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Comment by ddorian43 | Hacker News Reader

Why infrastructure costs in Snapchat ? Doesn't look special ?

SNAP's infrastructure story in the S-1 filing was a mess. They had 2016 revenue of $404M with a cost of revenue of $451M. A 5 year, $2 billion dollar vendor lock-in to Google. They basically admitted that Google has them completely by the balls and it costs them $3 per user per year to keep the servers on. Both of these independently are very very bad, together it's a disaster.

Facebook was at $1/user/year in their S-1, Twitter was < $1.

From the SNAP S-1:

"We rely on Google Cloud for the vast majority of our computing, storage, bandwidth, and other services. Any disruption of or interference with our use of the Google Cloud operation would negatively affect our operations and seriously harm our business."

"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."

For a B2B SAAS company...what's the ideal user cost of infrastructure? (I understand that it depends on the service..but a ratio of profit per user vs cost per user should be close no?)

It surely depends on how much users pay for the service, and how high the non-software costs are.

But in any case, the examples given are B2C free to use products which are generally going to provide... not a ton of revenue per user.

I thought Dropbox's revenue mainly comes from it's business clients - B2B is more $ compared to B2C although B2C might be more profitable as customers might pay the $10/1TB and not really use that much anyways)

Their paying users have increased, but the revenue per user has decreased (based on the S1...which I assume is because of enterprise deals).

This is from the SNAP S1 not the dropbox S1

The ideal cost is as low as possible without sacrificing future scaling needs or development velocity. At some point, you'll start to experience diminishing returns.

It usually goes POC->Cloud provider->Your own gear

apart from the bigger companies (like Fb), have there been any major SaaS companies (esp. B2B but I guess that's trying to be too narrow so B2B & B2C) that have moved from Cloud to their own Data Center? (I know Etsy comes to mind...but apart from them?).

Dropbox: https://techcrunch.com/2017/09/15/why-dropbox-decided-to-dro...

Github: https://githubengineering.com/evolution-of-our-data-centers/

Backblaze: https://www.backblaze.com/blog/our-secret-data-center/

Twitter: https://blog.twitter.com/engineering/en_us/topics/infrastruc...

LinkedIn: http://www.datacenterdynamics.com/content-tracks/design-buil...

FastMail: https://www.fastmail.com/help/ourservice/security.html

Stack Overflow: http://highscalability.com/blog/2014/7/21/stackoverflow-upda...

Wikipedia: https://meta.wikimedia.org/wiki/Wikimedia_servers

OpenStreetMap: https://blog.openstreetmap.org/tag/infrastructure/

The Internet Archive: https://www.theregister.co.uk/2017/11/16/head_like_a_memory_...

Gitlab tried, but didn't have the necessary in-house experience before they made the attempt: https://about.gitlab.com/2017/03/02/why-we-are-not-leaving-t...

Instagram was migrated from AWS onto Facebook's infrastructure: https://www.wired.com/2014/06/facebook-instagram/

WhatsApp was migrated from IBM to Facebook infrastructure: https://www.cnbc.com/2017/06/07/facebook-planning-to-move-wh...

Hacker News and Pinboard (acq. Delicious) run on a single server.

It's not hard, but you do need to know what you're doing and have resources to do it (most orgs rent colo space in someone else's datacenter, they don't build their own). There's a reason AWS margins are so high (which leaves a lot of cost savings to be had when your workload isn't highly variable). Any questions, email is in my profile. I spent ~16 years building data centers, hosting environments, infrastructure, etc.

Many SaaS companies not only lack the ops experience needed to run their own infrastructure (which may be only problem of perception, for me running stuff on dedicated HW in colo center seems like less hassle than dealing with things like AWS) but also the common sense required to not over-engineer the scalability of their solution in the early phases (which falls squarely into the YAGNI teritory, as you can run surprisingly large stuff on two or three physical low-end 1U servers).

I forget which report it was in but the average tech-focused startup spends 10-15% of revenue on infrastructure. Mature businesses spend ~5%.

Note that the modern gospel is any net business dont give a crap about costs, only growth and the ability to raise money.

This has been explicity stated by the saas business ‘gurus’

So even at 3$ per user that goes lower pretty quickly.

Plus they get alliance w/goog. Aws is a force but if i had a choice id have goog as a best friend over amazon.

Preferably id build my own data center and keep those assets.

> modern

If by modern, you mean 2015. Things definitely changed by 2017.

They also committed to a 1 billion dollar deal with AWS soon after that: http://fortune.com/2017/02/09/snap-inc-signs-big-aws-deal/

Their infrastructure commitments are ridiculously high.

"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."

https://www.recode.net/2017/2/7/14526832/snap-ipo-snapchat-s...

https://www.forbes.com/sites/quora/2017/02/22/could-snapchat...

https://www.cnbc.com/2017/02/09/snap-cloud-bill-aws-google-c...

EDIT: @dfee How that revenue is recognized is usually based on when the services are delivered, but I am not an accountant.

Imagine the sales commission on that one. “Here’s a $10B - Closed Won”.

When talking about deals that are the enterprise valuations of Fortune 500 companies, do you value the sale as if it were an acquisition? Or, some other way?

$2 billion, not 10.

Still a good reason to become a AWS or GCP sales engineer.

Yeah except imagine instead when you should be due that commission but then they find a creative way to bake it into a new cushy position that they carve out just for you (with no more comms on other deals) and they pay that comm out to you over 5-10 years. And in the process, putting you in a position you dislike in an effort to hope you'll leave some of it at the table.

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