Snapchat maker Snap Inc. held the biggest initial public offering ever for a Los Angeles company this week pricing its shares at $17 apiece. The company made its debut on the New York Stock Exchange on Thursday, where it quickly leaped to close at $24.48.
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Snap is hedging its reliance on Google for online storage and computing resources with a $1-billion agreement with rival Amazon Web Services.
Videos and photos posted to Snapchat move through computers operated by Google as the traverse the Internet under a five-year, $2-billion agreement between the companies. On Thursday, Snap said it has signed a similar deal with Amazon as a backup.
Analysts have questioned Snap's usage of computing vendors because costs could get out of hand as its social media and entertainment service grows. Many companies, including Facebook, have developed their own infrastructure. Though Snap said it might go that route, the company described working with third parties as a better use of its limited cash.
Still, the hosting costs likely accounted for about a third to a half of Snap's $925 million in expenses last year.
Snap said it has worked with Amazon since last March. Amazon is scheduled to receive $50 million from Snap this year, $125 million in 2018, $200 million in 2019, $275 million in 2020 and $350 million in 2021.