It’s a well-known story in the SaaS world – Dropbox reaching $1 billion in revenue in only ten years. But how did this online storage and collaboration startup gain the momentum to achieve this historic feat?
I had the opportunity to talk with Darius Contractor, former Growth Engineering Lead at Dropbox, to get an inside look at just what went into the making of this SaaS legend. While Dropbox is widely recognized as a poster child for product led growth (PLG), not everyone has had the opportunity to see exactly how the plan came together. Darius generously shared some helpful insights about how to identify when a company is ripe for a PLG approach and also some details about exactly what went into their own go-to-market strategy and how they built the kind of team needed to bring that strategy home.
PLG’s Bottoms-up Approach – Is It Right for You?
When a company is considering adopting PLG, one of the first questions they need to answer is whether or not a bottoms-up approach to growth will be a good fit for their organization. After all, there is no one-size-fits-all solution; you have to make sure there is true alignment between your product, business model and growth strategy.
The traditional, top-down approach to SaaS growth involves building a product and then employing a sales team to manually sell it into companies. This process usually revolves around activities including attending conferences, implementing complex marketing campaigns and maybe setting up some workflows for inbound inquiries. With a bottoms-up approach, the goal is to develop a methodology that enables people to discover and adopt your product on their own without all the hand-holding, company-driven support of traditional marketing channels.
As Darius explained, there are three key markers that indicate your company might be a strong candidate for a PLG strategy:
PLG works best when your product is simple enough that a user can not only easily understand what it is and how it works, but also be able to make a purchase decision independent of a sales person.
2. The Viral Factor
The products that see the greatest success with PLG are the ones that require sharing in order to get the full value of the product. Dropbox is a perfect example because it’s designed to facilitate collaboration with other individuals and groups, automatically creating additional users by constantly exposing new people to the product.
3. Self-serve Channel
Finally, you want to create a channel in which prospects can discover and use your product without needing support from a human being. For example, if someone is searching for a solution like yours, and lands on your website, you want them to be able to sign up and pay for your service without needing a salesperson to complete the transaction.
If your product meets these three core criteria, PLG might be a winning growth strategy for your business.
Dropbox’s One-two PLG Punch
Dropbox’s phenomenal growth is the result of using a PLG strategy that was fairly straightforward, but very effective. In the beginning, the company focused almost exclusively on growing their user base rather than monetization, which came later as the team took advantage of up-market opportunities. To drive exponential growth, Dropbox employed a one-two punch:
Step One: Deliver a simple, usable product that meets a market demand.
What initially made Dropbox an immediate success with users was the fact that it solved an existing problem with a very user-friendly UI. Dropbox replaced the onerous process of using FTP or local file servers with a simple, drag-and-drop interface that allowed instant access from any computer on the web. The product delivered an incredibly powerful and useful tool that was easy to use and free. Simply put, it was the best tool for sharing files.
Step Two: Introduce features designed to take advantage of the viral factor.
Once Dropbox had established a foothold in the market, the team launched a series of features that gave users even more reasons and ways to share the product with colleagues:
- Shared folders allowed teams of users to sync documents from multiple sources to a single cloud location, which in turn enabled groups of colleagues to facilitate collaborative online workflows directly in Dropbox.
- A referral program gave users an opportunity to increase their storage space by inviting new people to sign up for Dropbox. The freemium version of the product includes two gigabytes of free space, a generous amount, but is still not enough for power users. The referral program incentivized users by offering an additional 500 megabytes of free space for each referral. Users incorporated their referral codes on their blogs and shared them out to friends via email and so forth. The feature drove a lot of new users, which really increased Dropbox’s profile.
- Shared links gave users the ability to share a file without requiring the recipient to sign up for Dropbox. The addition of this feature meant users had more flexibility to use Dropbox in a wider number of scenarios.
From day one, Dropbox focused on solving a problem for users and then making it easy for those users to share their solution with others. It was a brilliant strategy that allowed the product to promote itself through real-world use. As Darius explains, “These were three different viral sharing techniques that were incredibly helpful to users, matched their needs and also spread the word about Dropbox in simple, scalable ways.”
Team Structure and Getting Started with PLG
Even though a product led growth strategy doesn’t require an army of sales and marketing people, it does require a cohesive and committed team. The Dropbox growth team has evolved as the company and strategy have evolved. In Darius’ opinion, the smallest growth team that can still be effective is a team of two: a growth-minded product person or designer partnered with an engineer or web developer. In rare cases, the skills and qualities of both these roles can be combined in one person, but usually you’ll need two individuals to get started.
As a team expands, Darius recommends adding a data analyst who can help make the overall team more data aware. “In many cases, looking at the data is how you are able to see the opportunities,” Darius says. “Also, you need data awareness as you run experiments. You need a really sharp perspective on how to use your data and which data to look at. As the company grows, this will help identify which fires require more fuel.”
