Posted by & filed under Cloud Computing, EXAM ARTICLE, industry analysis.

Description: Dropbox’s ascent has been just as stunning. The 50-million-user figure is up threefold from a year ago, and it has solved the “freemium” riddle, with revenue on track to hit $240 million in 2011 despite the fact that 96% of those users pay nothing.


Date: Oct 18, 2011

What Houston does is Dropbox, the digital storage service that has surged to 50 million users, with another joining every second. Jobs presciently saw this sapling as a strategic asset for Apple. Houston cut Jobs’ pitch short: He was determined to build a big company, he said, and wasn’t selling, no matter the status of the bidder (Houston considered Jobs his hero) or the prospects of a nine-digit price (he and Ferdowsi drove to the meeting in a Zipcar Prius).

Jobs smiled warmly as he told them he was going after their market. “He said we were a feature, not a product,” says Houston  .READ REST OF STORY

Questions for discussion:

  1. Why has Dropbox been so successful?

2.  What is the “freemium” riddle? , and how has Dropbox solved it?

10 Responses to “Dropbox: The Inside Story Of Tech’s Hottest Startup”

  1. Lindsay G

    2. What is the “freemium” riddle? , and how has Dropbox solved it?
    The freemium riddle is concerned with how to turn a profit even though the majority of users have access to something for free. In the case of Dropbox, they have been able to have a $240 Million revenue even though 96% of users do not pay for the service. Dropbox is able to overcome this is because of how frequently users use this service. By making the first 2 GB free people are able to become familiar with the interface and convenience. By providing the Dropbox service in a tiered manner, the general public is able to test run the product allowing for increased exposure. This strategy makes consumers more likely to upgrade to, and subsequently pay for, a larger dropbox size once they have met their limit.
    It also helps that Dropbox provides a service that is highly flexible and can bee useful do a highly diverse consumer pool. Because the service can be utilized in various way, a greater number of people are continuously looking into subscribing to this service. From businesses, to students, to families, the Dropbox user-base is constantly expanding – allowing for increased revenue gains, despite the ability to have access to this service for free.

  2. Kristin Schneider

    Dropbox is a free file synchronization and back up service that lets you bring all your photos, documents, and videos anywhere together, and share them easily. This means you never have to email yourself a file, never forget your thumb drive, or never lose a CD or DVD every again! Dropbox is more popular than other programs with similar functionality. Some reasons are as follows. Dropbox is cheap, and free to startup. Dropbox is universal with any operating systems, like PC, Mac, Linux, and also via mobile. Dropbox effectively combines fun and functionality because people love sharing with others and the social networking aspects works well (Dropbox provides a “public file” where you can save files that you want to share with other Dropbox users). Businesses can use Dropbox. After people use it (for free) they start to see the benefits and they will pay for additional storage, which gives it more value. Dropbox is great for critical files like photos and documents. Dropbox has came up with a catchy name and logo, making it successful in branding and marketing. All of this boils down to simplicity and the fact that it actually works, its convenience and peace of mind.

  3. adam smith

    I feel drop box has been successful for a couple of main reasons, one it does help being one of the first to start in the industry, they were up and going before apple, google and all there other competitors. When you’re the first to start, you get to start building a customer base first. Another great thing that has helped in my eye is their referral system everyone likes free stuff and if you can get free room for having a buddy sign up for free why not right. They say that even now a quarter of their customers are from referrals. So one can start up for free, they get 2 gigs completely free and can gain a little more for free when they sign people up. But once you start using it and realizing how useful it is and how convenient it can be, as well as protect the files that are important on your computer in case it crashes one soon finds out the space they have gotten for free is not nearly enough. The article states that they will make a nice profit to come even if they do not sign up another person. This is because they have gotten so many people in the door with the free 2 gigs that 96% of customers don’t pay but with the customers that do and with the many more that will realize that there free space is not nearly enough drop box will be sitting on a “gold mine” the biggest thing to watch will be how much of the market their competitors will take.

