The company behind the famous social media app Snapchat called Snap Inc., intends to hand out a whopping $2 billion to Google over the next five years. A sum agreed so the company can use the Google cloud computing services. Snap unveiled the news this Thursday during a public offering filing with the U.S. Securities and Exchange Commission.
Snap and Google signed an agreement on Jan. 30 that obliges Snap to shell out at least $400 million from its pockets every year on Google cloud services for a good five years until 2022. During the first four years of the deal, the company can be pardoned when it delays a portion of its payments.
Snap can roll 15 percent of the amount to the following year although it will have to pay the difference if the minimum purchase agreement is unmet. In exchange, Snap will be able to enjoy discounts from Google. "Any disruption of or interference with our use of the Google Cloud operation would negatively affect our operations and seriously harm our business," wrote Snap in the filing.
According to Snap, it depends on Google for a "vast majority" of its "computing, bandwidth and other services." There is still potential risk as Google can always discontinue the platform, change the terms of services or just go horribly wrong. However, Google is still religiously investing in the cloud platform as it aims to launch new cloud data centers.
With this deal, Snap proves that it is not afraid to take big risks. The company previously acquired an Israeli startup named Cimagine, which centered on augmented reality tech. The tech allows users to virtually place objects according to their liking on their mobile devicesand that's just one of the many recent acquisitions of the company. In 2016, Snap got hold of Vurb, Flite, Seen and Bitstrips.
