I was about to write a very similar article, but Adrian Kingsley-Hughes covered it already. In short:
The extra terabyte costs Yahoo more than the cost of a single 1 TB consumer hard drive. They’ll need multiple copies of every photo for redundancy, scaling, and practicality (for instance, storing smaller sizes for web display and storing JPEG renders of RAWs), so your 2 TB of photos may occupy 5–10 TB of actual hard drive space. Server-grade hard drives are also usually smaller and more expensive than consumer drives, so I bet Yahoo’s not making significant profit on the upgrade.
More importantly, most people on the free “1 TB” plan won’t use anywhere near 1 TB.1 I’m guessing the average user’s storage total, mostly shot by smartphones, will be more like 3–5 GB. But by definition, if you buy the storage upgrade, you are using 1–2 TB.
So they’re not charging $500/year for twice as much space — they’re charging you $500/year for what’s probably 200 times the average space.
It’s very similar to Gmail’s usage pattern and storage economics. And Flickr is much cheaper than Gmail’s extra-storage pricing, which is $600/year for 1 TB and $1200/year for 2 TB.
All of my photos currently occupy about 260 GB, not counting thumbnails or JPEG renders of RAWs, and only a small percentage are good enough to share on Flickr. And I’ve been shooting huge RAW files for five years. ↩