Dropbox is a great business that has been taking the world by storm over the last few years. They now have over 100M users a day.
In short, it's a free service that lets you bring all your photos, docs, and videos anywhere. This means that any file you save to your Dropbox will automatically save to all your computers, phones and even the Dropbox website. It's free for up to a certain amount of storage and then they charge you annual subscription fees if you want more storage space.
Drew Houston, the CEO, claims that after trying and failing to make the business grow through paid search they turned to referral and after switching on a two sided incentive they permanently increased signups by 60%. In April 2010, users sent 2.8M direct referral invites in a month. They now have 35% of daily sign-ups coming from their referral programme.
The mechanism that Dropbox uses is very simple: they offer extra product (i.e. space) to both parties. The referrer gets 1GB free and the referred friend gets 500MB free. They then enable sharing by email, twitter, facebook or by a link. They keep it simple and it works. Here is their sharing page.