What can we learn from Dropbox’s success?

dropbox-reviewOffering file hosting service including could service, file synchronization, personal cloud and client software respectively, Dropbox was founded in 2007 and launched in August 2008. Although there is fierce competition, Dropbox has had 500 million registered users until March 2016. Data sourceThen how does Dropbox make its success?

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MVP strategy

Before being launched to the public, Dropbox posted a private beta launch videoVideo source on digg.com, explaining how Dropbox works, to gauge people’s reaction.In this way, Dropbox got 12,000 diggs and an increase in beta waiting lists from 5,000 to 75,000 overnight-all of this without a real product.

Dropbox tested its idea before launching the real product. So that it could accelerate the learning of its product to see whether it was what customers really wanted as well as to improve its product according to the reaction of the market. Therefore, Dropbox not only reduced engineering waste, but also got the product to early customers as quickly as possible.

The technique that Dropbox used to validate the concept for itself is building MVP (standing for minimum viable product). As defined by Wikipedia, “In product development, the minimum viable product (MVP) is a product with just enough features to gather validated learning about the product and its continued development.” With the help of MVP, companies, especially start-ups are capable to learning how to build a sustainable business with the minimum amount of efforts.

Word of mouth

After being launched to the public, Dropbox struggled with its marketing. Although it made lots of efforts like simplifying the landing page to capture interest and email addresses, implementing SEM, and replacing the free account option for people arriving via search with free time-limited trial, the revenue was not positive.

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Afterwards, Dropbox tried to encourage users’ referral and sharing by offer bonus which turned to a good result (permanently increased signups by 60%) along with the help of signup surveys, split tests, flow optimizations and analytics. By its word-of-mouth strategy, Dropbox has acquired a large scale of users.

However, there is not always good news. Dropbox is now also facing some challenge. Although Dropbox owns a large registered-user base, the churn rate from free users to premium is quite low leading to the dilemma in which Dropbox can not increase its profits.

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To solve the problem, I believe Dropbox need to either keep current single product but focus on partnership to get more income and financial support, or segment its market and create “professional” version of Dropbox for small to medium sized businesses who can totally afford the premium fee.

 

Following are sources that related the topic:

Drew Houston’s presentation in 2011

Drew Houston’s presentation in 2010

How Dropbox started as a MVP?

More about MVP

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