drop.io/givingamazonalltheirmoney

drop.io is one of a few online storage.. dealies. drop.io’s particular shtick is that is gives you a tumblr-esque frontend to the things you have uploaded and is free, unless you want more than a hundred megabytes. Of course, this isn’t all they do. Like any self-respecting (or self-aggrandizing) Web 2.0 company, they have a whole slew of supposedly useful features.

• Twitter Integration – So that people can know when you just uploaded that picture of your dog, Scruffy.
• SMS Alerts – For when you have a public drop (Read: µImageshack) and you want to know that someone’s uploaded something. On your phone.
• Facebook Integration – So your work colleagues, old school buddies and more can know about said dog, Scruffy.
• Scribd’s iPaper – Because we’ve all wanted to read pdfs that’re wrapped in flash and javascript. And who needs to be able to copy & paste text anyway. What? You do? Too bad.
• Turn your storage into some kind of answering machine – Because that’s what we’ve always wanted. To be able to have people call in and leave clips of beavis and butthead, or farting noises/heavy breathing all over where we’re storing pictures of little Nicola’s third birthday.

But this isn’t even the start of the insanity that they cook up over in brooklyn. No, sir. Because their model is not so much unlike ones offered by everything from super-cheap hosting providers, like my one, to most consumer ISPs. That being, The Oversell.

In this case, drop.io will give you 100MB for free (or 1GB if you pay $10 for a year, or a lot more through their brand new enterprise service, the drop.io manager). The problem I see is that, if you were to make something that was very popular, you could very easily end up being what I call a Poor Value Propsition (eg, a customers that actually COSTS you money.). This is primarily because drop.io uses Amazon’s AWS and AWS is Not Cheap.

Let us look at the example of drop.io’s new Professional Plan. $19.99 a month, for 20gb (And of course, unlimited bandwidth). In the following calculations, we will use the cheapest possible prices for amazon services, so as to give the best case possible.

Now, you are paying them $19.99 a month. Presumably, there would be incidental costs like credit card charges, but we’ll make those $0 for now, giving the entire sum to drop.io. First, we subtract the storage costs for s3.

At $0.12 per GB x 20, that equals $2.40.  That’s 12% gone already, on pure storage costs. This leaves $17.59. Next, we have transfer costs. Now if you transfer over 150TB, the price goes down to $0.10 per GB. A little elementary maths gives us this:

$17.59 / $0.10 = 175.9, or 175.9 GB.

This means that, if you filled up your drop, you’d have to transfer 175.9GB a month and then anything after that, actually costs drop.io money. (This does not include incidental transfers like logos, CSS, etc and computational costs of EC2). Now, this seems like a lot, but infact, it’s not. That’s only 8.795x the size of your drop. If you were perhaps, posting HD videos of say.. urban exploration, or performances, or DJ sessions or something similar, do you really think it would be hard to get say.. 20 people to view half of the videos in your drop? Or 40 people a quarter? Or even 100 people to view just one or two? Probably not.

So lets run some possible numbers. 30 minutes of 720p video of say.. parkour antics (I like Parkour). That would be 1.8GB. You film these videos once a week, on the weekend. Each week, you get 2,000 video views of new and old content. Parkour is popular! That’s 2000 x 1.8GB, or 3600GB.

So 3600GB x $0.10 =$360. Per Week. Or $1440 a month. Now, as we calculated before, there is $17.59 left over for bandwidth. So you subtract that, $1440 – $17.59 and that leaves $1422.41. That’s a lot!

Every month, you end up costing drop.io over $1400 dollars. That’s around $18k a year. (($360 x 52) – Even if you assumed only 2,000 view a month, instead of a week, that’s still nearly $4500 a year.

Now, how many of these would you need before it eats up all the profit you make from people who pay for drops they hardly use, and then starts eating into the money you’re using for payroll?

To date, drop.io has raised $3.9 million dollars. By my reckoning, it’d only take about 250 of what I deem High Use (2000 HDvideo views a week) drops, or around 900 Medium Use (2000 HDvideo views a month) to deplete that capital in a single year.

And that’s just to pay Amazon.

In closing, this is why I feel that drop.io is something of a white elephant and that the companies risks being unprofitable. Perhaps some bandwidth limits are in order, guys. (And please, no, none of that “fair use” crap. Define Your Limits.)