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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

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.

paulddraper 10y ago
Precisely. Google Cloud is a good idea when you don't know how much infrastructure you need. Of course, maybe they got some killer promotional deal with Google. Seems likely.
- averageweather 10y ago
  How much did that sales rep get in commission? ;-)
- chetanahuja 10y ago
  > Of course, maybe they got some killer promotional deal with Google For sure. How much is this free marketing that Google cloud service is getting worth? I'm pretty sure whatever discounted deal Google gave Snap is more than made up by this free marketing blitz they're getting.
  - theDoug 10y ago
    Snap’s been a happy and public customer for some time, so any “free marketing blitz” would a) have essentially been used up before, and b) would truly have to be remarkable to work against some form of discount where the non-discounted remainder /still/ represents $2,000,000,000 over four years.
    - chetanahuja 10y ago
      First of all, extent of Snap's dependence on Google Cloud and this extreme volume of spend was never public. Also, there's a difference between something being public (like press releases) and actively generating buzz where lots of (relevant) people are actively talking about this. I think if you were in a GCE sales meeting yesterday you'd have noticed a lot of people jumping up and down in joy. They've been playing second fiddle to AWS and in desperate catchup mode. Their next cold call got so much easier. Their next close got so much easier. Screw all that, their inbounds suddenly went through the roof. Lots of smaller startups etc. who would have never thought of Google cloud as an option are now seriously considering it. A lot of people who are already on AWS just signed up for GCE out of curiosity "just to see what the big deal is about". I don't think there's any way to overstate the impact of this news on Google Cloud's future.
- cookiecaper 10y ago
  Having a basic scaffolding in place on a hosted cloud and making sure your devops scripts are up to snuff is a good idea when you don't know how much infrastructure you need, because then when the situation calls for it you can fire up a new node on-demand. But unless you're still "in the garage" and a couple of DigitalOcean droplets are good enough, it's going to be much, much cheaper and usually much wiser to run your core infrastructure on your own colocated bare metal. I've seen companies increase their server expenses by ~$1M/yr by moving everything to EC2, and they sit around congratulating themselves for it because now "they're in the cloud". There's no reason to do that! Little humorous tangent: an AWS rep told someone I've worked with that Amazon really wanted to help them secure better pricing, because as new CFOs come from self-hosted companies and into AWS-dependent companies, the CFO's eyes bug out when they see the Amazon bills and EC2 becomes the first thing on the chopping block. Script your stuff out in Ansible or something similar, run it on your own hardware, and use GCloud/EC2 as secondary data centers for failover/backup/support/emergency bursts/whatever. You can have the flexibility without paying through the nose.
  - mjolk 10y ago
    > Script your stuff out in Ansible or something similar, run it on your own hardware, and use GCloud/EC2 as secondary data centers for failover/backup/support/emergency bursts/whatever. You can have the flexibility without paying through the nose. Except then you have to run your own networking and when shit fails (as disks, links, and switches are want to do), it's now "your problem". Hybrid clouds and not being a tenant is nice, but not without time and monetary costs -- by the time you have geographically distinct failover, you've also spent a non-trivial amount of opportunity costs making phone calls, flying around, and writing lines of code and config for things customers don't even know exist.
    - Sanddancer 10y ago
      And when EC2 falls over, like it tends to do a few times a year? Hosts fall over, stuff dies. Something the scale of Snap, you're going to be doing setups that look a lot like cloud anyways. Bringing new systems up either by cloning a disk or through using PXE, setting up clustering, possibly by using the stuff they're already using, etc. You're going to be writing a lot of the same fallover code if you're running on someone else's hardware, so why rent?
yueq 10y ago
Facebook is not a good example here. Back to early 2000s there was no Cloud infra so they started from inhouse. Snap is a different story since they not only use GCloud but also have Google engineers support and oncall for them. Snap focuses on the Product and Growth that creates much more value.
- deleted 10y ago
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conanbatt 10y ago
It might be a sort of signaling that google is a potential buyer.
- dharma1 10y ago
  They're filing for IPO, I think that ship has sailed
nikcub 10y ago
