4 ms·

Why infrastructure costs in Snapchat ? Doesn't look special ?

toomuchtodo 9y ago
Their infrastructure commitments are ridiculously high. "In its disclosure, Snap has said that it is contractually obligated 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.” Of the current losses at Snap, more than 80 percent of those funds go straight into Google’s pockets." https://www.recode.net/2017/2/7/14526832/snap-ipo-snapchat-s1-wall-street-business-google-cloud https://www.recode.net/2017/2/7/14526832/snap-ipo-snapchat-s... https://www.forbes.com/sites/quora/2017/02/22/could-snapchat-have-saved-money-by-building-its-own-cloud-infrastructure-instead-of-paying-google/#daef8317f792 https://www.forbes.com/sites/quora/2017/02/22/could-snapchat... https://www.cnbc.com/2017/02/09/snap-cloud-bill-aws-google-cloud-higher-than-2016-revenue.html https://www.cnbc.com/2017/02/09/snap-cloud-bill-aws-google-c... EDIT: @dfee How that revenue is recognized is usually based on when the services are delivered, but I am not an accountant.
- dfee 9y ago
  Imagine the sales commission on that one. “Here’s a $10B - Closed Won”. When talking about deals that are the enterprise valuations of Fortune 500 companies, do you value the sale as if it were an acquisition? Or, some other way?
  - jeroen 9y ago
    $2 billion, not 10.
    - sjg007 9y ago
      Still a good reason to become a AWS or GCP sales engineer.
  - romaster 9y ago
    Yeah except imagine instead when you should be due that commission but then they find a creative way to bake it into a new cushy position that they carve out just for you (with no more comms on other deals) and they pay that comm out to you over 5-10 years. And in the process, putting you in a position you dislike in an effort to hope you'll leave some of it at the table.
teej 9y ago
SNAP's infrastructure story in the S-1 filing was a mess. They had 2016 revenue of $404M with a cost of revenue of $451M. A 5 year, $2 billion dollar vendor lock-in to Google. They basically admitted that Google has them completely by the balls and it costs them $3 per user per year to keep the servers on. Both of these independently are very very bad, together it's a disaster. Facebook was at $1/user/year in their S-1, Twitter was < $1. From the SNAP S-1: "We rely on Google Cloud for the vast majority of our computing, storage, bandwidth, and other services. Any disruption of or interference with our use of the Google Cloud operation would negatively affect our operations and seriously harm our business." "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."
- sonaltr 9y ago
  For a B2B SAAS company...what's the ideal user cost of infrastructure? (I understand that it depends on the service..but a ratio of profit per user vs cost per user should be close no?)
  - matthewowen 9y ago
    It surely depends on how much users pay for the service, and how high the non-software costs are. But in any case, the examples given are B2C free to use products which are generally going to provide... not a ton of revenue per user.
    - sonaltr 9y ago
      I thought Dropbox's revenue mainly comes from it's business clients - B2B is more $ compared to B2C although B2C might be more profitable as customers might pay the $10/1TB and not really use that much anyways) Their paying users have increased, but the revenue per user has decreased (based on the S1...which I assume is because of enterprise deals).
      - 9y ago

Their infrastructure commitments are ridiculously high. "In its disclosure, Snap has said that it is contractually obligated 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.” Of the current losses at Snap, more than 80 percent of those funds go straight into Google’s pockets." https://www.recode.net/2017/2/7/14526832/snap-ipo-snapchat-s1-wall-street-business-google-cloud https://www.recode.net/2017/2/7/14526832/snap-ipo-snapchat-s... https://www.forbes.com/sites/quora/2017/02/22/could-snapchat-have-saved-money-by-building-its-own-cloud-infrastructure-instead-of-paying-google/#daef8317f792 https://www.forbes.com/sites/quora/2017/02/22/could-snapchat... https://www.cnbc.com/2017/02/09/snap-cloud-bill-aws-google-cloud-higher-than-2016-revenue.html https://www.cnbc.com/2017/02/09/snap-cloud-bill-aws-google-c... EDIT: @dfee How that revenue is recognized is usually based on when the services are delivered, but I am not an accountant.

dfee 9y ago
Imagine the sales commission on that one. “Here’s a $10B - Closed Won”. When talking about deals that are the enterprise valuations of Fortune 500 companies, do you value the sale as if it were an acquisition? Or, some other way?
- jeroen 9y ago
  $2 billion, not 10.
  - sjg007 9y ago
    Still a good reason to become a AWS or GCP sales engineer.
- romaster 9y ago
  Yeah except imagine instead when you should be due that commission but then they find a creative way to bake it into a new cushy position that they carve out just for you (with no more comms on other deals) and they pay that comm out to you over 5-10 years. And in the process, putting you in a position you dislike in an effort to hope you'll leave some of it at the table.

teej 9y ago

SNAP's infrastructure story in the S-1 filing was a mess. They had 2016 revenue of $404M with a cost of revenue of $451M. A 5 year, $2 billion dollar vendor lock-in to Google. They basically admitted that Google has them completely by the balls and it costs them $3 per user per year to keep the servers on. Both of these independently are very very bad, together it's a disaster. Facebook was at $1/user/year in their S-1, Twitter was < $1. From the SNAP S-1: "We rely on Google Cloud for the vast majority of our computing, storage, bandwidth, and other services. Any disruption of or interference with our use of the Google Cloud operation would negatively affect our operations and seriously harm our business." "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."

sonaltr 9y ago
For a B2B SAAS company...what's the ideal user cost of infrastructure? (I understand that it depends on the service..but a ratio of profit per user vs cost per user should be close no?)
- matthewowen 9y ago
  It surely depends on how much users pay for the service, and how high the non-software costs are. But in any case, the examples given are B2C free to use products which are generally going to provide... not a ton of revenue per user.
  - sonaltr 9y ago
    I thought Dropbox's revenue mainly comes from it's business clients - B2B is more $ compared to B2C although B2C might be more profitable as customers might pay the $10/1TB and not really use that much anyways) Their paying users have increased, but the revenue per user has decreased (based on the S1...which I assume is because of enterprise deals).
    - 9y ago