Dropbox Cracks The Enterprise With The Help Of Addicted Users

Drew Houston is one of the few people out there who was able to turn down an offer from Steve Jobs. He had good reasons. His startup, cloud-syncing and -sharing service Dropbox, has shot to more than 45 million users to-date. After reportedly turning down an $800 million offer from Apple, Houston raised $250 million in Series B funding at a $4 billion valuation.

Now, the M.I.T. graduate aims to continue his company's rapid growth by opening up a whole new market for the three-year-old startup, the enterprise. Users have helped bring the service into more than a million businesses around the world, Dropbox reports, with hundreds of thousands of them taking advantage of the product at Fortune 500 companies.

Dropbox has typically been viewed as a consumer product, whereas startups like Box.net have claimed a stake in the fast-growing enterprise space. As Dropbox executives tell Fast Company, they see a massive opportunity in blurring the lines between the consumer and enterprise segment. That's why Dropbox introduced Dropbox for Teams on Thursday, a premium service that provides 1,000 GB storage to teams of five for an annual fee of $795.

"People keep saying that there's this business market and there's a consumer market," says Sujay Jaswa, VP of business development and sales at Dropbox. "What our users have told us—we've tracked the data incredibly closely—is that there's just one market, a need that people have to solve the 'universal sync' problem."

In other words, Dropbox noticed that users wanted to sync all their files—at work, home, wherever—using just one service. It wasn't necessary to have a consumer product at the office and a separate app on one's personal iPhone or laptop. As Jaswa explains, "When you go to work, you use Google search, and when you go home you use Google search." Why would you want a different experience to sync all your files in the cloud?

Dropbox is a freemium service with an inherently viral business model. Users can store several gigabytes of files online for free, accessible from most any Internet-connect devices. But once the max storage limit is reached, users have two options: They can invite more friends to join, which rewards them with an upgrade in capacity, or they can pay to use more space, purchasing various levels of storage for a monthly or annual fee.

It's a freemium-to-premium strategy that many have referred to as the "Trojan Horse" model—a strategy we've seen in various forms from the likes of Pandora, YouSendIt, Flickr, and Hulu or Spotify (discussed by Sean Parker in the video below). Trying out the service for free, users become hooked. In the case of Dropbox, they're hooked on having their data in the cloud. 

 

 

To feed their addictions, users either help the service grow by inviting more friends, convert to paying customers, or help Dropbox spread through the workplace. "Our product markets itself," says ChenLi Wang, Dropbox's business and sales lead.

Still, Jaswa says Dropbox hadn't any intention of implementing a "Trojan Horse" strategy because the company never had any intention of entering the enterprise market. "It wasn't actually expected that this would enter the business market," he says. "I don't think Steve Job designed the iPhone for people at work. He designed it for people, and it just so happened that people love it so much that they brought it to work."

Because of that, "the conversion rates we have on sales leads is staggering," Jaswa adds. (The company's founder Drew Houston claims Dropbox is already profitable, though specific figures have yet to be revealed.)

[Image: Flickr user Shaire Productions]

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3 Comments

  • Emily Kulish

    I am not sure how many businesses are seriously using Dropbox. Dropbox claims to have millions of businesses using its service, in reality, based on its annual revenue, each business only pays about $60/year, which is really an individual user.

    Dropbox does not have any advantages when it is for business cloud service. It lacks enterprise technologies. Price-wise, Dropbox set its business service price at $180/user/year with a 5-user requirement, which is extremely expensive. Rivals like DriveHQ only charges for $6/user/year while offering more advanced Cloud IT service. More detailed information can be found at:

    http://www.drivehq.com/help/solution/CloudServiceComparisonReview/DriveHQvsDropbox.htm

  • Daniel Sky

    Dropbox is old news. Check out a cool new app called Binfer. It lets you send files of any size and any quantity directly from your computer to any other computer [or smartphone]. You do not have to upload your files anywhere. http://www.binfer.com

  • tony wessels

    Thanks for this article, Austin. It’s great to see that the enterprise
    market is seeing the value in implementing technologies that employees
    are familiar with from their personal lives. I think what needs to
    happen next is that technology vendors already dedicated to the
    enterprise market need to embrace the same comfort employees feel around
    these consumer apps such as Dropbox, Amazon and Facebook, and apply
    that simplicity to enterprise software so that employees feel the same
    “addiction” you describe to the software they use at work. Business
    software in particular has complex functionalities, so it is that much
    more important for the interface to be intuitive and simplistic – that
    way employees actually want to use the technology and businesses achieve full potential ROI from technology investments.