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CUSTOMER RELATIONSHIP MANAGEMENT NEWS. UPDATED 2 MINUTES AGO.
You are here: Home / Customer Engagement / Dropbox Buys Israeli Firm CloudOn
Dropbox Buys Israeli Mobile Document Firm CloudOn
Dropbox Buys Israeli Mobile Document Firm CloudOn
By Jef Cozza / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
JANUARY
21
2015
Cloud storage provider Dropbox continued with its streak of acquisitions on Wednesday, announcing that it has acquired Israeli startup CloudOn. Based in Herzliya, CloudOn provides tools to enable users to edit Microsoft Office documents from their mobile devices.

Dropbox raised $607 million last year from backers such as Morgan Stanley Investment Management, BlackRock, and T. Rowe Price, in addition to another $500 million in credit financing. The company has so far put those funds to use on the acquisition trail with a steady stream of deals designed to get its hands on new talent, new technology, or both.

In the last year, Dropbox has acquired companies such as Hackpad, a tool for collaborative note-taking; Zulip, a messaging app designed for the workplace; and Loom, a tool for managing photo collections. Dropbox did not reveal the terms of the CloudOn deal.

International Expansion Plans

The company’s latest acquisition will give it a toehold in Israel’s robust technology industry, and would seem to fit in well with its plans for greater expansion worldwide. More than 70 percent of Dropbox users come from outside the U.S. In 2014, it hired Dennis Woodside as COO to lead the company’s international expansion. CloudOn, which was launched in 2009, has raised about $26 million.

According to CloudOn’s company blog, the company has 9 million users collaborating on more than 90 million documents. The acquisition will also bring around 30 engineers into Dropbox. CloudOn said it would cease servicing customers on March 15, and would no longer be accepting new users. The company said in the near future it will e-mail details to current users about how they will be transitioned to Dropbox.

The deal also seems to be part of Dropbox’s move to focus more heavily on its mobile application. Its Carousel application, for example, helps users manage space on their mobile phones by allowing them to back up their photos to their Dropbox accounts and then automatically delete them from their devices.

Focusing on Microsoft, and Business Users

CloudOn also helps Dropbox in another area that has been increasingly important for the company lately: integration with Microsoft products. Dropbox hosts more than 35 billion Office documents on its servers, and has been introducing new features to help business users work on Office documents.

In November, it introduced a feature that allows mobile users to edit Office documents from their mobile devices. Included among the integration features was the ability to access Dropbox directly from Office apps for Android and iPhone, and the ability to edit Office files from the Dropbox app. Users also gained the ability to sync Office files across their devices.

We reached out to Jeffrey Mann, an analyst at Gartner Inc., to get his thoughts on the Dropbox acquisition. He told us there are two ways to look at this move. He said it makes sense for Dropbox, as editing is functionality that its users are looking for. And having it would help Dropbox compete against Google and Microsoft and other EFSS (enterprise file synchronization and sharing) players that have built in editing. But, he added that it's also odd, considering the deal that Dropbox did for integration with Microsoft recently.

"One of the reasons I thought MS did that deal was that Dropbox is less of a threat to them because they don’t have content creation tools, unlike Google, which is a threat to both. They united to combat a common enemy," Mann said. "This acquisition potentially puts Dropbox on a track to compete with Microsoft more than they have in the past. I doubt that is where Dropbox is going, however. It is not really in their interest to go head on against Microsoft now that they have made nice with each other. Also, they would not have shut down CloudOn so quickly if this is the way they were going."

Mann's take on the deal is that it's a skills-and-channel play. "CloudOn started out offering a virtualized Microsoft Word on devices, but has been moving away from that to make a Word compatible editor," he said. "They have skills about how to build editing tools and compatibility with Microsoft. Dropbox can use those, not necessarily to make a Microsoft Word clone. That would be boring."

However, Mann said Dropbox could use it to build something really new, or add lightweight editing to things like Inbox, or add features to the various Dropbox mobile clients. "I don’t have inside information, but this sounds much more likely to me. I'm curious to see how this will play out and where they will go with it," he added.

Sam Rosen, Practice Director at ABI Research also shared his thoughts on the acquisition with us. Rosen explained that consumer cloud storage today is generally not a standalone business model, but rather a loss leader to derive revenues from other services, including music, photos (printing/gifts), advertising, e-commerce, etc.

"Therefore, it’s important for providers to have as many touchpoints available with the consumer to maintain engagement and monetize storage," he said. "DropBox has done well as the largest independent provider of storage (competing against giants including Apple iCloud, Microsoft OneDrive, Google Drive/Google+ and Amazon Cloud). We would expect DropBox to tightly integrate productivity into its applications in a way that works for mobile-first consumers and helps DropBox to gain relevance in emerging markets."

Although Dropbox has not yet discussed it plans for the CloudOn team, they will most likely be put to work helping further develop new integration features with Microsoft products on Android and iOS devices.

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