Snap Inc., the company behind messaging app Snapchat, will in fact be relying on both Amazon Web Services (AWS) and the Google Cloud Platform for its public cloud needs over the next few years.
Today Snap followed up on its S-1 paperwork kicking off the process to go public by releasing an update to its form S-1 conveying, among other things, that it has agreed to spend $1 billion on AWS between January 2017 and December 2021.
The deal ramps up over time: Snap must pay $50 million for AWS services this year, $125 million in 2018, $200 million in 2019, $275 million in 2020, and $350 million in 2021, according to the filing. “If we fail to meet the minimum purchase commitment during any year, we are required to pay the difference,” Snap said.
This builds on a pre-existing relationship between Snap and AWS, one that wasn’t disclosed in the initial S-1. It turns out Snap signed an “enterprise agreement” with AWS in March that was amended that same month and then amended again this month — hence the $1 billion terms. “Such agreement will continue indefinitely until terminated by either party,” Snap noted.
The $1 billion agreement is just half of what Snap has agreed to spend on the Google cloud. But the AWS commitment is still notable, for a few reasons.
First, it’s a big number, even for public cloud market leader AWS — as big as AWS’ deals with the CIA ($600 million) and Salesforce ($400 million) combined.
Second, the amount suggests that Snap might well end up using AWS for more than just “redundant infrastructure support,” even though that’s what Snap says the AWS deal is for.
Third, the AWS cloud is available in China, unlike the Google cloud, at least for the moment. If Snapchat pops up in China over the next few years, it might well be doing so with the help of AWS, not Google. Which is why it’s important to have AWS now, not later.
With that said, $1 billion isn’t exactly a game changer for AWS in the same way that $2 billion is for the Google Cloud. In the fourth quarter of 2016 AWS reeled in $3.53 billion in revenue. In all of 2016, revenue came out to a staggering $12.2 billion. So yeah, big, but not yooge.