Over the next five years, the company behind Snapchat will pay Google at least US$2 billion in cloud bills.
On Thursday, 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. That’s a steep figure, considering that Snap made roughly $404 million last year.
In return for the massive commitment, Snap will receive reduced pricing, though it’s not clear how deep the company’s discounts will be. Sinking a bunch of money into Google Cloud makes sense, because Snapchat began its life built on top of Google’s AppEngine platform-as-a-service offering.
Furthermore, Snap’s commitment to Google is a massive vote of confidence in the latter’s cloud capabilities, at a time when there’s heavy competition in the cloud market.
Right now, Google’s cloud is an underdog compared to Microsoft and Amazon. But being tied to a rising star in the social media landscape like Snapchat could help draw other companies to at least give Google’s platform a chance.
