Why does Flickr offer 1TB of storage for free yet charge $499/yr for 2TB?

Yesterday Yahoo! revamped its Flickr terms and gave every member 1TB of photo and video storage for free. But the company also announced a new offering called Doublr, which gives users the option to upgrade up to 2TB of storage … for $499 a year.

How can Flickr offer 1TB of storage for free, and yet ask a whopping $499 per year for 2TB?

The reason is that storage when measured by the terabyte is expensive, and Yahoo knows that most Flickr users aren't going to get anywhere near to that limit.

So why is storage expensive? After all, the likes of Gmail and Dropbox have been offering gigabytes of free data for years. What's so special about what Yahoo! is offering its Flickr customers?

Let's put things into perspective.

WARNING: What follows is a simplified view of data, but it serves the purpose of illustrating a point.

When you upload a photo to Flickr – say a photo shot on your iPhone – your picture initially takes about 5Mb of server space. But then Flickr takes this original image and splits it off into smaller resolution files for ease of viewing. Let's assume that these smaller versions take another megabyte. You're now up to 6MB.

But things don't end there. That 6MB of files is stored on a server where, for the sake of data integrity, it is mirrored across at least two disks, so your 6MB worth of files end up taking at least 12MB of storage space in toal.

But don't you also expect Yahoo! to keep backups of your data in case something goes horribly wrong? Of course you do! These are likely taken once a week, probably on a monthly cycle (after a month the old backups are likley deleted), so after a month those 12MB of files you started with have grown to 60MB (the initial photo along with lower resolution images mirrored across two drives, then backed up four times).

You with me? Good, because it doesn't end there.

Anyone storing important data knows that you also need to make sure that you have off-site backups in case anything goes wrong, and these might be conservatively taken every four weeks. The off-site backup will also be mirrored, adding more to the storage burden.

Looking at things this way, and it's easy to see how even 5MB grows into many tens of megabytes. Now think about the 1TB that Flickr is offering and you start to see that the storage that users are being offered is just the beginning.

And a terabyte of server-grade storage isn't cheap, with a 1TB 6G 7,200 RPM SAS drive going for $400. Not only will these drives be better quality drive than those being offered to consumers, they also normally come with no quibble warranty and support. When a drive fail – and given the volume in a large server room, this happens quite often – the replacement drive is usually accompanied by a technician to fit it.

And the drive is just the tip of the iceberg when it comes to costs. Servers don't grow on trees, neither do server rooms. The staffing is also costly, as in electricity needed to keep everything humming along and cooled to the right temperature.

Then there's the data backbone needed to shunt this data back and forth, both internally, and to off-site backup facilities, not to mention the data to and from customers.

All this costs money.

This brings me back neatly to the initial question of how Flickr can offer 1TB of storage for free, and yet needs to charge $499 per year for 2TB? 

The reason is that most people never come close to using that 1TB. In fact, they won't come anywhere near to it. Even today, it represents a vast amount if data. A Blu-ray Disc can hold 50Gb of data, equivalent to nine hours of HD video, but 1TB is equivalent to 20 Blu-ray Discs, or a whopping 180 hours of HD video.

Put this storage capacity in terms of digital photographs, and you're talking about half a million snaps. That's a lot. Even at the rate of 500 photos a month, that's still 83 year's worth of uploads.

What Yahoo! did with Flickr wasn't give everyone 1TB of storage, but make it essentially limitless, and turn storage space something the average user need never worry about again. There's a subtle difference.

The 1TB cap is there because Yahoo! knows that there are going to be a few users who will hover around this cap. And it's a safe bet that these folks – probably video people – exist because otherwise Yahoo! wouldn't have bothered to put a cap on storage. The good news is that if these folks are currently Pro members, and continue to keep their account in good standing, they can enjoy unlimited storage. If they don't, they, along with all new heavy users, will have to dig deep.

But to be fair to Yahoo!, $499 is not that expensive when you consider that a similar amount of storage would cost over $1,000 per year from Google.

Storage is cheap, but it's not so cheap that Yahoo! is happy to let everyone have an all-you–can-eat buffet just yet.