Snap and Google have entered into a five-year, $2 billion deal, making Snap one of the tech giant’s largest clients.
Snap completed an S-1 filing on Jan. 30, according to Business Insider, and the deal means Snap will buy $400 million in cloud services from Google every year until 2022. The pair first partnered in 2013, and this appears to be a continuation of that deal.
Snap will be able to roll up to 15 percent of the $400 million annual requirement over, but only for the first four years. And TechCrunch reported that while Google doesn’t release numbers for its cloud infrastructure, they do lump it in with other non-advertising businesses, like hardware. That total came to about $3.4 billion last quarter, so the $400 million per year from Snap is good news for the tech giant. Especially since Snapchat users reportedly return to the app about 18 times per day.
But the word is still out on whether Snap will ultimately benefit from this or not. The length of the deal means a large commitment and a potential risk factor should the platform change its terms of service or become virtually extinct. Not to mention that this move could limit Snap’s chances to expand in other markets, including China.
“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,” Snap said in its filing.
However, the deal does mean that Snap has a better chance of securing future alliances. Bloomberg noted that Google and Snap were in talks about a feature that would allow a Snapchat user to point their phone camera at an object in order to gain information about it from Google’s search engines.
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