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Dropbox: "It Just Works"

MIS A516

Kelley Regan

on 6 December 2012

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Transcript of Dropbox: "It Just Works"

Lessons Learned A slow roll-out after beta testing
Videos that generate interest and allow for feedback
Usability testing and fixing any bugs before launch
Maintaining a lean workforce
Avoiding expensive sales/marketing techniques
Using Amazon's S3 service to avoid expensive infrastructure By:
Kendra Hand
Jon Luksich
Kelley Regan A516 Fall 2012
Case Presentation Concerns Testing demand with prototype "It Just Works" Dropbox, founded in April 2007 by Drew Houston and Arash Ferdowsi, officially launched in September 2008.

Dropbox is a downloadable application that allows users to easily share, sync, and store files (photos, documents, videos etc.) across most personal computers and smart phones. Committed to offering a simple, easy to use product

Houston graduated from MIT and Ferdowsi dropped
out of Harvard to co-found company

Idea created due to Houston forgetting his USB drive
and thought it'd be nice to be able to access his work from
any computer

They were confident that while entering a competitive market they could succeed. They had a performance advantage of storing files locally and updating a cloud copy in the background using time and bandwidth saving optimizations. A video was made and sent to Houston's Fraternity and Hacker News. Targeting Paul Graham, founder of Hacker News and Y Combinator. Securing Capital Y Combinator invests $15,000 in April 2007, and September 2007 Sequoia Capital raises $1.2 million. By 2010 they raise a total of $257.2 million. Beta Testing After developing a Mac client, in March 2008 Houston posts video on Digg to generate interest, and beta testers jumps from 5,000 to 75,000 virtually overnite. Hiring Dropbox hires 6 MIT computer science majors, but not much luck with product or business manager hires. Concerns Continued Marketing Expensive marketing efforts, such as AdWords, and cost per click, it costs $300 to acquire a paying customer Improving Analytics An Analytics Engineer was hired to improve analytics and optimize customer acquisition efforts. Partnerships Partnering with a PC security software is discussed and an SVP disappoints Houston when he wants to bury the brand. They decide they need a VP of business development soon. Decisions Choosing a Business Model Dropbox worked to make sure they were simple, safe, fast and accessible.

They chose a Freemium strategy by offering a small amount of storage for free in the hopes of turning those users into paying customers. Dropbox is focusing on organic customer acquisition, word of mouth and viral marketing as opposed to paid advertising. Using a "Trojan horse" strategy to acquire business users. Where individual users bypass IT departments using Dropbox at work in the hopes of getting them onboard. Dropbox also has a sign-up driven home page, free storage for referrals and free storage for connecting with social media. Profitability Dropbox in April 2010 had 4 million users with 2.8 million direct referral invites, which implies a $10-15 million revenue run by mid 2010. We feel they will be profitable in June 2010. They are on track to have a $240 million revenue with only 70 staffers in 2011. Houston was able to raise a total of $257.2 million in capital from investors. The number of users is increasing at an astounding rate, as this occurs and the number of network files grows larger their costs shrink and margins grow wider. Houston had to make a few assumptions when he applied to Y combinator:
* Product was simple, easy to access, users would be technologically adept, pay for storage Hypotheses

These hypotheses were confirmed, it's easy to use, attracts many users, and people realize that storage comes at a premium but it is a necessity G-Drive
Google's G-Drive, if released at the same time as Dropbox probably would have stolen their thunder.

G-Drive would have probably offered more storage for less and probably would have been installed on all Android devices. Business Version?
We feel Dropbox should offer a small-medium business version.

They should survey their current users and request feedback to see if this service would be useful to their companies. Questions?

Additional Readings:
http://www.quicksprout.com/2012/01/12/6-business-lessons-you-can-learn-from-the-rise-of-dropbox/ http://dropbox.com Answers to Questions
Full transcript