Snap Inc. plans to spend $2 billion with Alphabet Inc. over the next five years to use Google’s cloud-computing services, according to Snap’s initial public offering filing. The social media firm also listed its dependency on Google as a key risk investors should consider before buying stock.
Snap, owner of the Snapchat mobile app, said it relies on Google’s services for the “vast majority” of its computing, bandwidth and data-storage needs. “Any disruption of or interference with our use of the Google Cloud operation would negatively affect our operations and seriously harm our business,” the company wrote in the filing on Thursday.
The two companies signed an agreement in January for the five-year deal. Under the terms, Snap is required to spend at least $400 million a year on Google cloud services. A portion of these payments can be delayed, during the first four years of the deal. In return for this commitment, Snap said it will get discounted pricing from Google, without being more specific.
The deal is a big win for Google’s cloud division, which under Diane Greene, is trying to catch leaders Amazon.com Inc. and Microsoft Corp. Snap was an early customer of Google’s cloud services, and the social media company remains one of its largest spenders, people familiar with the companies have said.