Saas Math Case Study: Dropbox

I’m guessing that most everyone who reads this blog uses Dropbox. The four year old company has over 50M users and adds a new user every second! It can be dangerous to use such run away successes as lessons when building your own startup. After all, most startups never achieve this level of success.

Still, a recent article in Forbes Magazine shed some light on their numbers and their success. If nothing else, these should serve as high level targets showing what is possible with a freemium SaaS company.

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SaaS Math: Activation, Retention and Churn

So far in the SaaS Math series, we have looked at why investors love SaaS, definitions of the key terms in SaaS math and last week we looked at user acquisition math. This week we’re talking about activation, retention and its polar opposite – churn. As you will see, churn and retention are the most important metrics to the long-term success of a SaaS business.

To recap, activation is just getting that 1st use of your product or service. Churn is the % of users / customers that abandon the service over time. This can be measured weekly, monthly, quarterly, etc. You will want to measure churn for users and churn for customers (assuming you have a free trial or freemium product). Retention is the inverse  – the % of users that you keep.

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The Saas Math Funnel: Acquisition

For the 3rd instalment of SaaS Math, we’re going to dig into the 1st step in the conversion funnel: acquiring users. For this and all posts on the conversion funnel, I recommend you read/ watch Dave McClure’s excellent talk on Metrics for Pirates.

As the name suggests, acquisition is all about driving new users, readers or buyers depending on whether you’re running a SaaS, media or e-commerce business respectively. We’re just focusing on SaaS here but many of these principles flow into the other business types.

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The ABCs of SaaS Math

Before we start going deep into SaaS Math, it’s important to level set on terminology. So without further ado, here are the key terms used. If you think I have missed any, please let me know.

AARRR: A pirate war cry or more importantly, an acronym coined by Dave McClure to summarize the flow of SaaS users from first activation to monetization and referral.

Activation: The first time someone uses your service.

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