Monday, 27 January 2014

How Dropbox makes freemium pricing pay off

Dropbox is a widely-used file sharing site that allows users to access and share documents, images and other files. Users appreciate being able to synch and access their Dropbox folder(s) across platforms, meaning PC or Mac, mobile or tablet.

For casual users, Dropbox has a basic, free service providing 2 GB of space (or more) for file storage and sharing. In fact, about 96% of Dropbox users pay nothing.

Based on freemium pricing, Dropbox also has a "pro" version with 120 GB of space and a "business" version with unlimited space available, both for a monthly fee.

Not surprisingly, Dropbox's freemium pricing has attracted 200 million consumer users in a very short time. In addition, availability of 'in the cloud' storage has attracted 4 million business customers who pay (month after month after month) for access to files across platforms, from anywhere at any time.

Dropbox has nearly 1 million Facebook likes and 3.3 million Twitter followers. It enjoys high brand awareness, reportedly has a solid revenue stream and ongoing demand for convenient and low-priced cloud storage/sharing suggests its freemium pricing model is paying off. (You can see some calculations about cloud storage costs here.) Looking ahead, how will increased competition, technological advances and pricing pressure affect Dropbox's profitability?