Pinterest commits to spending $3B with AWS through to 2029
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Another useful comment from the thread:
> Makes sense for both parties.
> For AWS, it allows them to make hardware investments early on
> For Pinterest - it allows them to keep costs manageable and get a significant discount on MSRP
~$400M/year, for a company with negative income so far
(Provided you know what you're doing.)
Probaly a case of vendor lock-in.
AWS is a middle man in the hosting business. Sometimes it's okay, but you can't cheat the fact that Amazon has to take their cut.
(This might change in the future when FAANG privatizes the global Internet for their own use, but we're not there yet today.)
Amazon's added value is in bundling open source tools and in provisioning and autoscaling. They don't make hardware, they don't generate electricity, they're not an ISP. They outsource the actual hosting part to other people.
If you just want to host stuff you can cut out the AWS middleman and rent a data center location for much cheaper. (Like, 4-5 or even 10 times cheaper.)
And yes, as a programmer/devops/sysadmin thinking about provisioning, autoscaling and packaging is your job. And yes, you absolutely can do it more efficiently than Amazon, because economies of scale don't apply to IT human resources. (Software projects don't become cheaper to make when you hire more programmers, quite the opposite, in fact.)
I can't imagine this deal (signed in April 2021) has that much impact on either AWS's hardware budget or their usage projections.
Is there a bunch of AWS sales people who just became instantly "Fuck You Money"-rich as part of their sales commission on this deal?
I don't know how it works in FAANGS for sales commission, but I've heard of 5-10% being "normal"... so sales comp on this deal @ 5% comp is 150 mil? If so, are there loads of sales people just kicking around waiting for their "one big sale" and then insta-quit and go live on their own private island?
And if commission is capped, then surely the flip side is now there are loads of disgruntled sales people sitting around spitting teeth and annoyed that they just pulled in 3 billion for the company but they "only" got 100K capped-commission or whatever and so rage-quit and go somewhere else?
Anyone know how this sort of thing pans out?
It's not clear what was sold by the saleperson since Pinterest could have just self-served themselves infrastructure off any combination of platforms. Presumably the idea is they're getting a discount in exchange for having this incentive favoring exclusivity. Their commission might also be amortized over the length of the contract (2029) since that's the length of time the value is generated.
So it was $100,000 a month for 18 millions visitors, and it is now $20,000,000 a month for 454 millions MAU.
Corey Quinn has to take a look at this.
EDIT: Corey provided some insight on contract negotiation at https://twitter.com/QuinnyPig/status/1430327936519872514
So it'd not be 5% of 3B but 1B (assuming 30% margin, but it's probably less on a deal this size). Still quite a nice chunk of change.
But, after that less-than-ethical companies often try to inflate costs as much as possible to even further reduce commission.
No. Do you think "Fuck You Money"-rich people are being minted every time a billion dollar government contract is awarded?
Oh really? Ever try building, staffing, powering, cooling and equipping a data center? And then build a DR? Let me tell you, my company has foolishly done that just in the past ten years and WE are screaming uncle! We're now transitioning to AWS because it's much, much, much cheaper!
The biggest eye-opener? Not only is the physical part of the data center a super expensive ongoing expense - staff, server life cycles, power, property tax - but the software licenses (we gotta have support!) will EAT YOU ALIVE! I've transitioned many projects to AWS and was able to justify it on the ongoing licensing costs alone - never mind all the other costs related to building a data center.
I bet Pinterest did their homework and realized the $3 billion they're going to pay to AWS is cheaper than building, staffing, and running their own infrastructure. That's the conclusion we came to - after building our own data centers.
Even after leasing all the hardware, hiring the staff, getting the transit brought in, we still cut our compute costs in half.
Even so, we ended up keeping cloudfront+S3 for serving static content because we couldn't beat the price they offered.
This is not a healthy opinion to have, not for the open source community and neither for the company using open source projects. All the bugs and missing features of the open source project you use are also a part of your technical debt now, you can either donate to project to keep it healthy or hire FTE working on contributing to these projects, which is just indirect form of payment and should absolutely be a part of your budget
To have a business depend on software you either need a support service or you support it yourself. We chose the latter and made sure the team had the skills to do so. Of course we contributed our bug fixes back and even released our own tools open source.
It was a long while ago so I may be off on the exact details.
Since most of my career postdates and predates renting capacity on someone else's computer, yes, have done that many times.
Would be great to publish a case study on your experience, would love to understand the numbers.
While for some rare scenarios AWS can be cheaper, for just about any use case it's going to be much more expensive than running your own.
The "cloud" provided by AWS is cheaper -- if you use the higher-level AWS portfolio of services . E.g. DynamoDB, Redshift, Kinesis, etc.
If the mental model of "cloud" is just "bare metal servers", aka EC2, then AWS is more expensive than self-owned datacenters.
