Today Dropbox dropped prices. They now offer 1 TB for $10/month. Other providers like Google Drive have similar offers for quite some time.
I wonder how they do this. Dropbox uses Amazon S3 to save files. The lowest possible price on S3 is $0.0275/GB/month. If a Dropbox user utilizes all available space it would cost Dropbox $27.50/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.
I see the following reasons why Dropbox might be able to make profit in the end:
- 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/GB/month.
Do I overlook something? What is most important reason why Dropbox and others are able to make this prices?
I wonder how they do this. Dropbox uses Amazon S3 to save files. The lowest possible price on S3 is $0.0275/GB/month. If a Dropbox user utilizes all available space it would cost Dropbox $27.50/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.
I see the following reasons why Dropbox might be able to make profit in the end:
- 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/GB/month.
Do I overlook something? What is most important reason why Dropbox and others are able to make this prices?