Snap, Inc. has partnered with Google with a five-year deal to avail cloud computing facilities. Snap is paying approximately $2 billion in those five years to avail services, which makes it one of the largest clients. S-1 filling had been completed by January 30, 2017. According to terms of the deal, Snap will purchase cloud infrastructure services worth $400 million per year, for next five years. Snap is using cloud services of Google from 2013 and this deal marked the continual of that deal.
According to the deal, Snap is able to roll up to 15% of the amount to be paid each year over to the next year. Even if it does not reach minimum purchase agreement, the company has to pay the difference. Till 2022, the company will pay up to $2 billion for Google’s cloud infrastructure. Google does not focus on gaining large sum of revenue through its cloud platform like Google Play and hardware. But the cloud segment generated $3.4 billion in revenue in recent quarter and the addition of $400 million per year marks a significant revenue.
Snap is an owner of the mobile app, Snapchat. The company stated in the filing that it relied majorly on Google’s services majority of its bandwidth, computing, and data-storage requirements. The company added, “Any disruption of or interference with our use of the Google Cloud operation would negatively affect our operations and seriously harm our business.”
This deal is considered as a large commitment and a huge risk factor if changes such as terms of service or policies or the discontinuation of platform occur. This deal may limit ability of Snap to expand into the Chinese market. “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,” stated Snap in its filling.
This would not affect Snap considerably and the company is planning to gain more penetration in the Chinese market. According to Bloomberg, both companies were discussing addition of a feature in which a Snapchat user points a camera at an object and Google’s search engine would display information about it.
Leading companies are adopting strategies such as partnerships, collaborations, and joint ventures to strengthen their position in the global industry. In its report on the global business cloud storage market, Research Beam offers insights on current market trends and growth opportunities in the industry.
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Published On : February 2017
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