Businessmodel of DigitalOcean

Customer Segments

DigitalOcean has a niche market business model, with a specialized customer segment. The company targets its offering at software developers who need to launch and scale their applications.

Value Proposition

DigitalOcean offers four primary value propositions: accessibility, performance, price, and brand/status.

The company creates accessibility by offering a wide variety of distributions and applications. Its platform provides five well-known Linux distributions that can be pre-installed upon server deployment: Ubuntu, Debian, CentOS, CoreOS, and Fedora. Numerous application stacks can be installed with a single click, including LEMP, LAMP, Docker, and MEAN. Also available are development frameworks such as Django, Ruby on Rails, and node, applications such as CMS solutions Ghost and Wordpress, and eCommerce software programs such as Magento.

The company’s solution offers strong performance. Its servers use high-performing Solid State Disks. This provides an advantage over shared hosting in that cloud servers can be live and configurable within 55 seconds. It also provides an advantage over dedicated servers in that it allows on-the-fly scaling – expanding disk size takes less than an hour, while changing the volume of RAM on a box can be achieved with a simple reboot. Furthermore, the solution offers a 99.99% uptime SLA around power, network, and virtual server availability.

The company provides its solution at a relatively low price. Hosting begins at $5 per month. DigitalOcean is able to offer this amount due to various advantages, including favorable financing terms with vendors and the fact that it only offers cloud servers. The firm also provides value by not charging a setup fee or having a minimum spending requirement.

The company has established a powerful brand due to its success. It serves 650,000 developers in 196 countries, utilizing 11 data centers. It has also achieved a number of milestones, including becoming the fastest-growing cloud hosting service and the second-largest hosting company in the world in the area of web-facing computers.

Channels

DigitalOcean’s main channel is its website. It also utilizes a direct sales team to acquire customers. The company promotes its offering through its social media pages.

Customer Relationships

DigitalOcean’s customer relationship is primarily of a self-service nature. Customers utilize the service through the main platform while having limited interaction with employees. The company’s website includes articles, over 1,395 systems administration and development tutorials, and answers to frequently asked questions. That said, there is also a personal assistance component in the form of phone and e-mail support, as well as one-on-one consultations at no extra cost.

Key Activities

DigitalOcean’s business model entails maintaining and enhancing its platform for developers.

Key Partners

DigitalOcean maintains the following two partnership programs:

Customer Referral Program - The company invites customers to refer friends to the service. Friends who sign up receive $10 in account credits. Once they reach $25 in billings, the referring customer receives $25 in a payout or account credits.

Tech Tutorials – The company invites customers to write tutorials on Linux and FreeBSD cloud hosting that it can publish on its website. All that is required is some technical knowledge, as its editorial staff will polish the writing. Individuals whose pieces are selected can earn up to $200.

Beyond these two programs, the company forms partnerships from time-to-time with other service providers. For example, it has an alliance with GitHub through which it provides students with free access to developer tools and offers a credit to their accounts on the platform.

Key Resources

DigitalOcean’s main resource is its proprietary software platform, which serves more than 650,000 developers. An important physical resource is its collection of 11 data centers around the world. It also depends on human resources in the form of its engineering employees to maintain the platform and its customer service staff to provide support. Lastly, as a relatively new startup it has relied heavily on funding from outside parties, raising $305.21 million from six investors as of April 2016.

Cost Structure

DigitalOcean has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is likely research and development expenses, a fixed cost. Other major drivers are in the areas of sales/marketing and customer support/operations, also fixed costs.

Revenue Streams

DigitalOcean has one revenue stream: subscription fees. The company offers the following options:

• $5/month (or $0.007/hour) for 512 MB/1 CPU, 20 GB SSD Disk, and 1 TB Transfer
• $10/month (or $0.015/hour) for 1 GB/1 CPU, 30 GB SSD Disk, and 2 TB Transfer
• $20/month (or $0.03/hour) for 2 GB/ 2 CPU, 40 GB SSD Disk, and 3 TB Transfer
• $40/month (or $0.06/hour) for 4 GB/ 2 CPU, 60 GB SSD Disk, and 4 TB Transfer
• $80/month (or $0.119/hour) for 8 GB/ 4 CPU, 80 GB SSD Disk, and 5 TB Transfer