Needing this amount of resources implies that Snap is expecting huge growth. This sounds like a really bad move on their part and they should have committed to building out their own infrastructure on 'bare metal' over the next 5 years instead.
If you read their S-1, they list a dependence on Google cloud as one of their big risk factors. Yet they then go ahead and make this commitment instead of working towards eliminating it.
There's so many advantages to owning your stack and if Snap thinks that it's going to need 2 billion dollars to pay for cloud infra, they're at the scale where it makes sense to build your own infra. Just look at Facebook, they're able to create tailor made data-centers that fit precisely what they need. The success of Snap relies on huge scale on the consumer side, if they want to scale their infra to support that 5 years down the line then this sounds like a poor move since they will either need to play catch-up later on or prepare to pay serious dough to Google.
Paying for cloud services seems like a great idea when you are not able to predict your needs in the coming years, given a deal like this I don't think that's the case.
If I could do it all over again I would probably opt for Google. The Kubernetes support is wonderful and the overall user experience blows AWS out of the water.
Why opt for Google if you're going to use containers in Kubernetes? You then become cloud agnostic. You can even move to your own datacenter at some point (relatively) easily.
Dropbox built out their own environment (and did it migrating 500PB out of S3) [1] [1a]. As did Twitter [2]. And Facebook [3]. And GitLab [4] (too soon?) As well as Mixpanel [5]. Even Twilio is multi-cloud (last time I checked it was split between AWS and Rackspace; this was several years ago during an interview, so maybe its changed). Sure, start in Google, or AWS, but at some point you will either need to use multiple compute/storage providers (redundancy) or go to your own gear (redundancy and cost).
Example: "In 2014, Moz CEO Sarah Bird said that it was spending “$6.2 million at Amazon Web Services, and a mere $2.8 million on [its] own data centers.” Simply put, the cloud killed its margins." [6]
EDIT:
simonebrunozzi: Forgive me, but when you're talking about hundreds of millions of dollars in spend, "easy" is relative. It is much easier when you're not relying on underlying primitives that are difficult to reproduce on your own at another provider (witness how terrible Open Stack is; no one wants to do that if they don't have to).
Am I minimizing the effort involved for this discussion? For sure. But the money involved...it solves most problems you would have migrating between providers.
> It seems to me that you have no serious experience in the real world.
You are entitled to your opinion. I have seen the pain, and it is relative. Its easier when someone says, "Here is the budget, just fix the problem", and your vendor's (AWS/Google) margins are 20-40% (these are real margins pulled from earnings reports); that's a lot of money you can put back in your own (or your shareholders') pockets.
If you we're spending $2 billion dollars, and I told you I could save you $400 million by spending $100 million, wouldn't you take that deal? Even at $200 million, its a bargain!
For less than what Snap is spending on Google cloud infrastructure, SpaceX built a rocket that can take a payload to orbit and return the first stage successfully (SpaceX has taken on ~$1.2 billion in funding over the last 14 years). Moving out of a cloud provider is comparatively hard?
EDIT: Maybe this is a roundabout way to kick back to Google in order to get preferential treatment on the Ad network. It sure isn't a logical decision.
EDIT 2: @ashayh: I'm not saying go back to good ol' bare metal. For $2 billion, you could build your own cloud provider out as an internal operation. The amount that's being spent on Google Cloud is egregious, and worse yet, common shares have no voting rights to push back against poor decisions like this.
EDIT 3: @hueving: HN throttles my posting; editing this comment is my only way to respond. Sorry about that!
So they hit $400m of revenue in 2016 and have committed to spend at least that much on infrastructure each year for the next 5 years? After all the costs for staffing and everything else they better I hope they achieve amazing growth if they ever intend to profit.
I would invest in Snapchat at any valuation that is below Facebook's. Sounds crazy but the first time I opened the app (on a friend's phone) and it landed me on a camera screen (almost forcing to contribute content to use the product) I felt like the guys were going to win whatever space they were in.
For ones (like me) wondering what Snap is, it is the company behind Snapchat, they apparently changed their name few months ago (source: https://en.wikipedia.org/wiki/Snap_Inc.)
Many talking of software here, but at this scale I think we should be looking at the cost of energy. Suppose Google has a true edge on the rest of the market in terms of what the cost of a Watt is to them. Take that outlook over the horizon of 5 years; all software arguments are thereby moot. If Google can generate a Watt in 5 years at 10% the cost that AWS can, then this drastically changes the equation.
