These days, some interesting news came out about Snap’s future plans and other moves that the company made. One of the most interesting moves was choosing Google as a Cloud provider for the company.
What is the price that Snap will pay Google for its cloud services?
Well, 400 million dollars per year. Snap made a five year contract with Google, which means that it will pay approximately 2 billion dollars in cloud bills.
See the full report:
This week, Snap declared in a filing with the US Securities and Exchange Commission that it signed a five-year contract with Google and it will pay approximately 400 million dollars a year for cloud services.
This sounds interesting, especially because Snap made just 404 million dollars last year.
What will Google do in return for the massive commitment?
Snap revealed in a filing with the US Securities and Exchange Commission that it signed a five-year contract to pay Google at least $400 million a year for cloud services. |
First of all, we must say that Snap will receive reduced pricing, but it is hard to say how deep the company’s discounts will be. Choosing Google is not a surprise, because if we go back in time Snapchat built its life with the help of Google’s AppEngine platform-as-a-service offering.
Read the full report: Snap Is Looking To Raise Up To $3 Billion In IPO
Moreover, Snap’s commitment to the huge search engine is a massive vote of confidence in the latter’s cloud capabilities. As we know, these days it is a huge competition in the cloud market.
At the moment, Google’s cloud is not as good and as evolved as other competitors, like Amazon and Microsoft. But, being chosen by a rising star like Snapchat, we must say that it will definitely help Google draw other companies or at least give Google’s platform a chance.
Another interesting thing to mention is that Google doesn’t break out revenues from its cloud platform, choosing to attach it to other non-advertising businesses, for example Google Play and hardware sales.
But, that segment totaled 3.3 billion dollars in sales in the recent quarter, which is good. However, managing to close a 400 million dollars a year contract with Snap is something amazing for Google Cloud.
On the other side, for Snap, closing such a deal will represent a huge future commitment, which is also considered to be a potential risk factor if the platform is closed down or if it changes its terms in policies or services.
Another interesting thing to mention is that closing a deal with Google Cloud could limit Snap’s chance to expand into huge markets like China. Here is a statement that Snap has released these days:
We also face regulatory challenges that may affect our ability to grow in certain markets. For example, we have very limited access to the China market, as we have not yet established an operating presence in China to support Snapchat. Access to Google, which currently powers our infrastructure, is restricted in China.”
But, this episode is highly unlikely, because as we know Google continues increasing its investment in its cloud platform. Moreover, Google’s vice president of technical infrastructure, has declared that the company will want to launch a new cloud data center at the rate of roughly one each month this year.