Snap just filed for a $3 billion IPO, giving us a peek behind the curtain at the company that makes Snapchat.
And what we’ve learned is that, earlier this very week, Snap entered into a $400 million-a-year deal with the Google Cloud Platform, to provide the infrastructure and services that keep the Snapchat app running.
“The agreement has an initial term of five years and we are required to purchase at least $400.0 million of cloud services in each year of the agreement, though for each of the first four years, up to 15% of this amount may be moved to a subsequent year,” says Snap’s S-1 IPO filing.
Google Cloud Platform is what technical types would call a “public cloud” service, where engineers like Snapchat’s can pay by the minute for unlimited supercomputing services. To this day, Snapchat remains one of the largest users of Google’s cloud infrastructure, although it’s recently brought a data center specialist in house.
Importantly, the terms of Snap’s agreement with Google allow it to use other public cloud providers, too. An example of a company that uses more than one provider is HTC, which as of mid-2o15 used Amazon Web Services for some stuff, Google Cloud Platform for a lot of its image processing, and Microsoft Azure in China, where Google doesn’t do business.
At the same time, though, if Snap doesn’t meet its $400 million per year spending minimums with Google, it’s on the hook for the difference. It’s a big deal for Google, which has been jockeying for position with the leading $10 billion Amazon Web Services cloud and the second-place Microsoft Azure.
Notably, Alphabet’s investment arm, Google Capital, previously made an investment in Snap.
Google declined to comment.