I don't follow these things closely, but what's the reason to expect that Google will be able to generate a watt at 10% of the cost that AWS can? 10x seems like a massively impressive edge to have over another huge player in the market for a commodity good like power.
The timing is curious, they signed this dead and added $2B in fixed liabilities on their balance sheet days or weeks before the S1 filing.
That they didn't wait until after the IPO suggests Snap may see the partnership as a positive. Could also have been pushed from Google's end as it is a nice way of bragging about a big get but without having to formally announce it, and being associated with a hot IPO that will get a lot of coverage.
This makes no sense. One cannot spend $33M a month on Google Cloud. (Remember that it's half the price of AWS, and given a contract of that magnitude it's possible that they negotiated yet another half off).
The amount of hardware and services one would get for that bill is insane. Snapchat doesn't need that much computing power and storage.
I'm not so sure. $33M would buy 412PB of egress alone. At 160M daily active users, that's roughly 2GB per user. In just bandwidth. That's high, and they've probably negotiated some deals to lower their bills, but also consider instances, storage (photos and videos), 10% of their bill is easily support...
$33M a month is the right magnitude. The more I think about it, the more I wonder if it's actually way too low, and they're getting really deep discounts.
I guess that speaks about the scale at which they are operating in Google Cloud. Diane Green mentioned in a recent conference that one of their healthcare customers collect about 2 PB / user. Lot of companies struggle with managing / extracting value from data. Thats where the bottle neck is usually. If they have capability to handle more data, overtime their services evolve to collect, store and process more data. Once Big Data became reality, many companies started collecting orders of magnitude more data. With Google Cloud its easy to handle petabytes of data. That enables large scale computing companies on Google Cloud. (Think of driverless cars / genomics / large scale machine learning / social networks / ... )
Yeah, that seems really high. $400m a year? They're 10% of Google's yearly cloud revenue on their own? That said it's definitely what the s-1 filing claims:
"Any transition of the cloud services currently provided by Google Cloud to another cloud provider would be difficult to implement and will cause us to incur significant time and expense. We have committed to spend $2 billion with Google Cloud over the next five years and have built our software and computer systems to use computing, storage capabilities, bandwidth, and other services provided by Google, some of which do not have an alternative in the market."
Yes, I wonder if they're over-engineering things. I've seen MongoDB, Cassandra, and MySQL, all 3 used simultaneously, for example (until a more sensible CTO came along and consolidated everything into one database).
They released Memories last year which lets you back up your sent Snapchats with them. So I'd expect some non trivial permanent storage costs, at least at their scale.
This could be a major issue with the ipo. Wall Street investors don't take kindly to long term commitments such as this. It looks especially impertinent because it is on the order of their current revenue ($400m per year due to google versus $404m rev 2016). The similarities in the numbers just beg comparison..
Snap Inc can negotiate this number down if their revenue targets aren't met. So its really just a pro-forma agreement that can be changed... Source: The S1... the article fails to mention that part.
It is so concerning to me that the company has committed to spending an average of $400M per year on cloud infra when their revenue is only $200M, and they've revealed that user growth slowed from 17% to 3% in the quarter Insta released Stories.
It'd be one thing if they were going to use some of the IPO money to cost-optimize revenue, but I get the feeling that they need to focus on growing revenue due to how Insta Stories gutted them in 2016. That means hiring more people and writing bigger checks to Google.
And they're branding themselves as a "camera company." Their hardware division does not contribute materially to revenue (not profit: Revenue), and practically every other consumer camera company, from Kodak to GoPro, is dying.
Hah yeah, to me too. Wasnt until half way through the comments I found out who Snap was. Could have at least used the former name in the article somewhere or their logo.
Google also owns a piece of Snap through their venture arm. Plus I would think Snap will want to stay close to Google for access to their advertising exchange. We are quickly getting down to just two advertising exchanges Google and Facebook.
What do you guys think Google Cloud's margins are like? Presumably, Google is able to run a data center more efficiently than Snap could, meaning that the savings of running their own data centers will be strictly less than GC's margins... thoughts?
> Access to Google, which currently powers our infrastructure, is restricted in China.
