Dropbox

Dropbox is using a freemium business model where it is an online application that allows users to share, synchronise and store files, offering basic account that provides an initial 2GB online storage space for free. Monthly fixed subscription charges are applicable should users require additional online storage space. To build their customer base, they implemented referral programs with the two sided incentive structure. Likewise, the ease of use and product reliability attracted users through word of mouth referrals and viral marketing.

Key elements of Dropbox current business model are as follow:

Go-to-market plan

• Houston and its team of engineers were all competent in developing Dropbox and focus on organic growth where Dropbox team tracked its support forum closely so as to get feedback from users to improve its products. Likewise, Dropbox attained its success through referral program where additional online storage space were given to every existing user who referred a new user. Through this, majority of Dropbox users were acquired through word-of-mouth referrals and viral marketing efforts. Thus, increasing the volume of customer acquisition and making Dropbox a sustainable business.

Customer value proposition

• Dropbox was designed as online user friendly product targeting at users with multiple personal computers and smartphones who wanted to access the data across systems. Users can invite people to access to any folder in their drop box. Likewise, they can track changes of the older version of files and files are securely backed up to Amazon S3. Houston developed this product so that as Dropbox users, they do not need to worry about revising wrong version of documents, carrying USB drives as files are kept online and easily accessible anywhere.

Profit formula

• As Dropbox just begin to start up its business, it’s hard to get people to pay and try online products. Henceforth, in order to appeal to consumers and build customer base, Houston adopted a freemium approach with offering basic account that provides an initial 2GB online storage space for free. Subscription charges are applicable should users require additional online storage space.

Technology & operations management

• Dropbox delivered its service through Amazon’s simple storage service (S3) cloud storage platform. Likewise, drop box client software tracked changes in real time to any file place in the users’ local drop box folder and almost instantly synchronising a copy of that file on drop box’s servers, updating only those portions of the file had been changed in order to save bandwidth and time. As drop box was starting up its business, Houston needed to ensure that dropbox would be successful. Henceforth, he operated on lean capital and partnered with Amazon that has an established infrastructure that would increase growth and position dropbox to scale rapidly. Through this approach, it also avoided the need for infrastructure investments.