Snap Inc., the company behind the popular Snapchat messaging and photo-sharing app, has agreed to buy $1 billion worth of Amazon cloud services over the next five years, according to a new filing with the U.S. Securities and Exchange Commission.
This tidbit, from an updated S-1 filing published early Thursday, comes just days after Snap revealed in another document related to its planned IPO that it has committed to buying $2 billion worth of Google Cloud services over the same five-year timeframe.
Snap reiterated in this new document that it relies on Google Cloud to host the “vast majority of our computing, storage, bandwidth, and other services.”
But then, it noted:
We have also committed to spend $1 billion with Amazon Web Services over the next five years for redundant infrastructure support of our business operations. In the future, we may invest in building our own infrastructure to better serve our customers.
It’s long been public that Snapchat relied heavily on Google’s cloud infrastructure—a vast array of servers, storage, and networking that Google, like Amazon Web Services, makes available to third parties. So it was not surprising that Snap revealed a big buy of Google (GOOGL) services going forward. It was the dollar amount that was somewhat stunning. No matter how you estimate the size of Google’s cloud business—which the company itself does not break out—$2 billion is a big piece of the action.
Snap said it signed an AWS Enterprise Agreement—basically a big corporate software license—in March 2016 and amended it on Feb. 8, 2017.
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Under the latest terms, it committed to spend $1 billion on AWS by December 2021. The agreement calls for it to spend $50 million this year, then $125 million, $200 million, $275 million, and $350 million in each subsequent year. If Snap does not meet minimum purchase requirements in any of those years, it must pay the difference.
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AWS is the market leader in public cloud computing by far, but both Microsoft (MSFT) (with Azure) and Google (with Google Cloud Platform) are investing heavily to make this a race. Other companies from IBM (IBM) to Oracle (ORCL), as well as the big telcos are also fielding shared public cloud infrastructure.
Many companies, including Coins2Day 500 entities, are turning to the public cloud model instead of augmenting or building more of their own data centers. But many worry about relying on just one cloud partner. In that respect, what Snap is doing exemplifies that trend.
Coins2Day reached out to both Snap and Amazon for comment and will update this story as needed.