Chris Kranky

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Dropbox review

Chris KoehnckeChris Koehncke

There are lots of back-up services available for prices ranging from free to a low cost. But most of these require you to start some back-up process each day usually at the wrong time, just as you’re starting to do something. There also not very friendly in how you can restore a file. The services required that I become an IT guy of sorts.

My problem was simple, I wanted file to back-up automatically, I wanted to be able to quickly get them from a simple web interface. But my biggest problem was I had a desktop computer and a laptop as well and I forever leaving one file on another computer or worse copying a file only to forget what revision was the latest.

Enter the a service from Dropbox ( Dropbox is a small application that you install that creates a simple folder called “My Dropbox” basically anything you put in there or change, automatically gets updated to the cloud. Best of all, you can install the application on multiple computers, set it up with your credentials and wham the “My Dropbox” folder is automatically kept in sync across all the computers. There’s also a simple web interface that allows you to download specific files if you’re away from any of ‘your’ computers. The little app stays out of the way, never bugs you for anything and I’ve yet to notice any slow down on my machine. The best thing, the basic 2 gigabyte storage versus is free. Dropbox (the paid version) automatically maintains various versions of changed documents and has this “go back” feature which is great as well.

Dropbox has gained immense popularity in 2010 and it’s easy to see why, it works and adds value. But I was left wondering, why weren’t they nagging me to sign-up for their more expensive paid service? I was perplexed, how exactly is this a business. I decided to investigate.

Dropbox is mostly just their little client (they have clients for Mac & PC as well as for some mobile devices). Dropbox isn’t running massive servers to store all this stuff, instead, they’re a client of Amazon’s S3 storage service. Dropbox also isn’t spending any money on advertising of any much sort and depends solely on word of mouth to get new clients. The word of mouth seems to be working, the number of visitors to Dropbox’s website has increased from 13k in May of last year to around 1.5 million in May of 2010. My guess is they didn’t have to do a lot to handle this extra growth.

The usage of the S3 storage is an amazing example of creating a company with almost no infrastructure. I’m figuring my 2 gig of storage is costing Dropbox maybe $0.10 a month (tops). Figure this blog article saying nice things about it is likely worth a lot more to them than a $1.20, so I’m likely now a valued customers (at least for this year).

The marketing approach is pretty intriguing. Obviously if you don’t use Dropbox, they don’t incur any costs and if you do, you’re likely gonna like it, dump more of your files on it and in 2-3 months, hit the 2gig limit, figure it works great and spring for the $100 a year it takes and move your account up to 50 gig.

The impact of this is that Dropbox’s cost of customer acquisition is near on ZERO and using my math above, their operating cost is perhaps $30 a year for my 50 gig, giving them a great profit of $70 on my single account (clearly they have some other costs as well). The point is this method of customer acquisition is self priming (great product, viral marketing), reasonable price and low operating costs.

You can hold your breath waiting for this company to be acquired, it’s a great concept and good addition for any number of the big guys!