Do you know the customer acquisition costs of Slack & Dropbox?

Dropbox is public so we have a general sense — it spends ~28% of each dollar that comes in on sales and marketing:

But … averages are misleading.

A huge chunk of Dropbox’s customers are acquired free, virally. Another chunk of revenue is from upsell, acquired cheaply. And only a minority of Dropbox’s revenue is sales-driven. So that likely means the segment that is from paid acquisition has a pretty high acquisition cost, actually. Since so many customers are acquired, retained, and/or upgraded for very little cost.

Alex Clayton from Spark Captial has a nice pre-IPO analysis here, summarizing a payback period of perhaps 17 months (which sounds right): Dropbox IPO | S-1 Breakdown – Alex Clayton – Medium

Add in an ARPU of $110 or so, and Dropbox is then perhaps likely spending on a blended basis about $180 to acquire a new user. But that includes the free ones. So in reality, they are likely paying much more.

As for Slack, we’ll have to wait and see.

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Published on October 15, 2018

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