Snap coverage will hit its income and daily average usage numbers, but there was one small information that occurred regarding the big business for the company’s cloud infrastructure partner, Google.
The company announced a license platform agreement it struck with Google for its cloud infrastructure requirements given in snap S- 1 which has complete information about the services. The term which has been completed on January 30 consist of Snap committed to purchasing at least $400 million in cloud services for each of the next five years.
Snap relationship with Google has been good, snap has been using Google’s infrastructure since from 2013, but the size of the deal will likely make it one of Google’s largest and most important cloud customers.
For first four years, Snap will be able to roll 15 percent of the amount over to the next year, but otherwise it will be required to pay the difference if it doesn’t meet the minimum purchase agreement. Which means snap will be paying Google at least $2 billion for its cloud infrastructure through 2022.
Google doesn’t break out revenues from its cloud infrastructure, choosing to combine it in with other non-advertising businesses like hardware and Google Play sales. But that segment totaled $3.4 billion in sales in the most recent quarter. if that’s the case, then the amount of $400 million a year is actually a statistically significant portion of the segment’s business.
Depending on Google Cloud could also potentially limit Snap’s ability to expand into markets like China. As the company notes in its filing: “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.”
This understanding between Google and snap will give snap a bright future and strong commitment, and is even listed as a potential risk factor if the platform is discontinued or if it changes its terms of services or policies, among other things.
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