
Ask HN: Why is cloud storage so cheep? - henningschuster
Today Dropbox dropped prices. They now offer 1 TB for $10&#x2F;month. Other providers like Google Drive have similar offers for quite some time.<p>I wonder how they do this. Dropbox uses Amazon S3 to save files. The lowest possible price on S3 is $0.0275&#x2F;GB&#x2F;month. If a Dropbox user utilizes all available space it would cost Dropbox $27.50&#x2F;month. In addition most users are not paying for Dropbox but use there free offering adding files (=costs) to Dropbox. Running the company, development of the application, application server, download traffic etc. will come on top.<p>I see the following reasons why Dropbox might be able to make profit in the end:<p>- Most people are using much less space than the maximum of 1 TB.
- Dropbox is doing deduplication. If two users have the same file Dropbox only needs to save it once. 
- Dropbox might have a better deal with Amazon and is not paying $0.0275&#x2F;GB&#x2F;month.<p>Do I overlook something? What is most important reason why Dropbox and others are able to make this prices?
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byoung2
Dropbox used to say they use Amazon S3 [1], but now they just say "storage
servers are provided by a managed service provider" [2] which could mean they
found someone cheaper than S3, or that another company is managing the
infrastructure for Dropbox. I always imagined Dropbox would move on from S3,
and Drew even said back in 2010 that "We may not be on s3 forever, and will
build our own store in addition, but for now this lets us focus on both the
client software and the performance of the layer we’ve developed on top of
s3." [3]

1\.
[https://web.archive.org/web/20140101095459/https://www.dropb...](https://web.archive.org/web/20140101095459/https://www.dropbox.com/help/7/en)

2\. [https://www.dropbox.com/help/7](https://www.dropbox.com/help/7)

3\. [http://www.makeuseof.com/tag/dropbox-review-invites-
and-7-qu...](http://www.makeuseof.com/tag/dropbox-review-invites-
and-7-questions-with-the-founder/)

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kedean
A huge part of it is the practice of overselling. The basic idea is that you
have n customers who all want k gigabytes of space, but on average they each
use only j gigabytes of the space. If that holds, then rather than having n _k
gigabytes available, you just need n_ (k/j) gigabytes to satsify their needs.
After amortizing usage, the people who overbuy and barely use their space more
than makes up for the users that max out their space. I don't know for sure if
Dropbox does this, but most hosting companies do, and its a sensible practice
(especially when your backbone is scalable).

Pairing with that, nobody actually uses all of their space. If you see
yourself getting within some percentage of your usage, one generally will buy
more to keep from hitting that upper bound. Nobody likes being in the
dangerous red zone.

I believe dropbox also compresses your data serverside, so you really use up
n*p gigabytes (where n is your local usage, and p is the compression ratio),
but don't quote me on that.

~~~
heatherrr
Pretty much nails it on the head. Overselling is a large part of online
services overall, like web hosting.

You think HostGator can actually give you unlimited disk space for a few
dollars a month? People don't use anywhere even remotely near their quotas,
but it's a compelling marketing/sales tactic for sure.

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benologist
The cost of the space is quickly approaching meaningless [1] and people are
streaming more and more which reduces the need for space in some heavy areas -
you don't need to store local copies of music, movies, tv shows etc anymore
when you have on demand unlimited access to them.

Expenses also get eroded by constant progress towards automation. As one
example it was only a few years ago that Heroku pioneered a way of deploying
apps that removed a shitload of manual labor maintaining and scaling apps,
which has now become widespread with competition and freely available through
open source.

[1] [http://www.pcworld.com/article/2599484/seagates-
monstrous-8t...](http://www.pcworld.com/article/2599484/seagates-
monstrous-8tb-hard-drive-is-the-most-spacious-storage-yet.html)

Also in that article - "Right now on Amazon you can get a 4TB desktop drive
for just under $200, with 5 and 6 TB drives edging closer to $300." Dropbox's
$100/year for 1 TB is just closer to what it should be.

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PaulHoule
I think you have it there.

A terabyte is a nice round number, but I think getting a TB into cloud storage
would be challenging, since most people have lower upload than download
allowances.

At 1 Mbit/sec upload, for instance, it would take 8000 sec to upload a GB or 8
million sec to upload a TB, which amounts to a few months of continuous
uploading.

That's a serious project for most people.

As for the other factors you'd better believe that they use compression,
deduplication, special deals and every other trick in the book to bring down
costs.

On top of all that, Dropbox has received over $1B in funding so it is very
possible that they are losing money to build market share.

So far as cost analysis, I'd also look at the networking costs with AWS, since
those are going to be significant. AWS doesn't charge for ingress, but it does
charge about 5 cents to move a GB out at high volumes, and that can add up if
a lot of stuff is being moved out.

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rtkwe
So there's a couple things going on that would make this feasible.

1) People are unlikely to use that much actual storage in the first place. The
tipping point, assuming their on S3 and haven't moved to a cheaper option like
some other comments have suggested, for the $10/mon is ~363 GB. That's a lot
of data for a single person to upload especially considering the poor state of
US internet speeds.

2) There are technologies to push that break even point even higher from the
customers perspective. Deduplication and compression will shrink many of a
users files while still increasing their used count. It's really hard to
estimate the effects of dedup and compression though because of the number of
unknowns.

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ewzimm
I think you've covered most of the reasons. Compression probably also reduces
the actual storage size of files. They are probably also using some of their
own storage outside of Amazon. Rarely accessed files could be moved to slower,
cheaper storage facilities. But you wouldn't get the full answer without
access to internal Dropbox documents.

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lazyant
Dropbox uses file deduplication, also I suspect the distribution of disk space
used is nowhere near the maximum offered (this is, they offer 1TB but most
users will take up only a small fraction of it)

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dem-nuts
I'm sure owning a large market share of a service storing consumer data is
worth something, as unethical as that sounds... Abuse is fairly common as
we've seen in recent years. When google scans a file into it's own format, or
when OCR's run on your images to index information, who else can access these
indexes?

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tsarzen
*cheap

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api
It's all the birds. Up in the clouds. Cheep cheep cheep.