There is nothing about using cloud services that makes this a unique risk factor. With self-hosting replace "Google" with the companies own name and list all the things that can go wrong - it's pretty standard for a tech co. S1. For ex. this is Twitter's risk item for running hosted services: > Our business and operating results may be harmed by a disruption in our service, or by our failure to timely and effectively scale and adapt our existing technology and infrastructure Continues bottom of page 26[0] [0] https://www.sec.gov/Archives/edgar/data/1418091/000119312513390321/d564001ds1.htm#toc564001_4 https://www.sec.gov/Archives/edgar/data/1418091/000119312513...
- late2part 10y ago
  So outsource the risk so you can blame someone else? Maybe....
  - Klathmon 10y ago
    Outsource the risk to someone who has an entire product devoted to that one area, and has many years of experience and is probably the largest provider on the planet for that service...
    - late2part 10y ago
      On the one hand - you're right. Google is good, I use GCP, they are competent and good to work with. On the other hand "someone who has an entire product devoted to that one area, and has many years of experience and is probably the largest provider on the planet for that service" also describes Enron at the time. Google's no Enron, but Size isn't the metric one should use.
      - lallysingh 10y ago
        Parent listed 3 metrics. I don't think it's fair to pull one out and attack that instead of the combination of all 3.
Alex3917 10y ago
> Needing this amount of resources implies that Snap is expecting huge growth. It's a hedge. If they don't grow as rapidly as expected then they're betting that someone else will buy the excess reserved capacity from them for close to market rates. So in the case that they only use 1.5 billion dollars worth of hosting, they're betting that they'll be out, say, $25M rather than $500M. On the other hand they want to make sure that if they do grow rapidly then Google has the capacity to meet their needs.
- matt_wulfeck 10y ago
  I've never heard of anyone buying excess cloud capacity from a private party. Is this a thing? Is there a market for this? Sounds like a security nightmare.
  - ohashi 10y ago
    http://docs.aws.amazon.com/AWSEC2/latest/UserGuide/ri-market-selling-guide.html http://docs.aws.amazon.com/AWSEC2/latest/UserGuide/ri-market...
  - Alex3917 10y ago
    AWS reserved marketplace? Security wise it's no different than any other instance; specific machines aren't associated with the party who originally reserved the capacity in any way.
    - matt_wulfeck 10y ago
      They're still just buying it from Amazon.
  - late2part 10y ago
    You're right. The deals businesses do at this level preclude you from selling the resources you've purchased at a discount to another party.
  - yclept 10y ago
    Yes there are marketplaces for this with some providers like AWS. You are buying capacity (like a voucher) for a server not a particular server.
ulfw 10y ago
It begs the question what their product really is if so much is outsourced to others and where the valuation is at if all it is is just branding.
- azinman2 10y ago
  Network effects are massive, and they keep iterating on product successfully. You're focusing on the least interesting bit that's outsourced.
burntrelish1273 10y ago
Snap needs to have consistent booked revenue in order justify this sort of outlay. This is akin to dot-com era companies signing long leases on buildings or small business owners buying lots of inventory. Plus, 2 gigadollars could easily buy 4-10 soup-to-nuts datacenters that have tangible (although less) resale value. Overexpansion is easy to do and super risky... these sort of moves increase expectations and scare off wise investors.
- late2part 10y ago
  Maybe. I agree with your sentiment, but a lot of investors say "cloud" - ooh good, I like Google, so Google Cloud must be good, buy Snap Stock!!!
  - burntrelish1273 10y ago
    Ideally, a company should use a hybrid of cloud and on-prem as a p&l dial to adjust risk and agility. EDIT: for super scrappy startups playing with on-prem with lab-like reliability, https://unixsurplus.com/ https://unixsurplus.com/ is awesome.
chetanahuja 10y ago
We run our infrastructure on public cloud but almost our entire stack is cloud agnostic (except for a particular big database service we use). So our serving nodes are distributed across many public cloud providers and we can make decisions based on location/cost etc. in different regions of the world. The rule of thumb I've heard is that you should start looking beyond public cloud once your cloud spend hits ~200K/month. Since at this level, engineering and ops investments you need to make to maintain your own infrastructure start making more sense. I think it's safe to say Snap is beyond that threshold right now.
andrewstuart2 10y ago
Facebook reported $27 billion in revenue in 2016. Snap reported $400 million. You're talking two orders of magnitude lower than Facebook and almost three lower than Google. Snap simply does not have the resources to pour into custom data centers, even if they can raise $2 billion for infra over 5 years. Unless they have serious talent already, they're not going to match Google's massive 15 year investments by a long shot, even if you only consider the services they actually need to use.
