Dropbox Referral Program — A Story of 3900% growth in just 15 months
Dropbox was founded in 2007 by MIT students Drew Houston and Arash Ferdowsi.
The cloud-based file storage and sharing service had built up a good early fan base within a year, concentrated primarily among the tech-savvy community centered in Silicon Valley.
However, they were not able to break out beyond the tech-elite. The founders wanted to grow faster as the competition was fierce.
One startup, Mozy had a two years head start in the cloud-storage market. Another one Carbonite had already raised $48 million vs $1.2 million raised by Dropbox.
Houston tried to raise venture capital. However, in every meeting investors told him that the “cloud-storage market” was crowded with existing products, none of them had made much money, and the problem wasn’t an important one.
On top of that, Tech giants — Microsoft and Google were also gearing up to enter the cloud storage business.
Dropbox had to grow really fast to stay relevant. Houston experimented with Search Engine Ads. The outcome was that they had to spend anywhere between $233-$388 on Ads to acquire a new paying customer. This wasn’t sustainable for a $99/year product.
Then he reached out to Sean Ellis to explore what he could do to help them grow beyond their not-yet-big-enough pool of early adopters.
Sean was moving out from the role of VP-Marketing at Xobni, a startup run by Houston’s friend Adam Smith. He had helped a lot of startups accelerate growth through his high-speed and cross-functional experimentation based approach — which he liked to call Growth Hacking.
Yes, he is the one who coined the term!
The underutilized potential of Word of Mouth
When Sean dived deep into Dropbox’s user data, he found that almost one-third of Dropbox users came from referrals of current users of the product.
This meant that there was a strong word of mouth for the product. People were raving about Dropbox to their friends.
However, the word of mouth wasn’t coming close to its potential for signing up new customers. It wasn’t driving growth fast enough.
Sean realized that they needed a way to harness and amplify their strong word of mouth, making it easy and appealing for the early fans to evangelize to many more of their friends.
The team (Sean, Houston & an intern — Albert Ni) brainstormed and decided to create a referral program similar to the PayPal Referral Program.
However, the problem in implementing PayPal like Referral Program was that PayPal gave away $10 to both referrer and referee, spending close to $70 million on referral rewards.
Dropbox in no way could afford that.
Also, cash rewards had worked well for PayPal primarily because they were in the online money transfer business, and rewarding users with cash helped them in creating trust and showing the real value of the service.
Dropbox had to decide an incentive that was cheap and in synergy with its product’s core value and also had to be valuable for its users.
What could that be?
Let’s think about it -
What is Dropbox’s core value proposition? — Store files on the cloud.
Now, imagine its 2009 and you are an early adopter of Dropbox on the free 2 GB plan. You have been using Dropbox extensively for storing and sharing files with friends and colleagues.
You are told that you will be given 250 MB of extra storage for inviting a friend to Dropbox and your friend will also get 250 MB of extra storage on signing up through your invitation.
Would you participate in the program?
Wouldn’t that be a valuable referral reward for you?
Let me remind you that in 2009, 250 megabytes of online storage was a lot of space for users.
Dropbox was using Amazon’s low-cost S3 Web servers for data storage and it was pretty simple and cheap to add more space to their servers.
Dropbox Referral Program went live with the 250 MB each for referrer and referee. The team immediately saw invites flooding out via email and social media, seeing an increase of 60% in sign-ups via referral.
The team experimented with messaging, offer, user experience, and every other important element to make the most out of the opportunity.
Every two weeks they would look at the results of each new experiment — what was working and what wasn’t.
Data from each experiment helped to decide what changes to test next. And over the course of several iterations, the result got better.
By early 2010, Dropbox users were sending more than 2.8 million invites per month to their friends. The company had grown from just 100,000 users to 4,000,000 in 15 months — 3900% growth!
They achieved this with no traditional marketing spend, no banner ads, no paid promotions, no purchasing of email lists, and most interesting of all — with no full-time marketer.
A fully-optimized referral program is extremely powerful.
Now, let’s dive into the details of the Dropbox Referral Program to understand the critical elements of its success.
Important Elements of Dropbox Referral Program
Referral Program is a part of their onboarding
As you can see in the image below, Dropbox had made the referral program a part of their onboarding process to encourage sharing.
User onboarding is very critical to the success of any product. Its only goal is to help people become better at what the product enables them to do.
For Dropbox, the goal of user onboarding was to make it easy for people to access and share their files from anywhere.
The step to “Invite some friends to join Dropbox” helped people realize that as more of their friends start using Dropbox, the easier it will become for them to access and share any file they would need.
The take away is that the visibility of a referral program plays an important role in its success. The more visible it is, the more people will participate.
Dropbox increased the visibility of its referral program by including it in the user onboarding itself.
Clear Messaging with multiple sharing options
It is very important that the messaging in a referral program is clear as many users tend to get confused.
If the messaging isn’t clear enough and users make assumptions on when they would get the reward — they can easily feel cheated and stop participating.
I have outlined every important section of the Dropbox Referral Program page in the screenshot below to explain how they created an absolute masterpiece.
Their Referral Program page has a very clear value proposition in the title — I can get up to 16 GB of free Dropbox space by inviting my friends.
The participation process and rewards are clearly explained in the description — I have to invite a friend and when she installs Dropbox, both of us will be given 500 MB each.
To start participating in the program — I have to input my friend’s email and hit SEND.
Then they have given us multiple sharing options with predefined messages. It gives us the convenience to choose the method we prefer and also makes it easy to share the invite.
In the end, they have given a link to a page where I can track the status of my referrals.
A critical piece of their successful Referral Program
The link “view the status of your referrals” takes us to a page that is called Referral Dashboard.
Referral Dashboard is one of the most ignored parts of any referral program. However, it plays a very important role in creating trust and motivation among users. Each user can, at any point in time track the following —
Total Reward she has earned — this motivates her to earn more reward.
The list of friends who have completed the signup process and reward value received by her — this gives her assurance that the referral program works.
Status of her pending referrals — this can trigger her to contact the friend and remind him/her to complete the signup process. Dropbox Referral Program clearly gives the state at which her referral is at. This enables her to help the friend with the signup process faster.
Check out the flow below of the different state at which a referral can be at any given point in time —
Referral Status: Waiting for Install
Referral Status: Email Verification Pending
Referral Status: Reward Received
Creating a Referral Loop using the “Thank You” Email
As I have mentioned earlier that — the more visible a referral program is, the more people will participate.
Dropbox ensured that their referral program is visible at every critical step of their users' journey. They absolutely nailed it by including a call to action (CTA) to “invite more friends” in the “Thanks for your Dropbox referral” email.
Upon receiving the reward confirmation, most users tend to get into a highly elevated state. The subtle CTA to Invite can easily compel them to refer more people to increase their storage space.
This clearly has the potential to create a referral loop that gets users to refer more than they would usually do.
Also, the email acts as a trigger for users who have become inactive in the referral program to start inviting their friends again.
As you can see that every aspect of the Dropbox Referral Program contributed to its Viral Growth.
There is no one formula that can fit everyone. Your efforts must be tailored specifically to your product.
You can discover that only with constant experimentation and data analysis.
I hope reading this article was helpful enough for you and would love to know your thoughts in the comments section below.
PS — This article was originally posted here.