What does this mean exactly? I could read the sentence above in two ways:
A- if a website is on Google infrastructure, then it will not be accessible in China
B- if a website is on Google infrastructure, then the cloud control panel will not be accessible to the IT operations personnel based in China
I think that it's the latter, I find it hard to believe that the scenario described at point A corresponds to reality. If that was the case it would have huge implications in terms of competition between Google and other providers.
I think it may be possible due to sharing of Google infrastructure that Google App Engine apps (what Snapchat runs on) are automatically blocked in China. This trick allowed Whatsapp to spoof censorship recently by feigning a connection to Google.com while truly connecting to an App Engine hosted proxy.
[+] [-] randartie|9 years ago|reply
If you read their S-1, they list a dependence on Google cloud as one of their big risk factors. Yet they then go ahead and make this commitment instead of working towards eliminating it.
There's so many advantages to owning your stack and if Snap thinks that it's going to need 2 billion dollars to pay for cloud infra, they're at the scale where it makes sense to build your own infra. Just look at Facebook, they're able to create tailor made data-centers that fit precisely what they need. The success of Snap relies on huge scale on the consumer side, if they want to scale their infra to support that 5 years down the line then this sounds like a poor move since they will either need to play catch-up later on or prepare to pay serious dough to Google.
Paying for cloud services seems like a great idea when you are not able to predict your needs in the coming years, given a deal like this I don't think that's the case.
[+] [-] whalesalad|9 years ago|reply
[+] [-] hosh|9 years ago|reply
I don't regret hand-installing Kubernetes on AWS, if only because I know a lot more about how it works now. But I rather just spin it up with GKE.
[+] [-] toomuchtodo|9 years ago|reply
Dropbox built out their own environment (and did it migrating 500PB out of S3) [1] [1a]. As did Twitter [2]. And Facebook [3]. And GitLab [4] (too soon?) As well as Mixpanel [5]. Even Twilio is multi-cloud (last time I checked it was split between AWS and Rackspace; this was several years ago during an interview, so maybe its changed). Sure, start in Google, or AWS, but at some point you will either need to use multiple compute/storage providers (redundancy) or go to your own gear (redundancy and cost).
Example: "In 2014, Moz CEO Sarah Bird said that it was spending “$6.2 million at Amazon Web Services, and a mere $2.8 million on [its] own data centers.” Simply put, the cloud killed its margins." [6]
EDIT:
simonebrunozzi: Forgive me, but when you're talking about hundreds of millions of dollars in spend, "easy" is relative. It is much easier when you're not relying on underlying primitives that are difficult to reproduce on your own at another provider (witness how terrible Open Stack is; no one wants to do that if they don't have to).
Am I minimizing the effort involved for this discussion? For sure. But the money involved...it solves most problems you would have migrating between providers.
> It seems to me that you have no serious experience in the real world.
You are entitled to your opinion. I have seen the pain, and it is relative. Its easier when someone says, "Here is the budget, just fix the problem", and your vendor's (AWS/Google) margins are 20-40% (these are real margins pulled from earnings reports); that's a lot of money you can put back in your own (or your shareholders') pockets.
If you we're spending $2 billion dollars, and I told you I could save you $400 million by spending $100 million, wouldn't you take that deal? Even at $200 million, its a bargain!
For less than what Snap is spending on Google cloud infrastructure, SpaceX built a rocket that can take a payload to orbit and return the first stage successfully (SpaceX has taken on ~$1.2 billion in funding over the last 14 years). Moving out of a cloud provider is comparatively hard?
EDIT: Maybe this is a roundabout way to kick back to Google in order to get preferential treatment on the Ad network. It sure isn't a logical decision.
EDIT 2: @ashayh: I'm not saying go back to good ol' bare metal. For $2 billion, you could build your own cloud provider out as an internal operation. The amount that's being spent on Google Cloud is egregious, and worse yet, common shares have no voting rights to push back against poor decisions like this.
EDIT 3: @hueving: HN throttles my posting; editing this comment is my only way to respond. Sorry about that!
[1] https://www.wired.com/2016/03/epic-story-dropboxs-exodus-ama...
[1a] http://www.informationweek.com/cloud/cloud-storage/how-dropb...
[2] https://blog.twitter.com/2016/overview-of-the-twitter-cloud-...
[3] https://code.facebook.com/hardware/ | http://www.zdnet.com/pictures/facebooks-data-centers-worldwi...
