Snapchat filed for an initial public offering and outlined its dependence on Google Cloud as a risk factor.
Snapchat is running its business on Google Cloud and has agreed to spend $2 billion over the next five years with the search giant.
The terms of Snapchat's cloud spending with Google was detailed in the company's initial public offering filing.
In that Securities and Exchange Commission filing, Snapchat cited Google Cloud as a risk factor. Snapchat said "we currently run the vast majority of our computing on Google Cloud."
Meanwhile, Snapchat said a move away from Google Cloud would result in "significant time and expense." Snapchat said:
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. Given this, any significant disruption of or interference with our use of Google Cloud would negatively impact our operations and our business would be seriously harmed. If our users or partners are not able to access Snapchat through Google Cloud or encounter difficulties in doing so, we may lose users, partners, or advertising revenue. The level of service provided by Google Cloud may also impact the usage of and our users', advertisers', and partners' satisfaction with Snapchat and could seriously harm our business and reputation. If Google Cloud experiences interruptions in service regularly or for a prolonged basis, or other similar issues, our business would be seriously harmed. Hosting costs will also increase as our user base and user engagement grows and may seriously harm our business if we are unable to grow our revenues faster than the cost of utilizing the services of Google or similar providers.
What makes Snapchat's comments interesting is that it's among the first to be all-in with Google Cloud. Amazon Web Services regularly touts companies that have gone all-in.
Snapchat said that Google could increase pricing terms, establish relationships with rivals, or modify the service.
Meanwhile, Snapchat noted Google and its YouTube unit are competitors in the advertising market.
The Google Cloud dependency is a risk factor, but in the grand scheme of the IPO filing, it's a smaller issue. Snapchat cited inexperience in the hardware market (Spectacles), maintaining daily active user growth and competition with Facebook, Google, and others as risk factors.
For 2016, Snapchat lost $514.6 million on revenue of $404.48 million. In 2015, Snapchat lost $372.9 million on revenue of $58.66 million.