Greatest insight I got out of this: offering money as a referral commission might not be the most effective.
Here he offered additional storage which is (a) cheaper for dropbox to provide probably and (2) closer to what users actually want.
I'm anxious to try this out on UniversityTutor.com now. I have a referral program to try and get tutors to refer other tutors, and they get $3/month if their referred tutor upgrades. But not many tutors upgrade. I think I'll try out giving them free job requests for each referral instead, since the free tutor account is limited based on how many job requests they can get. Great insight on dropbox's part here...
I considered a $-based referral program, but it seems a bit shady to me in that it provides a motivation to refer that is independent of the quality of the product. A kind of moral hazard.
But if the referrer is a user themselves, and their reward is more use... then the motivation is aligned.
And VC would have asked how big is the market for file sharing for grand mothers..
Just joking, but I find the parallel to usable by grand mothers quite amusing! A lot of products are usable, yet they aren't what grand mothers would use.
Watching the video, he discovered 4 steps to the epiphany via Marc Andreesen's blog (this post, I guess: http://pmarca-archive.posterous.com/book-of-the-week-best-bo...), but in the context it seems more retroactive reassurance than guidance. He also mentions Sean Ellis, with respect to split tests and analytics etc.
You're asking me to justify reading books that are recommended by someone I admire? Seems like such a trollish request! But I've liked some of your comments, so I'll try to answer straightforwardly.
I often read books for information, ideas of how to approach problems, and also for inspiration/motivation/reassurance/encouragement. That's what I hope to get.
Now, Drew is a very clear thinker, eg in his YC application., but obviously reading books that he's found valuable is not going to suddenly make me as clear as him - but it might help [I actually deleted that from my original comment because it seemed sort of irrelevant to the question].
Now, for these specific books, I've liked Steve Blank's blog, but if Drew has followed or used that book somewhat, that would be a significant recommendation. I have some doubts, because it seems to be a fact-driven approach, and sometimes the facts can't be ascertained - eg customers can't want something they can't imagine; you have to build it first and show it. (eg The Innovator's Dilemma). Drew mentions this in people weren't actively looking for what we were making and 'I didn't realize I needed this' (#27,28). I also think that being too focused on specific questions can close your mind off from serendipity. But that's just my opinion.
I have to say that what Drew has done is just so cool: a new technology-based product that is revolutionary. The slides also have some of that magical sheen of founder folklore. Although my last software business supports me financially, the technology wasn't revolutionary and it didn't start a revolution in usage. I hope my present one will be closer to it (that would be awesome!). I do have a bit of a "fan" attitude to Drew's success; perhaps that's why you're requesting justification.
I don't get this. How is having 4M users an achievement or success? Isn't the real question how many of the users actually use the paid service? It's interesting how the presentation talks nothing about that unless of course I missed it :)
I love this slide: Typical Dropbox User (Hears about Dropbox from a friend blog, etc. and tries it -> "I didn't realize I needed this" -> "it actually works" -> Unexpectedly happy ->tell friends)
Is the original screencast available anywhere? Would love to see that.
Dropbox has shown that if you build something that solves a big problem well, you can overcome even a seemingly high barrier to entry (installing client software).
I assume they've done studies of the monthly subscriptions model versus buying more storage for a single sum? Because the latter option appeals to me a lot more.
I like their service a lot, especially since it works on Linux, Mac and Windows but the monthly subscriptions are too expensive.
really interesting presentation !! Still, one question, even thought there are millions of users, does the majority of the profit is made from ads? And also, it must cost a lot to give a couple of gig freely to each new users..? How do you exactly make profit?
Dropbox are charging more for additional space that competitors that also have to have the physical disk space. So I'd image that margin for premium accounts would be higher, they can justify this due to the easy of use and simplicity of their product.
I think they use Amazon S3, so their cost is 5 cents/GB of storage + bandwidth costs. I would assume more referrals = more conversions and any conversion should be very profitable.
