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Dropbox Referral Program - A Story of 3900% growth in just 15 months

Updated: 5 days ago

Dropbox Referral Program is one of the most talked-about referral programs on the Internet. MIT students Drew Houston and Arash Ferdowsi founded Dropbox in 2007.

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!

He is also the founder of

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.

Dropbox team (Sean, Houston & an intern — Albert Ni) brainstormed and decided to create a referral program similar to the PayPal Referral Program.

The only 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.