Dropbox shows how it manages costs by deleting inactive accounts

Key Points
  • One way Dropbox manages costs is by getting rid of inactive accounts.
  • The company has also improved various metrics by ceasing to duplicate customers' data during its data center migration.
Source: Financial Times | Wikipedia

Dropbox employs a somewhat unusual technique to lower its costs, the cloud software company revealed on Friday in its filing to go public.

In a process the company calls "infrastructure optimization," Dropbox said it deletes users' accounts if they don't sign in for a year and don't respond to emails. That keeps the company from incurring storage costs for inactive users, a tactic Yahoo has used in the past.

Dropbox said that the costs of revenue dropped 6 percent in 2017 to $21.7 million, mostly due to a $35.1 million reduction "in our infrastructure costs."

As it prepares to lure public market investors, Dropbox is paying particularly close attention to its expenses. The company operates in an intensively competitive market against vendors including Apple, Amazon, Box, Google and Microsoft.

Once reliant on Amazon Web Services, Dropbox has moved away from public cloud in recent years and has been building its own data center infrastructure to store the majority of user data. Another way it's managed costs is by making sure that there weren't too many copies of users' files on third-party infrastructure.

Here's how Dropbox described its infrastructure optimization program:

Throughout 2016, we also took measures to manage the storage footprint of certain long-inactive Basic users, freeing up additional storage capacity. Specifically, we closed the accounts of certain Basic users who had not engaged in any activity on the Dropbox platform in the last year and did not respond to multiple e-mail inquiries from us regarding their inactivity. We continue to regularly take similar measures to manage long-inactive and non-responsive Basic user accounts, and our total registered user numbers do not include accounts that have been closed. This effort, along with additional usage optimizations in 2017, enabled us to continue operating our business within our existing infrastructure base without a need for extensive incremental capital expenditures and leasing activity.

These efforts are collectively referred to as our Infrastructure Optimization, and some are ongoing.

Our Infrastructure Optimization reduced unit costs and helped limit capital expenditures and associated depreciation. Combined with the concurrent increase in our base of paying users, we experienced a reduction in our cost of revenue, an increase in our gross margins, and an improvement in our free cash flow in the periods presented.

Dropbox didn't immediately respond to a request for comment about the activities.