- treblig 10y ago
  Yep, agreed. Snap only has 1900 employees.
  - mrweasel 10y ago
    That seems like a lot of people, especially when they buy infrastructure from Google.
    - thanksgiving 10y ago
      I'd imagine not if that figure includes sales team for ads, content team for discover, and so on. Especially sales (I don't have any inside information, so this is purely speculation) can be pretty personnel intensive if you're trying to court ad buyers.
  - iamgopal 10y ago
    so one person for every line of code. nice. (..I hope this comment does not wipe out all my karma on hn...)
  - the_duke 10y ago
    Where did you come up with that? Crunchbase says they have 100-250 employees. Their LinkedIn profile says 50-200.
    - acchow 10y ago
      It's in their S-1 filing "1,859 as of December 31, 2016" https://www.sec.gov/Archives/edgar/data/1564408/000119312517029199/d270216ds1.htm https://www.sec.gov/Archives/edgar/data/1564408/000119312517... I hope you don't rely on Crunchbase or LinkedIn for anything serious.
xux 10y ago
I love Hacker News, where a random person can tell a company their $2 billion plan on infrastructure is "a really bad move" with authority
- ben174 10y ago
  To be fair, that company is run by these same 'random persons' that are commenting here.
  - visakanv 10y ago
    That doesn't mean anything, though. "Some people who do X also do Y" does not imply that "people who do Y are qualified to comment on X." For example: Elon Musk is a Twitter user. I too am a Twitter user. So's Kylie Jenner, Donald Trump, and random spambots. Using the same service does not mean they're equally qualified to speak with authority about the same things.
    - agilo 10y ago
      Being a 'random person' or a Twitter user should have no bearing on the merit of one's arguments.
      - brianwawok 10y ago
        That was the point
    - ben174 10y ago
      Correct. That's why I said "to be fair". I'm saying the playing field is quite level, so we shouldn't judge a comment on whether we recognize their username, but rather on quality of content.
      - visakanv 10y ago
        > we shouldn't judge a comment on whether we recognize their username, but rather on quality of content Ah right, I think I see the nature of our disagreement / misunderstanding. I totally agree with you on the general principle that quality of content should be allowed to stand on its own. However, I believe that there are things that are context-specific things that the men and women in the arena will face. And these are things that those of us in the stands, however thoughtful and discerning, will never be able to appreciate them, because we simply do not know. (For a great read about this, check out Daniel Ellsberg's message to Henry Kissinger, on the reality of having access to top secret information: http://www.motherjones.com/kevin-drum/2010/02/daniel-ellsberg-limitations-knowledge http://www.motherjones.com/kevin-drum/2010/02/daniel-ellsber...) So for example. It seems obvious to me that the top comment is sensible and correct. Snap's CTO or whoever else made that decision is surely very familiar with the costs of being dependent on something like Google. So if they decide to do it anyway, I'm of the opinion that they're quite likely to have done it because of concerns that I am not able to appreciate, because I am not in their context. Of course, there's a non-zero chance that Snap is making stupid decisions. But I think it's far likelier that they're making decisions that SEEM stupid to a 3rd party, but make perfect sense once you appreciate their context. I could be wrong about this, of course.
omarforgotpwd 10y ago
True, but what's the opportunity cost of transitioning to bare metal? Is it worth slowing down development / feature releases / possible service outages? In the time it takes to transition, is it possible that cloud actually becomes cheaper than running your own infrastructure?
deleted 10y ago
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SoreGums 10y ago
The other thing you get with GCloud is multiple datacenters around the planet. Assuming Snap are going after the 2billion+ people not in America, this seems like an advantage to use someone else's gear. 2billion seems high, maybe it's the maximum negotiated on paper for the deal as opposed to the guaranteed? When you have Adwords dollars pouring in it makes sense to go send out a few people to buy up fibre and land/power/water for datacenters on the down low....
- beisner 10y ago
  This seems like the key to me. Yes, if I'm a SaaS company with low bandwidth requirements but have a ton of users domestically, maybe I'll build my own data center (think IBM, or maybe Salesforce). But if I am raising money in the hopes of scaling my user base into the billions, and I need hundreds of millions of people to be able to upload to and download hundreds of megabytes of data to my servers daily, and have those images be instantly available to every user's contacts worldwide, I'll build on top of Google's infrastructure, which was literally designed for these kinds of tasks. Buying the metal is just the tip of the iceberg when. Snap would have to design a high-throughput, globally consistent network of data centers, likely lay their own undersea fiber (as all the cloud providers have done), and assume all the technical risk that comes with building and operating that kind of infrastructure. I think they made the right call on this one.