So yes, if you're only looking at cpu and egress costs, AWS as a "dumb data center" is a terrible deal. But that's not how Pinterest uses AWS. They use AWS high-level services:
E.g. they use AWS Rekognition -- machine learning service to annotate images with text : https://aws.amazon.com/solutions/case-studies/innovators/pin...
Pinterest also tried self-hosted Elasticsearch but it cost them more money than AWS Elasticseaerch: https://aws.amazon.com/solutions/case-studies/pinterest-elas...
(Yes, those are AWS marketing articles but writing those case studies require cooperation and approval by the customer (Pinterest in this case.).)
So far, Pinterest concluded it would not be cheaper to build their own machine learning algorithms to process images. Paying for AWS Rekognition is part of the ~$400m/year cost.
What's interesting to me about this one is that I fundamentally believe that both:
- Cloud computing will be increasingly commoditized, with lower cost providers emerging in the next 3-5 years
- More companies of scale will go back to building their own infrastructure as a cost savings project.
For Amazon, I think the incentive is as much about locking in revenue as it is locking in "demand" - helps with their demand planning of how much more to build out.
When I think of AWS for new development I mostly think of serverless technologies like Lambda, DynamoDB and even serverless RDS. It’s going to be difficult for any company to do it for themselves cheaper.
To me, AWS is about the exact resources needed for a task blinking in and out of existence for the exact number of milliseconds they’re needed. I don’t know how anyone will compete with a cheaper on-prem solution.
Azure seems similar.
Right, in cases where the capacity needed is so low that "blinking out of existence" is a frequent scenario, it is indeed cheaper to rent only those CPU-milliseconds that are needed.
But as usage grows, it will fairly quickly exceed the cost of just having dedicated servers.
There are plenty of alternatives ranging from just IaaS ( you rent VMs) to more advanced PaaS/SaaS type "clouds" (e.g. Scaleway have managed databases, Kubernetes, FaaS, CaaS). There are some fairly decent ( in terms of coverage, cost, features) providers out there, outside of the big three.
However they are in an entirely different market similarly how Tata Motors, PSA Group and Lamborghini aren't competitors. Yes, both are used to move people around, but the scale and features aren't even close. There are so many managed services on AWS it's impossible to list them all coherently. Whatever you could need, it's probably there. Digital Ocean or Scaleway or similar are perfectly fine when you're smaller, more technically advanced, with more time available, higher failure tolerance. They can make sense to use, but aren't for every use case.
Btw it's crazy how these big cloud providers and especially AWS are making billion dollar deals left and right. It's good that we have multiple of them so they can compete meaning lower prices for buyers and increased quality for end users.
[0] https://www.zdnet.com/article/snap-commits-to-spending-1b-wi...
Also, I guess lawyers copy&paste each other because the Snapchat text about its GCP contract looks very similar with the word "required":
>excerpt from Snapchat S-1: On January 30, 2017, we entered into the Google Cloud Platform License Agreement. Under the agreement, we were granted access and use certain cloud services. The agreement has an initial term of five years and we are required to purchase at least $400.0 million of cloud services in each year of the agreement, though for each of the first four years, up to 15% of this amount may be moved to a subsequent year. If we fail to meet the minimum purchase commitment during any year, we are required to pay the difference. Our agreement with Google permits us to use other third-party service providers for a portion of our cloud services.
[1] https://www.vox.com/2017/2/2/14492026/snap-ipo-2-billion-con...
Obviously this $400M is inclusive of a fairly large discount. So one does wonder how much shit they are doing.
Naively I had assumed that barring the algorithm, most of the cost would be bandwidth. I would have assumed that there were cheaper CDNs out there.
Thousands of beefy EC2 instances, petabytes of warm-to-hot S3 objects, chunky RDS instances and a large data warehouse add up pretty quick.
It's important to note that these negotiated prices are way, way less than the sticker price. It's a win-win.
In short: it does not matter for a company that does not even have a profit and probably won‘t reach break-even soon. It‘s a waste of time to cut cloud-computing cost at that stage of the company.
The page is free from any content? Why do people bother setting up accounts there?
I mean I can't see it happening; I can't see Pinterest growing much larger than it currently is, and as hard- and software improves, AWS will lower prices and Pinterest will be able to use resources more efficiently.
They are still billed based on usage but must hit at least $3B total by 2029.
There are too many factors, often legal requirements and the umbrella company policies not being flexible, but , if you need 20 or more servers and redundancy and are legally permitted to go cloud, do it. You can run non business critical parts of the it on cloud and see if it makes sense to the cfo.
Buying physical servers and the premises is one thing, but there's so much more to it, it's far from plug and play. You need hypervisor, licences, one or two admins, it adds up.
I think you could have a server running for about every 10 or so users that are online at the same time.
I think 400 million is staggering amount of money to be used for computing, but if you are using that amount of money there are only handful amount of players that can absorb that kind of money and provide you services.