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Comment by andrewstuart2 | Hacker News Reader

Facebook reported $27 billion in revenue in 2016. Snap reported $400 million. You're talking two orders of magnitude lower than Facebook and almost three lower than Google. Snap simply does not have the resources to pour into custom data centers, even if they can raise $2 billion for infra over 5 years. Unless they have serious talent already, they're not going to match Google's massive 15 year investments by a long shot, even if you only consider the services they actually need to use.

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You don't need to have $400 million revenue and do custom data centres to pay less than the published rates for any of the public cloud providers. Heck, you don't need a million in revenue to be able to save on going managed hosting or bare metal colocated.

The key here is: Compared to published rates. They'll not be paying published rates, the same as there's no way Netflix is paying published rates at AWS.

They'll be paying extremely highly discounted rates, assuming they're negotiating team isn't staffed with a bunch of people who failed their business degrees.

> You don't need to have $400 million revenue and do custom data centres to pay less than the published rates for any of the public cloud providers.

Out of curiosity, at what point should someone look into negotiating lower rates with AWS (in particular)? And how would they go about that?

Anything more than a few tens of thousands per year, I'd say. I'm not sure where the lower threshold would be of when they'd offer it, but I know once you get into a couple hundred k a year, getting massive discounts is at least possible (know of specific cases). I'd say do your homework on what renting managed hosting would cost, and what using reserved instances would cost, and talk to your account manager and use the managed hosting prices as the argument (they will be far lower).

A lot of my consulting is on cutting hosting costs, and I've yet to have a client where we couldn't come up with substantially cheaper alternatives than AWS, but sometimes being able to show your account manager that you know how insanely high their margins actually are and that you have a credible alternative makes enough of a difference for them to end up sticking with AWS.

It also depends on ease of cutting the cost, I'd say. E.g. if 90% of your cost is bandwidth, and it's mostly serving up static assets, it's trivial to cut the cost dramatically by rolling your own mini-CDN outside of AWS (bandwidth prices at AWS are between 10x and 50x higher than the cheapest competitors depending on region if looking only at managed hosting or other cloud providers - more if you're large enough to look at peering options).

Thank you.

Is the comparison to Google's investments a good benchmark? Sometimes it's better to make something custom than to buy from a big corporation doing a more general thing at 100x your scale.

Sometimes. But look at Netflix. $8.8 billion revenue in 2016 and a good third of Internet traffic and nearly every single server they have is in AWS. They had their own custom data centers and made the choice to migrate to somebody else's infrastructure. I'm pretty sure they're doing just fine with that decision.

They don't use aws for cdn (i think level3 and many others) + they design custom server-cache which they put inside isps.

That's a really good example. They talk a lot about AWS, and nearly every service they run is in AWS. If you don't pay close attention, you might think they're all-AWS. I expect that Netflix' AWS pricing reflects that perception.

The exception is serving films. If you watch a film, you receive bytes served by hardware built to Netflix' specification, running in leased space at a mixture of colos and ISPs. That's a really big exception. The third of internet traffic is that exception.

> nearly every single server they have is in AWS

That's…not true. Netflix has a huge CDN[0] running their own custom-built servers that sits near customer endpoints.

I shudder to think of how much bandwidth they'd be paying to AWS if they didn't…

[0] https://openconnect.netflix.com/

>"Snap simply does not have the resources to pour into custom data centers, even if they can raise $2 billion for infra over 5 years."

They have 1800+ employees as disclosed in their filing. So clearly people resources are not a problem for SNAP.

Do you believe its not possible to build 4 datacenter - 2 US, 1 EU and 1 APAC datacenter for 2 billion dollars? These are tangible assets that you can depreciate as well. The lifetime TCO of a center rack is $120K

Source: http://www.linuxlabs.com/PDF/Data%20Center%20Cost%20of%20Own...

Here is a DC build vs buy calculator. So can see independently those costs are about right:

https://www.expedient.com/data-center-build-vs-buy-calculato...

Disclosure: I work for Google, but nowhere near Cloud, and I have no knowledge of this deal.

Quite apart from the dollar costs and human capital required to build and maintain a DC, there's the lead time required to build the thing, and I'd speculate that that's potentially a significant factor in Snap's decision. Perhaps Snap are looking at e.g. how quickly Pokemon GO scaled their operation, and they're thinking for whatever reason that they might need to do something similar?

I totally agree, you can't discount the lead times of things like zoning, permitting, and local bureaucracy. But on the other hand the time frame mentioned is a 5 year period.

It's not just about hardware and data centers. Google cloud offers a global secure high performance sdn, scalability, manageability, things like versioning and deployment tools, code debugging, world class security, and high speed of innovation, all out of the box, or even as intrinsic qualities transparent to customer.

By the time you build your infra (5 years was mentioned), Google would have iterated on their offering and their own network and data centers for 5 years.

(Work on Google cloud)

There are datacenters for sale, every day of the year, in the USA, that are already operational, lit with fiber, already staffed with the needed people, etc.

Thinking about it more, there must be some other strategic reason behind their decision to go with Google.

Yep, agreed. Snap only has 1900 employees.

That seems like a lot of people, especially when they buy infrastructure from Google.

I'd imagine not if that figure includes sales team for ads, content team for discover, and so on. Especially sales (I don't have any inside information, so this is purely speculation) can be pretty personnel intensive if you're trying to court ad buyers.

so one person for every line of code. nice. (..I hope this comment does not wipe out all my karma on hn...)

Where did you come up with that?

Crunchbase says they have 100-250 employees. Their LinkedIn profile says 50-200.

It's in their S-1 filing

"1,859 as of December 31, 2016"

https://www.sec.gov/Archives/edgar/data/1564408/000119312517...

I hope you don't rely on Crunchbase or LinkedIn for anything serious.

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