Why Google's price cut made the consumer cloud biz a lot cloudier

(Credit:Sarah Mitroff/CNET) If there was any question that the cloud storage business is a high stakes game, Google erased all doubt this week. The search giant shook up the consumer cloud world by drastically slashing its paid plans. Fifteen gigabytes of storage are still free, but 100GB are now $1.99 per month, down from $4.99. Even more impressive is the fact that you can get an entire terabyte of space for $9.99 a month, which used to be $49.99.

The move signals a clear, ruthless investment by Google. And when a giant like Google makes a push like that, it reverberates through the entire ecosystem, and the other players have no choice but to react. This isn't the first time Google has made a change that sent other companies jumping. When it began to re-categorize emails in Gmail, at least one firm that depends on the platform noted the change in an SEC filing, under the section "Risk Factors." The comparison isn't directly analogous, but the fairly obvious point remains. Google's stirrings are a big deal.

Calling out Google's price cut announcement as a turning point might seem a little out of place in a market as bustling as consumer cloud storage. (And yes, I'm aware of the absurdity of that last sentence.) The boring business of storing digital bits used to be etched in old guard tech companies like IBM, but has since been remade in the image of youthful upstarts like Box and Dropbox. Both with respective youthful leaders. Related: Dropbox CEO Drew Houston plays guitar in a 90s cover band called the Angry Flannels.

But more importantly, both have multi-billion dollar valuations -- Dropbox at $10 billion and Box at $2 billion. And both have ambitions of becoming big public companies. Box is rumored to make its public market debut this year.

To be clear, as the early movers and shakers in the space, Box and Dropbox still have the upper hand in terms of experience. But Google's aggressiveness does underscore how very cutthroat the fight has become. Since Box came along in 2005 and Dropbox in 2007 -- not to mention a host of other competitors like Carbonite, SugarSync and Hightail (rebranded from Yousendit) -- the giant tech incumbents have also launched services of their own. In addition to Google, which launched Drive in 2012, there's Microsoft's OneDrive (formerly Skydrive), and Amazon Cloud Drive. Sure, Google, with its $400 billion valuation, can throw around the weight of its margins to upend the market's pay structure, but at its core, Google's 80 percent price cut for monthly access to a terabyte of space just validates the business models of the smaller companies.

The upstarts were surely prepared for this. At least Aaron Levie, Box's co-founder and chief executive, was. (Here we should point out that while Box's meat and potatoes business is serving the enterprise, it also has consumer options. Inversely, Dropbox has enterprise options.) Levie was not available for comment, but in April 2012, when Google Drive first launched, he wrote:

Ultimately, we concluded that there would be a dramatic race to the bottom for the price of consumer online storage, and it would be impossible to maintain a competitive offering when elephants like Google, Microsoft and Apple could effectively subsidize their offerings. Because of the potential for user lock-in, each of these players had deep incentive to provide consumers with a drive in the sky, and with storage costs dropping precipitously, we saw a future where storage would be infinite and free. That just doesn't make for a great startup business.

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BrandProject Aims To Apply The Betaworks Model To Consumer Products And Goods

A new seed-stage investment fund and ‘company creation’ startup called BrandProject launched today, with offices in Toronto and New York, and a team of founders who, between them, have a boatload of experience building, shipping and marketing consumer hardware and software for some of the biggest brands on the planet.

The five-person founding team includes founder and CEO Andrew Black, who’s worked with Nike, Virgin and Lego; Stanley Hainsworth, a former VP of Starbucks and in-store branding/packaging expert who invented the Gatorade bottle; Jay Bhatti, CTO and former director of a boutique search marketing firm that counted Barneys and Coach as clients; and Sarah Prevette, former founder of entrepreneurial social network Sprouter and startup publication BetaKit (disclosure: I previously worked for BetaKit when Prevette was editor in chief).

The team will be working in what Prevette described in an interview as a “betaworks“-style approach to incubating talent and early-stage companies that aim to create consumer software and physical products, sometimes investing money with the $12 million initial they’ve amassed from private investors, the founding team itself, and BDC Venture Capital.

“The model is really flexible,” Prevette explained. “We look for really exciting transformational ideals that have traction in a wide variety of consumer verticals. We look at everything from health, to fitness, to beauty, to home consumer hardware and consumer tech. We’re also always looking for phenomenal people with a track record of success, but people come to us at different stages.”

BrandProject is incubating some ideas sourced from the founders that solve problems they’ve been having themselves, for instance, and they’re seeking “industry experts who share that passion” to help build those products and bring them to market. They’ve also already quietly worked with BRIKA, Hello Products, Caffeinated Chocolate and The Coveteur via investment and assistance in growing their business.

The consumer focus with a willingness to bet on hardware, especially for an incubator and early stage investor that has one foot planted firmly in Canada, is a rare thing. The investment climate locally in Toronto seems to have become more cautious lately, which has led to some funds closing entirely, and both investors and accelerators turning their attention to more enterprise and B2B companies, which represent less risk relative to the fickle consumer market.

Prevette says to expect to start seeing more from BrandProject and the companies it’s helping build very soon, but while the concept has a solid proven foundation with the likes of betaworks and Idealab, there’s still a lot of risk inherent in the model. BrandProject does have a team with a solid history of building and selling consumer products, however, and it shouldn’t have any trouble attracted talented people on the Canadian side of the border where resources for entrepreneurs interested in chasing the consumer market are relatively few and far between.

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How Snapchat Became The Breakout Consumer Product Of 2013

Editor’s Note: Semil Shah works on product for Swell, is a TechCrunch columnist, and an investor. He blogs at Haywire, and you can follow him on Twitter at 

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The Consumer Electronics Startup Show

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The size and scope of the Consumer Electronics Show is unfathomable for the uninitiated. CES has been called a cesspool. It’s been called a shitshow. And those descriptions are accurate. It’s a clusterfuck of consumer electronics companies, big and small, vying for attention. That’s why TechCrunch attends.

For the 2014 show, which is just two short weeks away, TechCrunch is, for the first time, breaking out its Startup Battlefield event from Disrupt. Called Hardware Battlefield, this startup competition has been tweaked and reworked to focus on, and celebrate, the brightest and most promising unlaunched hardware startups. And what better place to host it than CES?

CES is the largest startup show in the world, and to say that it takes over Las Vegas is not hyperbolic. The city is consumed by CES: Nearly every hotel room is booked; almost every conference room is used. For every Samsung and Microsoft, there are at least 100 smaller companies — the best and brightest of which often do not have an official spot on the CES show floor.

For years, CES has been held at the Las Vegas Convention Center. This massive facility has four exhibition halls nearly large enough to hold air shows within. But in recent years, with the LVCC bursting at its seams, the show expanded next door to the Hilton, The Venetian and Palazzo. If that’s not enough, companies and startups often save a bunch of cash, forgoing the traditional CES experience and rent suites in other casinos. Then there are hackathons, press events, and more lame parties than one can possibly attend.

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