oskarth 10y ago
> 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 to be clear, how many billion dollar infrastructures have you built up? What about played a significant role in, witnessing the various trade-offs that have been made? Taken part of, in any shape or form? Of course, if you have experience that's all well and good. But I would expect someone with experience to lead with it, not omit it, precisely because they know how important it is with all the trade-offs involved.
Forrest7778 10y ago
To be fair, they did address this concern under the 'Operating Leverage in Our Business' section where they said that they may look for another third party to rely on for cloud computing or they build their own infrastructure. "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 Cloud, some of which do not have an alternative in the market. We are currently negotiating an agreement with another cloud provider for redundant infrastructure support of our business operations. In the future, we may invest in building our own infrastructure to better serve our customers."
yAnonymous 10y ago
When Google eventually buy Snap, it's better for them to already manage the infrastructure. Then everyone can honestly announce that Snap user data won't be handed over to Google - because it's already there. ;)
abalone 10y ago
> 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. It doesn't mean they won't. Apple is reportedly spending a similar amount on Google cloud.[1] They're also investing billions in building their own data centers.[2] Those things go together. Do you really think a company facing literally hundreds of millions of dollars in cloud service bills is not going to run the numbers on plugging in their own servers. [1] http://www.businessinsider.com/google-nabs-apple-as-a-cloud-customer-2016-3 http://www.businessinsider.com/google-nabs-apple-as-a-cloud-... [2] http://fortune.com/2016/02/02/apple-data-center-move/ http://fortune.com/2016/02/02/apple-data-center-move/
robzyb 10y ago
> 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. If they ran on bare metal then they'd list that as one of their big risk factors too.
vonklaus 10y ago
Counterpoint: Maybe the agreement is breakable or they know they can resell the resources. This metric could be a good way to trick "tech savvy" analysts who don't care about total users. I assume spending this much would give them a below market discount and they could recoup some of their losses if nec. All this assumes it is a positioning tactic w/ a hedge. Maybe, they will just build a developer ecosystem a don't want to bifurcate their engineering output. If twitter fails, it would validate this choice as they can pay a slight premium and if their metrics increase build infrastructure in 2.5 years w/ more info to spec it
ciaranm 10y ago
But ensuring 5 years of guaranteed service at a fixed price is reducing their risk. It prevents Google from pulling the rug out from under them, or from the price going up and they have no option but to accept it. I imagine part of their plans are to move away from the dependency, but while it exists - this is exactly how you reduce your exposure to that risk.
- runeks 10y ago
  All in all, I would say that if needing a new cloud provider in case Google defaults is a big risk factor for your company, your company is in pretty good shape.
lallysingh 10y ago
I think they're paying for technical runway. They're not a big company yet, but expect substantial user growth. Right now, they probably believe that growth is more important than profit. So they're going to spend their engineering resources on getting more users to use and keep using their stuff. GCP isn't sticky. They can leave, or renegotiate, or even try to get Google to do some of their engineering work for them ("We'd really love if this API did this as well..."). Or some combination thereof to minimize risk vs max profits.
antoniuschan99 10y ago
If you watch Jeff Bezos Ted talk years ago, he made the comparison that back in the day, Beer Brewers used to have to generate their own electricity. Similarly, services like AWS provide companies with that type of infrastructure (data or internet in this case) so they can focus on building out features. But to your point, it gets expensive at some point and I am surprised that Snap is still outsourcing this instead of having their own data centers. I guess it's because the CEO is not strong Technology-wise so the company is focused on Product?
deleted 10y ago
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londons_explore 10y ago
You can bet that guaranteeing such a large future investment, they will have bought themselves a pretty hefty discount too. Perhaps a discount large enough that prices match or are even better than bare metal servers. Remember, Google builds its own custom hardware and probably gets much better performance per dollar than you would get from HP/dell/IBM/etc.

