Snap Will Spend More Money In 2017 Than It Earned In 2016; Here's Why

By Justin Lee , Feb 10, 2017 04:19 AM EST

Snap's updated IPO filing declared that on top of its plan to spend as much as $400 million a year for Google cloud services, the company also plans to spend up to $1 billion for Amazon web services over the next five years. It was said that in 2017 alone, Snap will be spending $50 million on the Amazon service. With that said, the company will be shelling out $450 million for its cloud hosting services this year alone. Interestingly, this amount is $45 million more than what it earned in profit last year.

Snap says that the Amazon service deal is "for redundant infrastructure support of our business operations." This means that the company won't be entirely dependent on Google for its quick media delivery and storage handling needs. As per CNBC, cloud services like what Amazon and Google offers have been an essential part for young companies as they aim to progress quickly without spending so much on servers, networking gear and storage arrays. The only drawback in this is the fact that costs could also go up when the daily active users of a company also increase in number. With that said, it's also worth noting that Snap is also headed towards the more cost-effective solution. The company shared that in the future, they may as well invest in having their own infrastructure.

As per a source, Snap has used Google's Cloud since the company was created. However, the problem is that the costs have increased for Snap as time passed by. It's worth mentioning that for the first few years of the business' existence Snap hasn't spent anything more than $30 million per year for the said Google service. It was just last year when the hosting costs started to increase considerably. With that said, Snap has become one of Google's top cloud customers and if the former doesn't invest in its own infrastructure, its cloud costs can still continue to increase over time.

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