The cost of Google Cloud Storage is $0.02 / GB / month (with Regional). Let’s use this as a proxy for the actual cost. Obviously, there’s a lot of compute and network cost, but GCP has its own margins, and Google has lots of compression algorithms, so I think it’s a good enough ballpark for the “true” cost of storing photos.
Let’s assume 15 MP photo (max size for “High Quality” backup) is 1 MB. If the average monthly active user has 1,000 photos, that means about 1 GB of storage costs. If Google has 500 million monthly actives, their infrastructure cost is roughly $10 million/month. If Google’s able to get 5 million (or 1% of their monthly actives) to pay for their $2/month plan (100 GB), they’re break-even.
The average Google Photos user will have more and more photos over time, so this yearly cost will increase, but their cohort will likely mature into paying as well. 1% is extremely conservative (from my experience in consumer SaaS, even 5% would be a a conservative ballpark, especially as the product matures and the reasons for upgrading become more compelling), so break-even (or even slightly profitable) is pretty easy to imagine.
Of course, “slightly profitable” isn’t a great place to be as a business, but this is Google after all. Google Photos isn’t meant to be a meaningful revenue generator (short term), any more than Gmail or Android was when they first built it (only a decade later have they become revenue drivers). It’s a beachhead against Facebook, great training set for Brain, and potential future revenue source.
It’s interesting to me because during my tenure at Dropbox and one year prior, Dropbox had release its own photo app, Carousel. It was plagued by delays, wasn’t able to get widespread adoption, and was eventually killed. Part of it was because Carousel was part-product (standalone app!), part-feature (Carousel space ate into your free Dropbox space). When it launched, Carousel was prettier…but not functionally or economically different than most competitors. While Google Photo’s machine vision features were much-talked-about, the killer feature was free, unlimited photos. I always wonder if Carousel had launched a half year earlier (in conjunction with iPhone 5S and near the peak of consumer interest in the company) with free, unlimited photos at the iPhone’s resolution (8 MP), where would Dropbox be today?
If hindsight was useful, we’d have eyes on our hinds.