paulddraper 10y ago

Precisely. Google Cloud is a good idea when you don't know how much infrastructure you need. Of course, maybe they got some killer promotional deal with Google. Seems likely.

averageweather 10y ago
How much did that sales rep get in commission? ;-)
chetanahuja 10y ago
> Of course, maybe they got some killer promotional deal with Google For sure. How much is this free marketing that Google cloud service is getting worth? I'm pretty sure whatever discounted deal Google gave Snap is more than made up by this free marketing blitz they're getting.
- theDoug 10y ago
  Snap’s been a happy and public customer for some time, so any “free marketing blitz” would a) have essentially been used up before, and b) would truly have to be remarkable to work against some form of discount where the non-discounted remainder /still/ represents $2,000,000,000 over four years.
  - chetanahuja 10y ago
    First of all, extent of Snap's dependence on Google Cloud and this extreme volume of spend was never public. Also, there's a difference between something being public (like press releases) and actively generating buzz where lots of (relevant) people are actively talking about this. I think if you were in a GCE sales meeting yesterday you'd have noticed a lot of people jumping up and down in joy. They've been playing second fiddle to AWS and in desperate catchup mode. Their next cold call got so much easier. Their next close got so much easier. Screw all that, their inbounds suddenly went through the roof. Lots of smaller startups etc. who would have never thought of Google cloud as an option are now seriously considering it. A lot of people who are already on AWS just signed up for GCE out of curiosity "just to see what the big deal is about". I don't think there's any way to overstate the impact of this news on Google Cloud's future.
cookiecaper 10y ago
Having a basic scaffolding in place on a hosted cloud and making sure your devops scripts are up to snuff is a good idea when you don't know how much infrastructure you need, because then when the situation calls for it you can fire up a new node on-demand. But unless you're still "in the garage" and a couple of DigitalOcean droplets are good enough, it's going to be much, much cheaper and usually much wiser to run your core infrastructure on your own colocated bare metal. I've seen companies increase their server expenses by ~$1M/yr by moving everything to EC2, and they sit around congratulating themselves for it because now "they're in the cloud". There's no reason to do that! Little humorous tangent: an AWS rep told someone I've worked with that Amazon really wanted to help them secure better pricing, because as new CFOs come from self-hosted companies and into AWS-dependent companies, the CFO's eyes bug out when they see the Amazon bills and EC2 becomes the first thing on the chopping block. Script your stuff out in Ansible or something similar, run it on your own hardware, and use GCloud/EC2 as secondary data centers for failover/backup/support/emergency bursts/whatever. You can have the flexibility without paying through the nose.
- mjolk 10y ago
  > Script your stuff out in Ansible or something similar, run it on your own hardware, and use GCloud/EC2 as secondary data centers for failover/backup/support/emergency bursts/whatever. You can have the flexibility without paying through the nose. Except then you have to run your own networking and when shit fails (as disks, links, and switches are want to do), it's now "your problem". Hybrid clouds and not being a tenant is nice, but not without time and monetary costs -- by the time you have geographically distinct failover, you've also spent a non-trivial amount of opportunity costs making phone calls, flying around, and writing lines of code and config for things customers don't even know exist.
  - Sanddancer 10y ago
    And when EC2 falls over, like it tends to do a few times a year? Hosts fall over, stuff dies. Something the scale of Snap, you're going to be doing setups that look a lot like cloud anyways. Bringing new systems up either by cloning a disk or through using PXE, setting up clustering, possibly by using the stuff they're already using, etc. You're going to be writing a lot of the same fallover code if you're running on someone else's hardware, so why rent?

yueq 10y ago

Facebook is not a good example here. Back to early 2000s there was no Cloud infra so they started from inhouse. Snap is a different story since they not only use GCloud but also have Google engineers support and oncall for them. Snap focuses on the Product and Growth that creates much more value.

deleted 10y ago
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conanbatt 10y ago

It might be a sort of signaling that google is a potential buyer.