  4. D. Kozak

    Dropbox has been hugely successful with this idea of signing up for free and receiving 2 gigs of memory storage, and the more you use, you begin to subscribe to it. This is where Dropbox has made its revenue, by simply allowing you (the consumer) to test the use of the cloud software. They have begun to show people how much they need it, when people hadn’t realized this, or much less even seen a need for it. The fact that users have a chance to experience dropbox, is why it has continued to grow at such a rapid rate. The idea that referring individuals and receiving more space is huge with this concept. I personally know of a few individuals that refer their family and friends all the time to Dropbox and receive more space. I believe that has made Dropbox so successful in making its presence known. Overall isn’t that the best way to market something? by having your customers speak for the product and refer it to other potential users, and then rewarding current users. I believe on a large scale this is just pure genius as first,it allows users to access files, photos, and documents available anywhere you are, and second it builds the company with its referral system. Another factor, is that they have made it compatible with most popular platforms is huge! Being able to access your data from your lab-top, your mobile device, your friends computer, the computer at school or the workplace makes it so convenient. Dropbox is taking over the use of a USB, as why would you want to carry around a memory stick when you can just show up and log in and have the same information readily available. The only downside to this, is it requires the use of internet, so if you are trying to access files with out an internet connection it makes it rather difficult, unless you the application is downloaded to your computer and updated on a regular basis.

  5. Taylor Elderton

    Dropbox has been so successful because it solves a problem that nearly every single person using the internet and computers has. How to get files from one computer to another. Most people now days carry around at least one piece of external hardware, sometimes two. Whether it be a flash drive, or an external hard drive. There are two huge problems with carrying around these things. Problem one is that they are physical, which means they can break. Flash drives can be bent or broken, no longer making connection with the computer. External hard drives can be dropped, or the disc inside stop spinning. The second problem is that they are very easy to leave somewhere. In two years of college I lost three flash drives by leaving them in computers, plus they were never with me when I needed them. Dropbox solves these problems, and as I write this I realize I should start using this service.

    The freemium riddle is the question of “How does a business make money and offer something for free?” There are a couple ways. One is advertising. Most of the time this is the best way of doing it, because everybody likes something free on the internet. The issue with this, however, is that your site needs to be successful enough to get advertisers. The second way is to offer a free version and a paid version, with the free version being almost like a trial. This is what dropbox has done. It’s become so successful for them, because when somebody gets the free version they realize it’s so helpful it’s worth the extra money to get the upgrade.

  6. Kevin K

    Who was Houston’s celebrity rapper drinking buddy?

    a) Drake
    b) Vanilla Ice
    c) Mos Def
    d) Will.I.Am

    (Answer, D)

    Houston got the idea for Dropbox while travelling on a:

    a) Bus
    b) Plane
    c) Subway
    d) Bicycle

    (Answer, A)

  7. Jian Li

    Free storage attracts quite a few users. Dropbox can be used as a network hard disk. Even though it is free for less than 2G storage, I think with more use of Dropbox, more people will trend to pay for more capacity. By using Dropbox, people don’t have to carry flash drive around (no worries about forget it in computer of the labrary). There is no capacity limit. The users can access it from any computer. Also, people can recover their deleted documents. The security is pretty reliable. The Dropbox provides an attractive promotion—current user can have free capacity by inviting new user. However, it is not easy to survive in this competitive environment. Dropbox has some problem when it is used in China. First, the existing competitors, they are well known for the Chinese internet users. Also, the interface is designed more fit Chinese uses’ needs. Third, there are more attractive tools like binding with other popular website, softwares, ect. Politics can be another challenge, after the ban of google, facebook, twitter, recently Chinese users are not able to access. With a number of four hundred million internet users(the number is still increasing), Dropbox may not want to lose the big market. As a dropbox user, I expect that I can access and use my document stored in Dropbox even when I am in my country.

  8. Blair Watkins

    Dropbox is a successful company because it solves an issue that everyone faces. Storage. Especially now a days when everyone lives online or through there gimmicks people carry their lives with them, wherever they go. You can be half way across the world and carry thousands of song, photos, files, or whatever it might be. THe reason that it’s so hot is that gimmicks crash. When that happens people lose all the information that hasn’t been backed up to some external holding cell. The real advantage to Dropbox is that if you lose something you don’t have to go to that external holding cell to find it. You can go to an online holding cell and it’s right there. It has become a success because not only was it one of the first competitors in that specific industry but it also had a great referral program to promote word of mouth. You know you got a good thing going when you have the likes of Steve Jobs knocking down your door to buy you out.

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