Microsoft Lowers Cloud Storage Prices in Time to Catch Ubuntu One Users

Microsoft (MSFT -1.02%) has increased its OneDrive free storage allocation from 7GB to 15 GB, and lowered the price for its 100GB plan to match Google's (GOOG 1.85%) (GOOGL 1.87%) Drive. This service plan is aimed at OneDrive users who have not subscribed to Office 365. Microsoft and Google now have the largest free allocations for cloud storage services.

It's probably not a coincidence that Microsoft pulled off this move at this time. It could very well be that the giant software maker has its eyes set on Ubuntu One cloud users. Ubuntu One was officially shut down on June 1, 2014, with all user data scheduled to be deleted on July 31, 2014.

Ubuntu One wrote in a blog to its users that the huge free allocations by services such as Google Drive had made it unfeasible for it to continue operating competitively. Interestingly, Linux offered up Google Drive as a top cloud storage alternative where Ubuntu One users could migrate their data.

Microsoft also increased the free storage allotment for Office 365 Home users from 20GB to 1TB.

Source: Ubuntu

Google Drive still wins, for now
Ubuntu One users can migrate their data to Google Drive using a robust native client for Linux from a company called Insync. But, it's not clear how these users can migrate their data directly to OneDrive. However, it's quite possible to transfer data from one cloud drive to another using other means. The ease of transfer to Google Drive might, however, mean that Google Drive wins, for now.

By lowering the prices of its OneDrive lower-priced tiers, Microsoft has positioned itself as a highly competitive cloud drive for new users, as well as existing cloud users who might want to move to OneDrive. After all, it's quite easy to migrate data from Google Drive to OneDrive.

In case you are wondering how Microsoft decided on 15GB instead of, say, 10GB or 20GB free allocation, the company has said that it used its own telemetry that showed 75% of OneDrive users have 15 GB of data or less (though it appears as if the price cuts were aimed at matching Google Drive's prices more than anything else).

Last May, Microsoft announced that 250 million people were using its cloud drive (formerly called SkyDrive). There has been no official statement from the company about this year's figures. But, judging by the fast 150% year-over-year growth of Microsoft Azure, SkyDrive users could have hit anywhere between 350 million-400 million by now, which means that there could be as many as 87 million paying OneDrive users.

Assuming 80% of these users fall in the 100 GB price tier, and the rest fall in the 200GB tier, Microsoft could fetch as much as $2.5 billion, or about 3.5% of its overall revenue, from OneDrive in fiscal 2014, which ends on June 30.

What about Google Drive?
Google Drive had 120 million users as of the end of 2013, which is almost one-and-a-half years since its launch. That's impressive growth. The fact that the service is so competitively priced is probably one of the reasons its user base is growing so fast. In comparison, Dropbox, launched in 2007, had 175 million users by the end of 2013.

Google does not provide a breakdown of its Google Drive figures that shows how many users are paying customers. Assuming that it's structured similarly to OneDrive, then approximately 25%, or 30 million, of Google Drive users are paying customers. If 80% of these users fall into the 100 GB tier, and the rest mainly fall into the 1TB tier, Google could see revenue of $2 billion, or 3.5% of its overall revenue.

Regarding the number of Ubuntu One users who might join Google Drive, it's difficult to estimate the number of Ubuntu One users. Using the market share of Linux desktop OS (1.62%) can be misleading because a study done by Ubuntu two years ago revealed a great degree of overlap between Ubuntu and other operating systems.

Approximately 76% of Ubuntu users were also Windows users, while 51.3% also used Android. Moreover, Ubuntu One offered 5GB of free storage space, compared to Dropbox's 2GB. Dropbox works great with nearly every other cloud storage, and it's relatively easy to shift data to/from Ubuntu One and the cloud drive.

Source: Ubuntu

Ubuntu One could, therefore, have tens of millions of users, possibly more than 100 million. Google Drive could soon see a huge influx of Ubuntu One users and a large boost for its Google Drive user base.

Foolish bottom line
Cloud revenue is quickly becoming an important revenue source for companies such as Microsoft and Google. Intense competition in the space is leading to falling cloud prices and better offers, which is great for customers, and good for revenue growth for the providers.