dharma1 10y ago
They're filing for IPO, I think that ship has sailed

nikcub 10y ago

There is nothing about using cloud services that makes this a unique risk factor. With self-hosting replace "Google" with the companies own name and list all the things that can go wrong - it's pretty standard for a tech co. S1. For ex. this is Twitter's risk item for running hosted services: > Our business and operating results may be harmed by a disruption in our service, or by our failure to timely and effectively scale and adapt our existing technology and infrastructure Continues bottom of page 26[0] [0] https://www.sec.gov/Archives/edgar/data/1418091/000119312513390321/d564001ds1.htm#toc564001_4 https://www.sec.gov/Archives/edgar/data/1418091/000119312513...

late2part 10y ago
So outsource the risk so you can blame someone else? Maybe....
- Klathmon 10y ago
  Outsource the risk to someone who has an entire product devoted to that one area, and has many years of experience and is probably the largest provider on the planet for that service...
  - late2part 10y ago
    On the one hand - you're right. Google is good, I use GCP, they are competent and good to work with. On the other hand "someone who has an entire product devoted to that one area, and has many years of experience and is probably the largest provider on the planet for that service" also describes Enron at the time. Google's no Enron, but Size isn't the metric one should use.
    - lallysingh 10y ago
      Parent listed 3 metrics. I don't think it's fair to pull one out and attack that instead of the combination of all 3.

Alex3917 10y ago

> Needing this amount of resources implies that Snap is expecting huge growth. It's a hedge. If they don't grow as rapidly as expected then they're betting that someone else will buy the excess reserved capacity from them for close to market rates. So in the case that they only use 1.5 billion dollars worth of hosting, they're betting that they'll be out, say, $25M rather than $500M. On the other hand they want to make sure that if they do grow rapidly then Google has the capacity to meet their needs.

matt_wulfeck 10y ago
I've never heard of anyone buying excess cloud capacity from a private party. Is this a thing? Is there a market for this? Sounds like a security nightmare.
- ohashi 10y ago
  http://docs.aws.amazon.com/AWSEC2/latest/UserGuide/ri-market-selling-guide.html http://docs.aws.amazon.com/AWSEC2/latest/UserGuide/ri-market...
- Alex3917 10y ago
  AWS reserved marketplace? Security wise it's no different than any other instance; specific machines aren't associated with the party who originally reserved the capacity in any way.
  - matt_wulfeck 10y ago
    They're still just buying it from Amazon.
- late2part 10y ago
  You're right. The deals businesses do at this level preclude you from selling the resources you've purchased at a discount to another party.
- yclept 10y ago
  Yes there are marketplaces for this with some providers like AWS. You are buying capacity (like a voucher) for a server not a particular server.

ulfw 10y ago

It begs the question what their product really is if so much is outsourced to others and where the valuation is at if all it is is just branding.

azinman2 10y ago
Network effects are massive, and they keep iterating on product successfully. You're focusing on the least interesting bit that's outsourced.

burntrelish1273 10y ago

Snap needs to have consistent booked revenue in order justify this sort of outlay. This is akin to dot-com era companies signing long leases on buildings or small business owners buying lots of inventory. Plus, 2 gigadollars could easily buy 4-10 soup-to-nuts datacenters that have tangible (although less) resale value. Overexpansion is easy to do and super risky... these sort of moves increase expectations and scare off wise investors.

late2part 10y ago
Maybe. I agree with your sentiment, but a lot of investors say "cloud" - ooh good, I like Google, so Google Cloud must be good, buy Snap Stock!!!
- burntrelish1273 10y ago
  Ideally, a company should use a hybrid of cloud and on-prem as a p&l dial to adjust risk and agility. EDIT: for super scrappy startups playing with on-prem with lab-like reliability, https://unixsurplus.com/ https://unixsurplus.com/ is awesome.

chetanahuja 10y ago

We run our infrastructure on public cloud but almost our entire stack is cloud agnostic (except for a particular big database service we use). So our serving nodes are distributed across many public cloud providers and we can make decisions based on location/cost etc. in different regions of the world. The rule of thumb I've heard is that you should start looking beyond public cloud once your cloud spend hits ~200K/month. Since at this level, engineering and ops investments you need to make to maintain your own infrastructure start making more sense. I think it's safe to say Snap is beyond that threshold right now.

andrewstuart2 10y ago

Facebook reported $27 billion in revenue in 2016. Snap reported $400 million. You're talking two orders of magnitude lower than Facebook and almost three lower than Google. Snap simply does not have the resources to pour into custom data centers, even if they can raise $2 billion for infra over 5 years. Unless they have serious talent already, they're not going to match Google's massive 15 year investments by a long shot, even if you only consider the services they actually need to use.