[4] https://about.gitlab.com/2016/11/10/why-choose-bare-metal/
[5] https://code.mixpanel.com/2011/10/27/why-we-moved-off-the-cl...
[6] http://www.thewhir.com/blog/moving-away-from-aws-cloud-dropb...
[+] [-] hemancuso|9 years ago|reply
[+] [-] andrenotgiant|9 years ago|reply
In reality, it's probably more like $200M, $300M, $400M, $500M, $600M
[+] [-] rokhayakebe|9 years ago|reply
[+] [-] georgeott|9 years ago|reply
[+] [-] gigatexal|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] krzyk|9 years ago|reply
[+] [-] andybak|9 years ago|reply
[+] [-] sobinator|9 years ago|reply
[+] [-] smeyer|9 years ago|reply
[+] [-] specialist|9 years ago|reply
https://en.wikipedia.org/wiki/Performance_per_watt
[+] [-] nikcub|9 years ago|reply
That they didn't wait until after the IPO suggests Snap may see the partnership as a positive. Could also have been pushed from Google's end as it is a nice way of bragging about a big get but without having to formally announce it, and being associated with a hot IPO that will get a lot of coverage.
[+] [-] eitally|9 years ago|reply
(they initially built their product on AppEngine)
[+] [-] user5994461|9 years ago|reply
The amount of hardware and services one would get for that bill is insane. Snapchat doesn't need that much computing power and storage.
[+] [-] 010a|9 years ago|reply
$33M a month is the right magnitude. The more I think about it, the more I wonder if it's actually way too low, and they're getting really deep discounts.
[+] [-] obulpathi|9 years ago|reply
[+] [-] freyir|9 years ago|reply
[+] [-] bpicolo|9 years ago|reply
[+] [-] mikecb|9 years ago|reply
[+] [-] empath75|9 years ago|reply
[+] [-] vijucat|9 years ago|reply
[+] [-] Cyph0n|9 years ago|reply
[+] [-] scottmcleod|9 years ago|reply
[+] [-] dopamean|9 years ago|reply
[+] [-] eip|9 years ago|reply
[+] [-] filereaper|9 years ago|reply
Isn't Snapchat supposed to delete data after 30s or whatever?
Why this insanely high cost? Can somebody shed some light.
[+] [-] firloop|9 years ago|reply
https://www.snap.com/en-US/news/post/introducing-memories/
[+] [-] argonaut|9 years ago|reply
2. Like Whatsapp, server has to store the message until the receiver is online again (until they open the app).
3. Whatever systems they use for advertising, tracking, profiling, and analytics is probably a significant chunk of their backend.
[+] [-] teej|9 years ago|reply
[+] [-] ErikAugust|9 years ago|reply
Interesting that just having one startup like Snapchat start on their platform made all the other little startups that came and went worth it.
[+] [-] jpeg_hero|9 years ago|reply
[+] [-] anonu|9 years ago|reply
[+] [-] dhsbdb|9 years ago|reply
[+] [-] eddd|9 years ago|reply
[+] [-] stp-ip|9 years ago|reply
[+] [-] 010a|9 years ago|reply
It'd be one thing if they were going to use some of the IPO money to cost-optimize revenue, but I get the feeling that they need to focus on growing revenue due to how Insta Stories gutted them in 2016. That means hiring more people and writing bigger checks to Google.
And they're branding themselves as a "camera company." Their hardware division does not contribute materially to revenue (not profit: Revenue), and practically every other consumer camera company, from Kodak to GoPro, is dying.
This is not a healthy company.
[+] [-] beefsack|9 years ago|reply
[+] [-] plorntus|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] johnsmith21006|9 years ago|reply
[+] [-] sebleon|9 years ago|reply
[+] [-] mastazi|9 years ago|reply
> Access to Google, which currently powers our infrastructure, is restricted in China.
What does this mean exactly? I could read the sentence above in two ways:
A- if a website is on Google infrastructure, then it will not be accessible in China
B- if a website is on Google infrastructure, then the cloud control panel will not be accessible to the IT operations personnel based in China
I think that it's the latter, I find it hard to believe that the scenario described at point A corresponds to reality. If that was the case it would have huge implications in terms of competition between Google and other providers.
[+] [-] firloop|9 years ago|reply
[+] [-] owenwil|9 years ago|reply