After the search experiment, Dropbox built a referral program that paid in a currency it made itself: more Dropbox. Refer a friend who joins and both of you get extra space. A year later a third of the company's daily signups came through it.

PublishedHouston's slides, April 2010. Registered users reached 4 million in January 2010, fifteen months after launch, with growth of 15% to 20% or more a month and no advertising.

The currency cost almost nothing

Today's terms give a free account 500 MB per referral, up to 16 GB, and a paid account 1 GB per referral, up to 32 GB. Storage is a currency Dropbox prints at its own cost per gigabyte, which is small. To the user it's worth a lot, because it's exactly the thing they came for.

It also did something cash can't. A user with extra space puts more files in Dropbox, and a user with more files in Dropbox is harder to lose. The reward fed retention, and retention kept inviters inviting.

The best reward is more of the thing the customer already came for.

The count waited for real use

The help center spells out when a referral counts: the friend accepts the invite, installs the desktop or mobile app, logs in from the app and verifies their email. All four, or neither side gets the space. A website signup earns nothing. Only a friend who is actually using the product does.

The loop was also inside the use

The referral program gets the attention. Houston's slides show a second source that got none: in January 2010, 35% of daily signups came from referrals and another 20% from shared folders and other viral features. Share a folder with someone who doesn't use Dropbox and they need Dropbox to open it. That's PayPal's payment to an email address, applied to files.

Measured on every signup

Look at how Houston stated the result. The program "permanently increased signups by 60%": all signups, not referral-attributed ones. That's the right way to count a loop and it's rare. Count the Loop, Not the Link is built on that difference.

Eight years later

Dropbox's 2018 registration statement shows where the loop went. More than 500 million registered users and 11 million paying users at the end of 2017. More than 90% of revenue from self-serve channels, meaning customers who signed up and paid without talking to a salesperson. The filing called its registered users its best salespeople, and said that in 2017 more than 40% of new Dropbox Business teams included a member who had previously been a subscriber.

FiledDropbox, Inc., Form S-1/A, March 2018. Sales and marketing spend fell by a fifth in a year while the base grew, the same shape as PayPal's cost per account.

What a DTC brand can take from it

• Pay in product, not price. A refill, a second color, a sample of the next product, an upgrade. It costs you cost of goods, not face value, and it deepens use.
• Cap it. A cap keeps the reward a bonus rather than the reason to join, and it limits what a fraud ring can take.
• Define the count in product terms. Delivered, used, past the return window: your version of installed and logged in.
• Look for your shared folder. Any feature a customer uses with someone else, a shared list, a gift registry, a bundle shipped to two addresses, is a loop that doesn't need a reward.

Do this

• Price three product rewards at cost of goods beside your current referral credit.
• List every feature a customer uses with another person. If the list is empty, chapter 16 is next.