Box, Uber and 29-cent TacosFollow @jdh
My twitter is alive today with stories of Box, now offering *unlimited* file storage for just $35. What a deal! Consumers love the idea of getting storage, which we all know costs real money, for a low fixed price, right?
Almost as much as I like me some UberX for half the cost of a crappy taxi. And given that the price drops a further 25% with every new fundraise, we are asymptotically approaching free car service. Who doesn’t like free transportation?
Still, I’m reminded of my view when Taco Bell offers a value menu with 29 cent tacos: beware buying ‘food’ at a price for far less than it would obviously cost to make food. If it’s too good to be true, it’s probably not true.
What do I think on Box? I think maybe they’ve designed a product marketed as “all you can eat” but it really more “all you care to eat” — “unlimited” but practically not useful for a lot. Or, they figure that while burning hundreds of millions a year, what’s a few more hard drives, we’ll solve this math problem when we figure out a real business. Or they’ve mistakenly figured they’re in the same situation as Uber…
What do I think on Uber? I think they want to suck all the oxygen out of the new-taxi market. They have clear market and product leadership, which has translated into unprecedented access to capital. They have probably been surprised and dismayed to see Lyft more-or-less match them dollar for dollar, as deep pocketed investors who regret missing the Uber train are trying to buy their way into a duopoly. Uber, one of the fiercest competitors I have ever seen, is having none of it. They’ve decided their market is winner take all, and before regulators decide to regulate “dumping” in the taxi market, they will drive price so low through subsidy that Lyft runs out of gas, just like Groupon did to LivingSocial. Surely no one will fork out $1.2B for a distant-second-place-Lyft? We’ll see. If they do, expect a $5B Uber fundraise and UberX price cuts by another 30%.
Box may think they are in this market: lose money now to lock up a monopoly later. I am not even really sure Uber is in that market, and that if in time they try to raise price to leverage their monopoly, a competitor would be foreclosed by their market position. Probably, but not for sure, in my view. But hey, when you can raise billions at basically no dilution, what the hell! And for consumers, free rides! But Box played it’s last “cheap capital” card about a year ago, and from here it looks pretty dearly priced, and it’s not clear that anybody in the cloud enterprise storage market has enough product-market fit yet to pour money in the funnel like Uber can… I guess that fact may actually mitigate the total bill here.
So, for the businesses: I think the Uber strategy is brilliant and brutal. I think the Box strategy is not.
But, for consumers: enjoy your free rides now, and we can all wring our hands later when Uber has a market monopoly and does what every monopoly has in history (extorted profits and worse service, just like the taxi you used to take.) And I think 29-cent tacos are gross.
Next up, don’t get me started on all you can eat Sushi specials…