treblig 10y ago
Yep, agreed. Snap only has 1900 employees.
- mrweasel 10y ago
  That seems like a lot of people, especially when they buy infrastructure from Google.
  - thanksgiving 10y ago
    I'd imagine not if that figure includes sales team for ads, content team for discover, and so on. Especially sales (I don't have any inside information, so this is purely speculation) can be pretty personnel intensive if you're trying to court ad buyers.
- iamgopal 10y ago
  so one person for every line of code. nice. (..I hope this comment does not wipe out all my karma on hn...)
- the_duke 10y ago
  Where did you come up with that? Crunchbase says they have 100-250 employees. Their LinkedIn profile says 50-200.
  - acchow 10y ago
    It's in their S-1 filing "1,859 as of December 31, 2016" https://www.sec.gov/Archives/edgar/data/1564408/000119312517029199/d270216ds1.htm https://www.sec.gov/Archives/edgar/data/1564408/000119312517... I hope you don't rely on Crunchbase or LinkedIn for anything serious.

xux 10y ago

I love Hacker News, where a random person can tell a company their $2 billion plan on infrastructure is "a really bad move" with authority

ben174 10y ago
To be fair, that company is run by these same 'random persons' that are commenting here.
- visakanv 10y ago
  That doesn't mean anything, though. "Some people who do X also do Y" does not imply that "people who do Y are qualified to comment on X." For example: Elon Musk is a Twitter user. I too am a Twitter user. So's Kylie Jenner, Donald Trump, and random spambots. Using the same service does not mean they're equally qualified to speak with authority about the same things.
  - agilo 10y ago
    Being a 'random person' or a Twitter user should have no bearing on the merit of one's arguments.
    - brianwawok 10y ago
      That was the point
  - ben174 10y ago
    Correct. That's why I said "to be fair". I'm saying the playing field is quite level, so we shouldn't judge a comment on whether we recognize their username, but rather on quality of content.
    - visakanv 10y ago
      > we shouldn't judge a comment on whether we recognize their username, but rather on quality of content Ah right, I think I see the nature of our disagreement / misunderstanding. I totally agree with you on the general principle that quality of content should be allowed to stand on its own. However, I believe that there are things that are context-specific things that the men and women in the arena will face. And these are things that those of us in the stands, however thoughtful and discerning, will never be able to appreciate them, because we simply do not know. (For a great read about this, check out Daniel Ellsberg's message to Henry Kissinger, on the reality of having access to top secret information: http://www.motherjones.com/kevin-drum/2010/02/daniel-ellsberg-limitations-knowledge http://www.motherjones.com/kevin-drum/2010/02/daniel-ellsber...) So for example. It seems obvious to me that the top comment is sensible and correct. Snap's CTO or whoever else made that decision is surely very familiar with the costs of being dependent on something like Google. So if they decide to do it anyway, I'm of the opinion that they're quite likely to have done it because of concerns that I am not able to appreciate, because I am not in their context. Of course, there's a non-zero chance that Snap is making stupid decisions. But I think it's far likelier that they're making decisions that SEEM stupid to a 3rd party, but make perfect sense once you appreciate their context. I could be wrong about this, of course.

omarforgotpwd 10y ago

True, but what's the opportunity cost of transitioning to bare metal? Is it worth slowing down development / feature releases / possible service outages? In the time it takes to transition, is it possible that cloud actually becomes cheaper than running your own infrastructure?

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SoreGums 10y ago

The other thing you get with GCloud is multiple datacenters around the planet. Assuming Snap are going after the 2billion+ people not in America, this seems like an advantage to use someone else's gear. 2billion seems high, maybe it's the maximum negotiated on paper for the deal as opposed to the guaranteed? When you have Adwords dollars pouring in it makes sense to go send out a few people to buy up fibre and land/power/water for datacenters on the down low....

