Having just filed for IPO, Snap’s S1 document is full of insight about Snapchat usage and internal operation. In disclosing various risks, the company notes that the “vast majority” of Snapchat runs on Google Cloud, with a just signed $2 billion five year deal. Additionally, work to improve the app’s experience on Android is mentioned.
Under the “Risk Factors” section, Snap makes no secret that the majority of users are on iOS, thus resulting in “prioritized development” over Android. While there is feature parity, performance and experience has historically lagged on Google devices.
Fortunately, Snap recognizes that they “need to prioritize development of our products to operate on smartphones with Android operating systems” in order to “continue growth in user engagement.”
An additional risk is Snap’s heavy reliance on Google Cloud for “the vast majority of our computing, storage, bandwidth, and other services.” On Monday, a $2 billion deal was signed that sees Snap paying $400 million a year for Google services until 2022.
While beneficial for Google’s cloud ambitions, such an infrastructure could be risky, with the filing noting how a transition “to another cloud provider would be difficult to implement and will cause us to incur significant time and expense.” It also note that some services provided by Google “do not have an alternative in the market.”
However, the deal is nonexclusive, with the company currently negotiating with an undisclosed cloud provider for “redundant infrastructure support of our business operations.” More importantly, Snap notes that they might building their own infrastructure in the future.
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