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In this video tutorial, the process of reducing an Excel file size without deleting data is demonstrated. The initial size of the file is 1232 kb, and the first step to reducing the size is to compress picture size by selecting the picture, going to picture format, selecting compress, and choosing the desired compression options. An alternative method to ensure pictures are always compressed is to go to file, then options, then advanced, and make sure to discard editing data and not compress image files. This allows for reducing the file size by adjusting the PPI.