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Dropbox:It just works betterFebruary 9, 2013Illinois Strategy Case Competition
Pressing IssuesContext of the DecisionAlternative EvaluationRecommendationsStrategy AnalysisImplementation TimelineKey Takeaways
DropboxDespite enjoying a reasonable track ofsuccess, the fast-paced & evolving natureof the industry is now pressing Dropbox todetermine what the long-term strategyshould be.
Key Questions & Challenges What should the product offering be?(Single vs. Segmented) How can Dropbox expand?(Partnership, Advertising, Organically, etc.) How will we differentiate Dropbox from competitors?(Google, Microsoft, Carbonite, etc.) How to create a business management team?(Product Managers, Business Units, etc.)
Company Culture Obsessed with quality and hard workClear visionConservative cost managementUser-centric (Ease of use and Accessibility)Goals Give users what they want without compromising visionProvide seamless accessibility that works for allAccelerate growth in size and profitability
Easy to use and accessible Secure Quality & user- centricCompanyValues Increase of customer baseGrowthVision Sustained sources of revenueFinancialHealth
StrategySegmentedProductsPartnershipsNew Pricing ModelStatus QuoOne Product, h
1Product Segmentation Long-term Growth Strategy2Feature Enhancement Respond to Consumer Needs3Flexible Pricing Drives Organic Marketing
IndividualsDropbox OneGroupsDropbox Co-op Current system Basic features Integrated system Added features Current Users Value Simplicity Provides Customized Solutions For Groups Allows for Coop Premium Pricing
SecureDataRecoveryReliable &Easy to UseDropbox Co-opReal-timeEditMulti-sync
Current2GB Free50GB 9.99/Mo100GB 19.99/MoProposed2GB FreeEach Additional5GB .99/MoSmaller Increments Enhanced Paying User Base
Increasing Profit by Converting Users in Current Year 2010% Paying Users2%5%10%15%Total Revenue 10 11.4 13.8 16.2Total Cost 6.5 6.8 7.2 7.7Total Profit 3.5 4.6 6.6 8.5% Increasefrom 2%N/A34%90%147%*Numbers are in millions**Calculations estimated using analyst values and provided industry data
Increased Incremental Profit (10% Paid Users) 160,000,000 140,000,000 133,359,496 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 3,115,728 02009201020112012201320142015Small increase in paid users turns into great profit in future years
Business Segmentation Due DiligenceDropbox Co-op DevelopmentDropbox Co-op Promotion - “Buzz”Dropbox Co-op LaunchFlexible Pricing ImplementationConsumer Behavior RevisionsCreation of a Management Team
HighImpact of Risk12Low0%50%100%Likelihood1User Mistakes in Multi – Synch2Low Free–To–Paying User Conversion
BusinessSegmentation Expansion by Learning Healthy Financial GrowthEnhancedFeatures (CoopSegment) Company Culture Fit Quality ProductsFlexible Pricing Company Culture Fit Healthy Financial Growth
% Users Paying# of Payer Users# of Free UsersTotal Annual RevenueTotal Annual CostTotal Profit% IncreaseCustomer Growth# UsersIncremental RevenueIncremental CostIncremental Profit2010 (Current)2%5%800002000003,920,0003,800,000 10,000,000 11,425,600 6,546,710 6,803,912 3,453,290 4,621,68833.83%2010300%4,000,000 3,801,600 685,872 3,115,72810%4000003,600,000 13,801,600 7,232,582 6,569,01890.22%Increased Profit20112012225%169%13,000,00034,937,500 12,355,200 33,204,600 1,876,220 4,244,139 10,478,980 28,960,46115%6000003,400,000 16,177,600 7,661,252 8,516,348146.62%2013127%79,155,273 75,229,172 8,093,473 67,135,699201495%154,290,943 146,638,112 13,278,616 133,359,496
GB for Free UsersGB for Paying UsersCost/GB (Free User)Cost/GB (Payed User)Cost/GB (Changed User) Annual Decrease in CostGB/Free UserGB/Changed UserGB/Paying UserTotal Current UsersCost for 31.0825254,000,000 0.99
Product (Dropbox One & Coop)Price (Flexible & Premium)Promotion (Niche Channel)Place (Online ‐ Everywhere)
Mobile Applications are in placeAPI partnerships enhance mobile capability Inexpensive but increases leverage of mobilePre‐installation on OEM not a wise move Large scale and very costly Already found that it is hard to create demand
50GB 9.99/Mo100GB 19.98/Mo Incremental plans Unlimited # of PCsconnected Priced based onincremental usagerather than numberof people
It just worksStrengths to Build on– Providing customers what they can use Competitive advantage– Synchronization and public/private capabilities Results through word-of-mouth advertising– Relentless focus on ease and reliability fosters loyaltyPast Failure Marketing costs outweigh benefits Board is discussing strategy and how to accelerategrowth
Users are not accessing old files- can they be archived?Organic customer acquisitionis valuablePaying users don’t utilizethe space they pay forSpace may not be valuable but is perception?Businesses are not paying, butprobably would!
Late market entrant in 2007 Used prototype to show off best features andsolicit users (took some risk) API already, native iPad Service grows rapidly So referral program is launched Don’t want to trick customers
Freemium Business Model Left a lot of things undone to do a few things well No business people, no mainstream PR, fast &loose Used analytics successfully Modified strategy once before No VP of development Despite improvements from analytics, marketing isnot profitable
Multi Sync option for Dropbox Individual Offer additional features for Dropbox Individual ifVotebox requests reach a certain threshold
It just works – Providing customers what they can use Competitive advantage – Synchronization and public/private capabilities Results through word-of-mouth advertising – Relentless focus on ease and reliability fosters loyalty Marketing costs outweigh benefits Board is discussing strategy and how to accelerate growth
