University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Dropbox was created in 2007 and launched to the public a year later. It was founded by Drew Houston and Arash Ferdowski; who were classmates together at MIT in the early 2000’s. The created a product that allows you to sync you computers together by using a cloud to share files between the different computers. At the time of creation there were existing products in the market but they believed that they created a product that would simplify the process as well as make it secure and reliable for the customers. Their plan was to differentiate themselves form their competitors based off these factors.
For a customer of Dropbox it allows them to easily and reliably share files between their computers or devices. They believed that the existing products were unreliable and would only allow u to share a certain amount of files. Their product would be reliable and easy to use for the customers. They would also get a free 2G worth of space or could but additional space if they needed to. This is something seen by a few competitors but not all of them. They also created a product that can be used for both business and personal use.
Dropbox will do something that also differentiates itself form their competitor. They will use Amazons server to provide the customers space the store files. This will be rented from Amazon and will drastically decrease the amount of money they spend to provide space. Owning their own servers will be costly to purchase and maintain for Dropbox. They also only hired engineers to their company in the early going to be able to continue to improve the technology they are providing. To keep improving their product they offered beta testers the opportunity to test the product and see how they like it. They also listened to their customers after the launched to see what they liked and did not like. This led them to develop a feature of the product that allows the customer to provide feedback to the company. They also observed users using the product to see if it fit the needs of a basic user, which turned out to be very beneficial to the company.
Dropbox launched their product in 2008. While the product was still in beta it began to gain customers through various websites and technological competitions for startup companies. This allowed Dropbox to get their name out there to the people who most likely are already using similar products or have the need for this product. When they launched the product they used the freemium business model where they offered free use for up to 2G of space and you could pay a premium for more space. They wanted to grow rapidly in the market to gain as big of market share as possible in the shortest amount of time. They also found great success from word of mouth referrals and viral marketing campaigns.
Dropbox’s biggest problem they needed to solve early on was their customer acquisition rate. They found that in the early going to cost about 300 dollars per customer they had pay. This was due to the amount of free space given away to the amount that people were paying for. This does not set them up to be successful financially if it didn’t improve. Dropbox was able to figure this out and lower their costs but utilizing more word of mouth referrals. Dropbox was fortunate enough to have backers that supported their company in the early going with enough money to keep the company going until they could gain the following needed to decrease costs. They have a greater opportunity for profit then most of their competitors because of their use of Amazon’s server instead of buying and maintaining their own, especially with the decreasing rate of renting server space.