Google has announced that its Photos app will now store an unlimited number of pictures for zero cost. The company is now fully engaged in what industry experts call the “race to zero.” In this race, a handful of large companies, including Amazon, Microsoft, and Google, are attempting to offer certain services for free while capitalizing on premium products that customers are willing to pay for.
The cloud-computing industry was ushered in by the likes of Dropbox and Box, and was quickly adapted by Amazon, Oracle, and other tech giants. As the cost of data storage has fallen, those companies have continued to lower the cost of storage. In 1993, it cost $9,000 for one gigabyte of storage, today that cost has shrunk to just $0.04 (based on 2013 numbers). As those numbers continue to fall, companies have raced to secure massive customer numbers. However, once those numbers are achieved, the companies must then spend billions of dollars to build and maintain new data centers.
While Amazon already offers free photo storage to Prime customers, who pay $99 per year for the companies bundled online and delivery services, and Microsoft offers free storage to Office 365 subscribers with prices starting at $70 per year, Google services are available on 90% of Android and iPhone devices already sold. That gives the company a step up in the race to zero.
Making Money In The Race To Zero
So how will companies make money in the race to free services? Box hopes to sell more security platforms to enterprise customers while offering new collaboration tools that make it easier for workers to share documents across the cloud. Dropbox also offers business services aimed at securing files while providing additional administrative features.
Other companies, such as Amazon, are offering certain cheap services for free, while adding additional services into the mix. While Amazon helped usher in the cloud computing sector, the company has since expanded to include Route53, a domain registrar and DNS service, along with analytics, deployment & management, administration & security, and dozens of other services. The company might store customer photos for free, but it also capitalizes on more complex cloud services to earn billions of dollars annually.
Consolidation Of An Industry
As services continue to race to zero, there will likely be major consolidation in the cloud-based services industry. Companies such as Microsoft, Amazon, Google, and Apple, can leverage the billions of dollars they have on hand to build $1+ billion data centers, and then maintain those services as they attempt to find new services that capitalize on their growing database of free users. While companies such as Dropbox helped disrupt the data services industry, we are likely to be left with a handful of old school data firms that manage those services.
There is some good news for smaller firms looking to break into the cloud-based industry. While photo and video storage may not be profitable in the near future, there are still plenty of opportunities on the management and security sides fo the business. There is a very good chance that third-party apps will begin adding new security layers to already established cloud services Gwhile other software and hardware providers will find better ways to manage entire data ecosystems.
The race to zero was pushed to new levels by Google this week, and now we get to sit back and watch what happens next.