We've seen this before. It was called google video. Google ended up buying youtube because even they could no longer deny they'd lost the battle and they couldn't risk it going to a competitor. Dropbox is in for a rough ride, as long as they can maintain focus and quality (beat them at customer support, that should be a walk in the park) they'll be the biggest YC exit ever once Google has run its course with the Goog…
Wow, it's amazing how everyone thinks Google Video entered against the entrenched Youtube and lost. Google Video preceded Youtube. Google Video was launched before Youtube was even formed as a company. Youtube just straight up out-competed Google Video. Probably being a startup, capable of being naughty[1], staying closer to the copyright infringement line, and being willing to piss of big media companies helped them…
Google changed to copy YouTube's style of video hosting after YouTube already gained traction. The version of Google Videos that people are familiar with came out after YouTube. The version of Google Videos that you're talking about died.