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Snap IPO: Snapchat Parent Company To Spend $2 Billion Over Five Years For Google Cloud Platform

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Snapchat just recently filed its $3 billion IPO, finally going public five years after its launch, and with it, the company has given everyone a peek at the myriad of spokes underpinning Snap Inc., the popular photo-sharing app's parent company.

Snap Pays Google For Cloud Services

Lots of checkpoints are on the company's roadmap, including its five-year deal with Google. Earlier this week, Snap agreed to cough up $400 million a year for Google's Cloud Platform, which will provide Snap's infrastructure and other services, which in turn will fuel Snapchat's operations.

"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," as stated on Snap's filing. For each of the first four years, up to 15 percent of the amount may be moved to a subsequent year.

Google Cloud Platform

Google's Cloud Platform, for the uninitiated, is a public cloud service that different companies can leverage for a price, and it often includes unlimited supercomputing services as part of the deal. Like Amazon's Web Services, Google aggregates an inordinate amount of servers and rents them out to companies who need cloud services.

Even today, Snapchat is Google Cloud's largest customer.

Snapchat's five-year Could Platform deal with Google doesn't bar it from using other cloud providers too, a concept that's not really novel: HTC, for instance, uses Amazon's Web Services and Google's Cloud Platform for different things, according to Business Insider.

Snapchat's Google Cloud Platform dependency can, of course, be seen as a risk factor, though in broad strokes, as informed by the IPO filing, it's a much smaller issue. Snapchat cited inexperience in the hardware market, maintaining daily active user growth, and competition with Google, Facebook, and others, as risk factors. Although if anything, the pessimistic warning signs could just be Snapchat using legal boilerplate language, as most IPOS are wont to do in a similar situation.

The Cloud Platform deal is a huge win for Google's cloud division, which, under Diane Greene, is keenly trying to best Amazon and Microsoft — big names in the space.

Snapchat will get discounted pricing from Google for its commitment, but the company was no more specific than that, Bloomberg reports.

Snap IPO

Snap hopes to raise $3 billion on the New York Stock Exchange under the ticker symbol SNAP. It says it had 161 million daily active users in the December quarter and that people aged 25 and under used Snapchat for longer periods, signaling a loyal user base.

The IPO pronounces Snap as a serious, formidable venture, which is only fitting, given that Snap has recently evolved its identity from just an app developer to a "camera company," having released on Spectacles, a popular pair of video-recording sunglasses.

Snap comes as the first major tech IPO this year, and the biggest U.S. tech IPO since Facebook's in 2012.

Snaps says that it's also negotiating a contract with an unnamed cloud services provider as a backup infrastructure solution. What's more, it may also build more of its own infrastructure in the future, according to the filing.

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