With this small, core team, the initial approach to PLG involves a lot of experimentation all over the funnel. “You want to hit early stages, later stages, new users, older users,” Darius says. “Follow the data and your intuition and explore aggressively to see what works. This will give you a good idea of what the levers are.” At this point, you may be ready to hire more people for the growth team, bolstering product, engineering and data support so you can pursue the opportunities you’ve uncovered.
Initially, the opportunities will be about making small tweaks, but as you learn more and your team expands, you can think about bigger opportunities, like exploring different pricing structures. As you scale the organization, branch out into separate growth teams, and start to make more substantial changes to workflows, it’s critical to ensure that everyone is aligned around the same metrics. The challenge, as your efforts become more complex and involve overlapping service areas, is keeping track of who owns what and how it’s all being tracked against central growth objectives.
Part of Darius’ recipe for success is in the setup of growth teams. He combines alignment on key metrics with low-stakes testing. “When I’m working with a company that’s starting growth teams, I tell them the best thing to do is find a metric everyone cares about,” Darius says. “That’s usually either user growth or revenue growth.” After that, Darius recommends identifying a surface area where you can make a lot of changes without disrupting other teams or needing to jump through too many hoops. For example, the payment page or the onboarding flow – places where you have the freedom to try out a lot of different things quickly in order to figure out how to create success.
Virality – The Secret to PLG Success
Without question, one of the most important elements of large-scale PLG success is virality. For companies looking for an initial viral hook, Darius suggests taking a look at three areas:
- Where does your product require more than one person to work?
“I like to say that a good viral product is broken without your friends,” Darius says. “Meaning that without your friends, you won’t get the full value of the product.” Dropbox makes sharing a core part of the user experience that is front and center at all times. They feature a prominent share button on every file and a sharing tab that displays everything that others have shared with the user.
- What are the different roles that interact with your product?
“There are all kinds of different roles within a company who might need to use your tool,” Darius says. “See if you can surface those relationships and build features to serve the interactions of those roles.” From creators to collaborators to approvers and related teams like IT and data analysts, think about how you can deliver more value for each kind of user.
- How can you encourage/make it easy to share?
Darius recommends identifying “virality points” in the product and then finding ways to engage users at those points. “Take whatever you’re doing, and make it shareable,” he explains. “If you build presentations, build in sharing of presentations. If your product is a database, think about who else in the company might need to know about and access the database. Build in some virality and you build up free mind share within a company. ”
- Where does your product require more than one person to work?
Once you’ve established some of these viral elements, it’s helpful to think about your product as a series of user reactions in order to maintain engagement and sharing. Darius uses Facebook as an example of how a user moves through a series of reactions to the initial invite, the prompt to invite friends, the prompt to begin posting. It’s a sequence of small, simple steps that get the user more and more engaged with the product. For Dropbox, the flow has to do with users becoming aware of and then using additional features such as more storage, different kinds of sharing and so forth. The trick is to make sure that one reaction leads to the next reaction so that you keep creating viral loops that lead the user deeper into the product.
User “Psych” and How to Use It
To help sustain user engagement, Darius uses a concept he calls psych. “Psych is kind of like a gas tank of user excitement,” he says. “When someone first arrives on your site, they have a certain amount of excitement about exploring it – let’s say the gas tank is at 50%. If the marketing material effectively conveys how the product can solve their problem, they might get more psyched, maybe up to 65%. Then, as they fill out your forms and get into details like the pricing page, their psych might go down. They might start to think the process is too tough. But as long as their psych is above zero, they still have gas in the tank for finishing your flow.”
To work effectively with “psych,” you need to always be cognizant of how each point of interaction is affecting a user’s level of excitement about your product. Think about each element on the page as an emotional interaction. Will it make the user more psyched or less psyched? Play around with A/B testing to help you evaluate the interactions. “Clicking the button to go to the next page takes some energy,” Darius says. “And everyone has a hundred other things to do.” Try different copy, different headlines, removing form fields – all of these tweaks have the potential to increase user psych and encourage people to complete the flow.
It’s also important to step back and think about where user psych is most valuable for your business. For instance, help desk SaaS company Intercom makes a big ask of users very early in their flow. They ask users to copy and paste their widget onto every page of their website. This uses up a lot of “gas” from the psych tank, but it’s a critical step that’s incredibly valuable for onboarding with Intercom. So, in this scenario, Intercom builds up psych and then uses almost all of it on that one action; but – once a user takes that action – Intercom is able to do all kinds of things that are really valuable to both the user and to Intercom.
And that’s really at the core of the kind of strong, sustained virality that took Dropbox to $1 billion dollars so quickly – creating something that delivers value for both the user and the company. It’s a kind of partnership. As Darius points out, “It’s very hard to get work done in the world without someone’s help.”