Overview

The company was founded by Drew Houston and Arash Ferdowski in 2007. There is some Wall Street speculation that Dropbox will be going public soon. However, at the time of this writing, it is still a private company and is not required to release its financials. According to several sources, Dropbox currently has 500 million subscribers. Even if their paid subscriber rate is half that and all of those paid subscribers paid the lowest amount of $9.99 per month, revenues would be a bit shy of $2.5 billion per month.

News reports suggest that U2’s Bono and The Edge have invested millions in the company.

How the Company Started

Houston was tired of forgetting his USB drive so he created a service where he could save his files in the cloud. This got him thinking that others may want a similar service and adapted the software to expand the service to others.

There have been six funding rounds totaling $1.11 billion, according to CrunchBase.com.

Initial Problems

The biggest challenge for the company is the lack of barriers to entry in the field. Storage is extremely cheap. While the company does have the advantage of being the most common service that people know, this gap is closing quickly.

Microsoft and Google both offer more storage as part of their free subscriptions. This type of service is becoming commoditized, which is initially good for the consumer until some players drop out of the market.

Another ongoing problem seems to be complaints about terrible support by the company. Several complaints are centered around the lack of customer support getting back to callers and the system of logging tickets for support are convoluted, according to reports by users.

The company hired mostly engineers and ignored marketing. All things being equal, engineers don’t make great marketers. They rectified this situation later and now have marketing people to increase exposure.

Why it Works

The company works due to its simplicity. When it first started out, there were other solutions that were too complicated, which prevented users from accepting it.

It has become a go-to service for many people when sharing files. Due to its prominence in the market, most people are familiar with the company. If someone asks you to send them a file, it’s likely they will suggest using Dropbox because of this reason.

The company often gets compared to companies who offer backup solutions. While Dropbox can be used for that purpose, it is more of a file sharing and syncing service.

For people who have small cloud-storage requirements, the free version of Dropbox should serve them quite well. The pro or business version does offer decent features for frequent users.

Over time, you have a captive audience when subscribers have several files stored on the platform. If those subscribers share with their customers, they are less likely to switch platforms. This can lead to revenues for several months and even years into the future. The customers of the subscribers also become potential customers for Dropbox.

Promotion:

Word-of-mouth promotion is huge for the company since it is an early adopter of this type of service (file sharing) and has become synonymous with the term. The freemium subscription model helps as it is easy to get people to sign up when they don’t have to pay initially.

The company offers a referral program, which gives users more space whenever a referral signs up. Referral programs are a great way to increase sales without increasing costs. The costs of acquisition are solely upon the affiliates.

Users can also gain more storage when they share information about Dropbox on social media. It’s not clear as to the specifics on how that works, i.e., will they credit accounts for negative comments about the company posted on social media?

Another possible boost is the support of an Application Programming Interface (API). When companies support this, solutions providers can market custom services to their clients, which could increase the subscriber base of Dropbox. Services of such nature are often monthly and ongoing.

Major players, such as Spotify and Hyatt have signed up as customers. This helps juice the company regarding unofficial endorsements. When smaller customers see that these major players are on board, it increases their comfort level when considering their subscriptions.

Dropbox continues to increase its offerings to customers. It experiments with new features consistently.

Features:

There are a fair amount of complaints about the company, although some are suspect. On complaint boards, people state they signed up for the free trial, but were charged even after apparently canceling.

However, the amount they specified as charged, doesn’t even exist as part of the service. Sometimes, competitors will create bad reviews on these types of boards. There are complaints on the Better Business Bureau as well.

The company’s own forum shows some issues with support not getting back to people. This is not a great way to keep business, especially now that a company like Google (via Drive) offers a similar service. Microsoft also offers a comparable service. Competitors are likely to pounce on this lack of customer service.

PCMag in the UK gave it a decent review with its only con being that the service is expensive. In the body of the review, PCMag specifies that other services give more as part of their free subscription.

The company’s Facebook page has over 1.3 million likes. It is an active poster on the page. Oddly enough, the posts do not receive an overabundance of likes, considering the number of likes (and by extension follows) it received.

Lessons Learned By The Business

• The company likes to try out new features and see how existing customers react. This is a great way to develop offerings without spending massive amounts on promotion. The customer base already exists and serve as guinea pigs of sorts.

• The company captures a visitor’s email right from the front page. This gives them the ability to keep these visitors in the sales funnel. The possibility for future sales increases greatly when this happens.

• Dropbox is active on social media. It is likely they use the data from their social media channels for demographics and needs assessment from customers and potential customers.

• The company prides itself on hiring well. It looked for the smartest people they could find and enticed them into the company.

• The company believes in trying to keep a naïve state-of-mind. People who are naïve don’t realize they can’t do something and just go for it. People who are “experienced” tend to have preconceived notions of what will or won’t work. It’s not always easy to keep this point of view, especially when you have many experiences. But, they try to continue with this type of mindset.

How Other Businesses Can Learn From This

Whenever possible, new companies should use the Lean Startup Principle. The concept suggests that companies should experiment with the features of its products in an iterative manner and use feedback from existing customers to find out what works and what should be abandoned.

It is popular with technology start-up firms but could be applied across many businesses. When used properly, less capital is wasted on products or services and only the best features are exploited.