Daily Tech Snippet: Wednesday, February 8

• Snap has financially handcuffed itself to Google Cloud: The S-1 Registration Statement just issued by Snap is (as these documents usually are) highly illuminating into the inner workings of this business. While the company has managed to grab a massive user base, there are a number of red flags in the business that are sure to give potential investors pause, not the least of which is the current annual loss of more than $500 million. However, there’s something even more remarkable hidden in that financial loss that would make me think twice about investing in this software business: The fact that Snap has handcuffed itself to Google Cloud and (in doing so) is not in control over some key parts of their business and costs for the foreseeable future. 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. Snap is often compared to Facebook and Twitter, and it is certainly hoping for an IPO that rivals Facebook’s extraordinary valuation. So, how have these companies handled infrastructure? Famously, both social networks have built out their own cloud infrastructure. Facebook has a number of data centers which operate as a single cloud, all running a host of open source tools (in contrast to the proprietary on-demand services of public cloud providers), and it has even open sourced its hardware designs. Twitter famously solved their early “Fail Whale” issues with scale by shifting their entire platform to Apache Mesos, and now has one of the most resilient and cost effective cloud infrastructures in the business.