Dropbox: “It Just Works” Lauren Katz 3/22/2016

Qualitative Analysis Only 32.7% consumers are from US Customer Value Proposition Downloadable application that allows users to easily share, sync, and store files across most personal computers and smartphones Online backup and storage is a fiercely competitive industry and Dropbox is a late entrant Dropbox is innovative in the way it stores files locally and updates the cloud copy in the background faster, can use any file size or type MVP at launch: Simple and easy to use product: “It just works” Many customers request other features but this violates the MVP  MVP is blocking growth Freemium business model Free and premium options Scales easily by offering single product version to both consumers and business users At first did not have a lot of formal testing but then tested through posting videos and introducing A/B testing and Votebox they still do not take into account business vs individual users or use surveys Only 32.7% consumers are from US  Capitalize on this by appealing to all nationalities Go-to-Market Plan “Personal use as a Trojan horse” go to individuals first than companies will want it Target Market: Online backup and storage services Market for online storage is booming but competitive Followed “tried-and-true” as a blueprint for launching Struggle with advertising Pivot to referral programs, shared folders, and other viral features (cheaper and greater results) Technology and Operations Management Team is small (25 people) but strong develop slowly Houston started programming at 5, experience with starting a venture; Ferdowsi (CTO) recruited dropped out of MIT Financials 2GB Free per month;50GB plan for $9.99/month or $99/year; 100GB plan for $19.99/month or $199/year. Estimated only 2% are paying customers increasing this percentage can be huge Market expects huge growth

Quantitative Analysis Revenue Model: 2GB Free per month;50GB plan for $9.99/month or $99/year; 100GB plan for $19.99/month or $199/year. “undo history” $39/year add-on feature Financials in 2010: Revenues: 10-15million Users: 4 million, 2-3% are paying customers(~100,000) increasing this can greatly increase revenues COGS: $.11/free customer, $3.18/paying customer  expected to decrease in future years total COGS = approximately $747,000 Gross Profit = around $14,253,000 - $9,253,000 Carbonite Financials reveals Dropbox’s Promising Profitability: Carbonite incurred an operating cost of $14.2 million during the first 6 months due to marketing Dropbox avoids this and stick to cheaper referral programs Dropbox has similar financials to Carbonite besides advertising. If Carbolinite did not spend as much on marketing they would have had positive returns shows good potential for Dropbox AdWords Report: $388.11 - $233.31 is the cost per conversion that sticks not worth it Market is growing: 28% annual growth for the market mainly due to the rapidly dropping cost of bandwidth

Recommendations: Testing Recommendations: Look at individuals, small businesses, and large businesses as separate customers when testing. Determine if there are unique needs that might require more than just a simple all in one plan. Perform A/B testing for features that go against “just do it” MVP  listen to customer feedback Product Segmentation – Business Specific Packages Address the requests of customers without violating MVP by making premium packages for businesses that allow them to sync outside files, use other languages, etc.  Satisfies requests of customers while encouraging them to switch to premium and increase revenues. Team Expansion: Development is slow and scaling is only possible with a larger team to handle business and technical sides. Demand is growing so Houston should recruit people that know how to handle expansion. Revisit Partnerships: Now the company is more established the team should agree to revisit partnerships especially with Android. Since Android is created by Google, that eliminates the competition of Google needing to give out free storage since it will now work with Dropbox. This will also secure Dropbox’s relevance Risks of not making these changes: Google, Microsoft, and any other competitive business has the technology to do what Dropbox does... Partnering can avoid the risk of becoming irrelevant like Napster. 25 person team will not be able to handle expansion Carbonite may take a lot of business customers away from Dropbox