Snap Inc, the owner of Snapchat app, is expecting to spend $1 billion over the next five years to use Amazon's cloud services. The deal adds, and also acts as a backup to its previous $2 billion deal with Google.
Based in California, Snap has said that it relies on Google Cloud to host the vast majority of its computing, storage and bandwidth. But Snap is also leaving the possibilities for it to partner with other service providers.
In its deal with Google, the search giant "requires that we use their cloud services for substantially all of our hosting requirements." But Snap also said that the arrangement "permits us to use other third-party service providers for a portion of our cloud services."
And Amazon was its choice. The deal between the two was originally signed in 2016.
While Snap's deal with Amazon isn't as big as its deal with Google, it is showing that Snap doesn't like to be bonded to just one provider. By partnering with Amazon, Snap has an agreement to spend at least $50 million with Amazon in 2017 and increase its spending each year for the next five years until it reaches at least $350 million in 2021.
Snap may eventually invest in building its own infrastructure, it said on February 9th, 2017. This would bring it close to other bigger competitors, like Facebook, that already had its own infrastructure.
But meanwhile, Snap chooses to work with third-parties instead as it is better for its limited cash.
Snap also added details about user habits outside North America and Europe where cellular connections tend to be slower and more expensive. Users in the two regions have limited use of Snapchat which requires high bandwidth, said the company.
What this means for Snapchat: users from those countries tend to be consumers rather than creators, making them a better target for Snapchat competitors.
"Fewer Snaps and Chats sent means fewer notifications inviting friends back into the application and therefore lower and more sporadic daily use," said Snap.
The company, which filed its IPO registration statement earlier, is seeking to raise $3 billion. This would make the company to be valued between $20 billion to $25 billion, making it the biggest IPO for U.S. technology company since Facebook went public.
Snapchat that was founded in 2011 by Evan Spiegel as a free mobile app that allows users to send photos that vanish within seconds, competes with Twitter, Instagram and Facebook for users.
But one advantage that others in the competitors doesn't have is that, out of Snapchat's 100 million active users, 60 percent of them are aged 13 to 24. This makes the platform attractive to advertisers to reach teens and the millenial generations.