Amazon.com’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

Amazon.com (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.

Store up for retirement the right way
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

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 Amazon.com, Gartner, and Google (A and C shares). The Motley Fool owns shares of Amazon.com, 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers