Snap Inc. disclosed a major contract to use Google Cloud Platform as part of its $3 billion IPO filing today.
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Snapchat’s parent company has agreed to spend at least $2 billion with Google Cloud over the five-year life of the contract — which was finalized on Monday, according to Snap’s S-1 filing with the Securities and Exchange Commission.
The deal is a big commitment by Snap and a significant customer win for Google in its competition with Microsoft Azure and public cloud leader Amazon Web Services. It’s not the first connection between Snap and Google: Google Capital disclosed in November that it’s a Snap investor.
Snap says in the filing that it uses Google to “host the vast majority of our computing, storage, bandwidth, and other services.”
But Google won’t be the only cloud platform Snap uses. The company says in a filing that it’s “currently negotiating an agreement with another cloud provider for redundant infrastructure support of our business operations.” It adds, “In the future, we may invest in building our own infrastructure to better serve our customers.”
Here’s how the filing explains the financial terms of the Google contract.
The agreement has an initial term of five years. During that initial term, we are required to purchase at least $400.0 million of cloud services from Google each year beginning on January 30, 2017, though for each of the first four years, up to 15% of this amount may be moved to the subsequent year. We have an option to request a reduction in our minimum purchase commitment if we experience a significant revenue decline. In return for the minimum purchase commitment, we will receive discounted pricing for certain Google Cloud platform services. During the initial term of the agreement, the benefit of that discounted pricing compared to standard rates may diminish. If we fail to meet the minimum purchase commitment during any year, we are required to pay the difference.
As a bonus for cloud computing aficionados, a redacted version of the actual contract between Snap and Google was made public as an attachment to the IPO filing, revealing many of the nitty-gritty details of the agreement.