That's definitely true, that you wouldn't buy all your capacity upfront, but you would need to have a minimum amount of capacity on hand upfront, and to do that in multiple datacenters and build the software to manage it would cost money. That explains why they started on S3 but it doesn't explain why they are still there now. looking at the economics of it, I wonder if Amazon hasn't cut Dropbox a huge discount to keep them around. But even still, with $250 million in the bank, I bet the discussion to move in house is happening right now. After a certain point (X users, Y revenue, Z $ VC money), I would look at hosting in-house. http://blog.backblaze.com/2013/02/20/180tb-of-good-vibration... looks like an interesting solution to storage.
> I wonder if Amazon hasn't cut Dropbox a huge discount to keep them around.
I can't imagine why they would. Dropbox dedupes all their data before hitting S3, but Amazon can still leverage their bulk hardware discounts that Dropbox likely isn't big enough to score. Amazon would have the upper hand in such a deal, and I don't see why it would be friendly.
AFAIK those boxes are and have usually been tuned for lukewarm or maybe even lukecold storage to cut costs. Dozens of 5400 rpm drives loaded on bare minimal support planes have a genuine rating of Shit for reliable seek times. It's great for backup, when you only expect a small fraction of users to actually make a query and be thankful enough they're pulling down a recovery. For the kind of direction Dropbox wants to take, this is absolutely out of the question.
Dropbox hosts the metadata on much faster hardware. When you find your file, seek time on the file system is not as important as transfer speed, and over the Internet, the network is your bottleneck, not your spinning media.