beisner 10y ago
This seems like the key to me. Yes, if I'm a SaaS company with low bandwidth requirements but have a ton of users domestically, maybe I'll build my own data center (think IBM, or maybe Salesforce). But if I am raising money in the hopes of scaling my user base into the billions, and I need hundreds of millions of people to be able to upload to and download hundreds of megabytes of data to my servers daily, and have those images be instantly available to every user's contacts worldwide, I'll build on top of Google's infrastructure, which was literally designed for these kinds of tasks. Buying the metal is just the tip of the iceberg when. Snap would have to design a high-throughput, globally consistent network of data centers, likely lay their own undersea fiber (as all the cloud providers have done), and assume all the technical risk that comes with building and operating that kind of infrastructure. I think they made the right call on this one.

oskarth 10y ago

> 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 to be clear, how many billion dollar infrastructures have you built up? What about played a significant role in, witnessing the various trade-offs that have been made? Taken part of, in any shape or form? Of course, if you have experience that's all well and good. But I would expect someone with experience to lead with it, not omit it, precisely because they know how important it is with all the trade-offs involved.

Forrest7778 10y ago

To be fair, they did address this concern under the 'Operating Leverage in Our Business' section where they said that they may look for another third party to rely on for cloud computing or they build their own infrastructure. "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 Cloud, some of which do not have an alternative in the market. We are currently negotiating an agreement with another cloud provider for redundant infrastructure support of our business operations. In the future, we may invest in building our own infrastructure to better serve our customers."

yAnonymous 10y ago

When Google eventually buy Snap, it's better for them to already manage the infrastructure. Then everyone can honestly announce that Snap user data won't be handed over to Google - because it's already there. ;)

abalone 10y ago

> 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. It doesn't mean they won't. Apple is reportedly spending a similar amount on Google cloud.[1] They're also investing billions in building their own data centers.[2] Those things go together. Do you really think a company facing literally hundreds of millions of dollars in cloud service bills is not going to run the numbers on plugging in their own servers. [1] http://www.businessinsider.com/google-nabs-apple-as-a-cloud-customer-2016-3 http://www.businessinsider.com/google-nabs-apple-as-a-cloud-... [2] http://fortune.com/2016/02/02/apple-data-center-move/ http://fortune.com/2016/02/02/apple-data-center-move/

robzyb 10y ago

> 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. If they ran on bare metal then they'd list that as one of their big risk factors too.

vonklaus 10y ago

Counterpoint: Maybe the agreement is breakable or they know they can resell the resources. This metric could be a good way to trick "tech savvy" analysts who don't care about total users. I assume spending this much would give them a below market discount and they could recoup some of their losses if nec. All this assumes it is a positioning tactic w/ a hedge. Maybe, they will just build a developer ecosystem a don't want to bifurcate their engineering output. If twitter fails, it would validate this choice as they can pay a slight premium and if their metrics increase build infrastructure in 2.5 years w/ more info to spec it

ciaranm 10y ago

But ensuring 5 years of guaranteed service at a fixed price is reducing their risk. It prevents Google from pulling the rug out from under them, or from the price going up and they have no option but to accept it. I imagine part of their plans are to move away from the dependency, but while it exists - this is exactly how you reduce your exposure to that risk.

runeks 10y ago
All in all, I would say that if needing a new cloud provider in case Google defaults is a big risk factor for your company, your company is in pretty good shape.

lallysingh 10y ago

I think they're paying for technical runway. They're not a big company yet, but expect substantial user growth. Right now, they probably believe that growth is more important than profit. So they're going to spend their engineering resources on getting more users to use and keep using their stuff. GCP isn't sticky. They can leave, or renegotiate, or even try to get Google to do some of their engineering work for them ("We'd really love if this API did this as well..."). Or some combination thereof to minimize risk vs max profits.

antoniuschan99 10y ago

If you watch Jeff Bezos Ted talk years ago, he made the comparison that back in the day, Beer Brewers used to have to generate their own electricity. Similarly, services like AWS provide companies with that type of infrastructure (data or internet in this case) so they can focus on building out features. But to your point, it gets expensive at some point and I am surprised that Snap is still outsourcing this instead of having their own data centers. I guess it's because the CEO is not strong Technology-wise so the company is focused on Product?

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londons_explore 10y ago

You can bet that guaranteeing such a large future investment, they will have bought themselves a pretty hefty discount too. Perhaps a discount large enough that prices match or are even better than bare metal servers. Remember, Google builds its own custom hardware and probably gets much better performance per dollar than you would get from HP/dell/IBM/etc.