvo at Box and Dropbox when it introduced its Zocalo data storage service last week. Box fired back Tuesday, lifting capacity limits. You know what? None of that matters. If you're a tech investor, Zocalo should make you a lot more interested in the inevitable IPOs for both Box and Dropbox.

A market for users, built by users
Zocalo is an aggressively priced data-storage service tied to Amazon's S3 platform, which is part of a suite of cloud computing products that exist under the umbrella we know as Amazon Web Services, or AWS. A tie-in with the company's WorkSpaces product -- think of it as a PC, with the desktop and services located in the cloud -- encourages greater use of Amazon's cloud platform.

How could that be good for Box and Dropbox, especially given Box's response to the product? I'll grant the benefits are indirect, but I also think it's fair to say that every improvement in cloud infrastructure boosts the entire market for cloud services, including commodity services such as data storage.

Look at the numbers. According to its most recent SEC disclosures, Box's revenue more than doubled in fiscal 2013. Dropbox was tracking for near 80% revenue growth last year. Why so fast? Companies and users no longer object to the idea of storing huge volumes of data in the cloud, which means spending that might have gone to bigger servers and storage arrays in years past are now going to the likes of AWS, Box, and Dropbox.

And to big platforms. Google (NASDAQ:GOOGL)(NASDAQ:GOOG) says it serves 5 million businesses and over 50 million users via Google Business Apps, which comes with at least 30GB of storage space. An upgraded version includes unlimited storage for $10 per user per month, and includes apps for creating documents, presentations, spreadsheets, and the like. Microsoft (NASDAQ:MSFT), for its part, offers Office 365 subscribers 1TB of storage and 15TB to those that use its OneDrive storage cloud.

The value of a data dump
To me, it's these and other offerings like them that explain why Gartner is seeing lower spending on external controller-based storage. There's simply not as much need for on-premises systems in the era of cloud storage. Yet that's also half the story. AWS, Box, and Dropbox aren't just picking at the leftovers of a dying market. To the contrary; data storage needs are expanding geometrically.

Researcher Statista estimates that global computing service revenue related to storage will nearly double between now and 2016. According to one IBM estimate, users and machines combined to create some 2.5 billion gigabytes data every day in 2012. Imagine how much greater the total must be today, and then consider Gartner's findings. We're awash in data, and most of it is flowing through the great digital river we call the Internet.

That's an opportunity for every company that makes it easy to store and retrieve data in the cloud. Box and Dropbox -- with their big client lists, history of growth, and impressive backing -- do the job better than most. I suspect their IPOs, when they finally arrive, will reflect this truism.

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Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Google (A and C class) and International Business Machines at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends, Gartner, and Google (A and C shares). The Motley Fool owns shares of, Google (A and C class), International Business Machines, 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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