I wonder if they will reach a tipping point where it will be cheaper for them to have their own distributed hosting setup. I think Ubuntu One is doing it right now (I haven't used it yet) http://en.wikipedia.org/wiki/Ubuntu_One
The impression I got (at the conference yesterday) is that the dropbox guys are extremely smart and hardworking, but there's a huge amount of luck involved in that the timing was just perfect.
One thing that I kept thinking throughout a lot of the presentations is that certain product/service offerings are almost inevitable. If it weren't DropBox (or Twitter or Facebook or Google or whatever) then it would have been someone else around the same time with something similar that fit the emergent needs of the market. The market, in a way, designs the products by choosing which of the thousands of new things succeed or fail.
High quality product. Good market fit. Smartly promoted. I am not arguing with any of that.
If they had made the same product four years earlier or four years later, I strongly doubt it would have been a success. Too early, the market won't "get" it. Too late, some other product would have owned the space.
I'm not sure I agree. Similar products (or similar-sounding, at least) had been around for years, so much so that Joel Spolsky wrote a post ripping the idea of file-synchronization apps as the biggest failed cliché around. The space was regarded as saturated. So Dropbox was a late entry, not a luckily timed one.
There's another (rather prominent) precedent, of course, for a startup entering a space that was widely believed to be saturated and taking it over on the basis of a simple product that just worked better. I hadn't thought of it before now, but Dropbox kind of reminds me of them in this respect.
Oh, I know it's your point; it's what I disagree with. If those products were anywhere near as good as Dropbox, Dropbox wouldn't have been able to take the market from them.
I guess our disagreement isn't really resolvable since both positions rely on a counterfactual: imagining what would have happened if their timing were different, which of course it wasn't.
This is odd, I'm sure that there are solid examples of a perfectly good product or service failing because it was too ahead-of-its time, but I'm drawing a blank at the moment. Ugh.
Anyway, the point I was getting at is that timing does matter, and that DropBox was, in addition to being well-executed, was also well-timed. And that given enough time, eventually, someone else would have come along and executed well once the market was ready for it.
Remember that they choose to create this application at that exact moment. Maybe, 1 year later, they would have worked on a totally different idea and you would have said: Luck is involved, right timing, etc.
I was thinking more in terms of the product than these particular guys, who were wise in all of the products they decided not to bring to market.
What I am trying to express poorly is that you can't look at the success of a particular new technology and say "if it weren't for that implementation, nobody would have built it or brought it to market". If it weren't for the Wright Bros. someone else would have had powered controlled flight. If the DropBbox guys hadn't made a successful online filesystem, someone else would have (successfully) filled that niche eventually.
@dhouston - Can you give us more insight as to why a) the affiliate program didn't work and b) the referral program worked / what you mean by "2 sided referral program"?
im assuming affiliate is where payment is in the form of $ and to non-users who promoted dropbox and referral is payment of more storage on dropbox (ie- 250 mb per referral more) to actual users. Do you think a mix of the two would have worked well ie- payment of actual $ instead of the 250mb, BUT to actual users.
If so that is a brilliant idea but it should absolutely be more prevalent of their homepage.
I specifically didn't use their service because I think that going out to tell people "you should use this service, it is great and free" and then profit from it wrong (I don't have a problem with money but I want to keep my money and friends separate).
The thing is most people would still recommend it even if there was no incentive (I know I would), it is indeed "great and free". Come to think of it, I didn't take advantage of the referral system yet and I have recommended it two at least a dozen people I know.
Also I think its a very silly reason not to use Dropbox.
Here he offered additional storage which is (a) cheaper for dropbox to provide probably and (2) closer to what users actually want.
I'm anxious to try this out on UniversityTutor.com now. I have a referral program to try and get tutors to refer other tutors, and they get $3/month if their referred tutor upgrades. But not many tutors upgrade. I think I'll try out giving them free job requests for each referral instead, since the free tutor account is limited based on how many job requests they can get. Great insight on dropbox's part here...