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Team no: 13

Mustahid ali and Sachin Singh

DROPBOX: It Just Works

Dropbox, founded in April 2007 by Drew Houston and Arash Ferdowsi, officially launched in
September 2008. Drew Houston, is he co-founder and CEO of dropbox, a downloadable
application that allowed users to easily share, sync, and store files (photos, documents,
videos,ets) across most personal computers and smart phones. The company headquarter is
in San Francisco, California. Dropbox is a venture-backed Silicon Valley start up, founded in
2006, that provides online storage and backup services to millions of customers using a
"freemium" (free + premium offers) business model. The case recounts Dropbox's history
from conception through mid-2010, when founder/CEO Drew Houston must make strategic
decisions about new product features which are rigorously demanded by the users, how to
target enterprise customers, and whether to pursue distribution deals with smartphone

Drew Houston graduated from MIT and Ferdowsi dropped out of Harvard to co-found
company. The idea was simple but very tough to execute, apart from this they already have
around 80 competitors in the market and Mozy , Carbonite was doing very well even they
are on the first position.
Despite this they were confident that while entering a competitive market they could
succeed. The first generation of cloud storage services was based on simplistic model,
where file accesses were redirected over the internet instead of your computers hard drive,
but they had a performance advantage of storing files locally and updating a cloud copy in
the background using time and bandwidth saving optimizations. The industry is growing
decently $76 million in 2007 to $ 715 million in 2011.
After long period and discussion they got their initial funding from YCombinator, a seed fund
and incubator. Initially they provide them 2% to 10% as well as monitoring, workspace and
introductions to other advisors and investors over a three month period.
Later on they launched BETA version for limited group of users who registered through a
simple landing page. They used guerrilla marketing, online marketing, viral marketing.

They were more focused on developing part and always try to give the user friendly and
secure service, thus they analytics, they trying to do the product segmentation on normal
and business basis and try to accelerate the growth.
Houston wondered if dropbox should continues its strategy of offering a single products for
all users or whether it should segment its diverse and growing user base, perhaps by
creating a professional version that targeted the power user or a separate product for
small/medium- sized business. Houston looked forward to discussing these option with his


The main problem was in applying the effective strategy as they were new in the
field and their competitors already were doing very well. So to sustain in the market
they need the continuous growth in features in the product.

Second problem was Funding, they initially got only 2 to 10% of what they needed by
somehow later on they manage to survive, but it was hard.

Beta version testing problem: After developing a Mac client, in March 2008 Houston
posts video on Digg to generate interest, and beta testers jumps from 5,000 to
75,000 virtually overnite.

Hiring problem: getting the good employee is not a easy task, getting a wrong one
might kill your business, Dropbox hires 6 MIT computer science majors, but not
much luck with product or business manager hires.

Analytics and developers problem: An Analytics Engineer was hired to improve

analytics and optimize customer acquisition efforts.

Marketing and promotion problems: Expensive marketing efforts, such as AdWords,

and cost per click, it costs $300 to acquire a paying customer, that was very
expensive for the company.

Problem in partnership: Partnering with a PC security software is discussed and an

SVP disappoints Houston when he wants to bury the brand. They decide they need a
VP of business development soon.
Overall it was a simple idea but very challenging to build certainly enough to keep
busy for the next five years.

Most of the time situational analysis is given by the SWOT or PEST analysis but here I am
giving you the combine analysis.
The first generation of cloud storage services was based on simplistic model, where file
accesses were redirected over the internet instead of your computers hard drive, but
dropbox had a performance advantage of storing files locally and updating a cloud copy in
the background using time and bandwidth saving optimizations.
For dropbox it was vey challenging to penetrate in the market as it already had so many
competitors, and few of them are the leader such as Mozy, carbonite. But dropbox had have
its unique features which none of them have, i.e it was somehow easy to enter in the
Somehow it was weekend because of its low level strategies, not getting the proper funds,
unsuitable marketing strategies which was expensive, not getting the tie up or partnerships.
Launching the votebox and apple and android apps was successful and performing very
nicely. Market is growing rapidly , in 2007 the total market was of $76 million and then
within in four year it become $715 million. Its has the great future. IDC projected 28%
annual growth for this market from $724 million in 2009 to $2.5billion in 2014.
From their balance sheet which is provide in the case itself they are performing in a decent
way getting the gross profit of $7,000 within one year, and they are 80% successful in
retention rate.


Dropbox worked to make sure they were simple, safe, fast and accessible.
They chose a Freemium strategy by offering a small amount of storage for free in the hopes
of turning those users into paying customers.
Dropbox is focusing on organic customer acquisition, word of mouth and viral marketing as
opposed to paid advertising.
Using a "Trojan horse" strategy to acquire business users. Where individual users bypass IT
departments using Dropbox at work in the hopes of getting them onboard.

Dropbox also has a sign-up driven home page, free storage for referrals and free storage for
connecting with social media.
so, i feel drop box should offer a small medium business version.
they should servive their current users and request feedback to see if this service is useful to
their companies.
Except this they should try to tie up with bigger data based companies and online portals

Overall this has great future after having so many challenges dropbox is doing very well,
there are some requirement of internal change and like employees and strategies, even
though they are earning good and comes on 5t position within in 5 years.