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Customer value proposition II
• How did the competitive landscape look like?
Type of users
Individuals Businesses
Mainstream
Users’ competence
Advanced
• Keep service simple and easy to use to grow the user base very fast.
Customer value proposition IV
• What was Dropbox charging its customers?
Subscription price
• Intellectual property
• Ability to seamlessly work with multiple OS platforms.
Go-to-market plan
Growth in customer base
• Reliance on viral marketing. 5 (Mn)
• 35% of new users originate from referrrals. 4
Number of users 1 1 3+
Storage 2 GB 1 TB 2 TB
Support Basic email support Priority email support Live chat support
Questions to consider in a Freemium model
• What features are for free?
• Do customers understand the premium offer?
• What is the target conversion rate?
• percentage of users who upgraded to the premium product
• What challenges await at various stages of the conversion life cycle?
• Are users helping you in spreading the word?
• Free users are worth as much as 25% of paid users because of the referrals
they generate.
Customer acquisition costs
• Dropbox almost spent nothing on marketing.
• How many paid users are supporting free users (Free/paid ratio)?
Cash flow needs
• Asset intensity
• Using Amazon’s S3 reduced the need for upfront capital.
• Working capital
• Subscription model provides cash upfront.
Profitability estimates
Revenue estimates
Revenue
Free/Paid ratio
Value per 1 2 3 4 5 Cost of
year 81.8 81.8 81.8 81.8 81.8 Cost of serving acquisition
free customers
How did Dropbox’s model differ from it Y-
combinatory application?
• Search engine marketing
• Cost of customer acquisition.