Will Snap’s Bet on the Cloud Pay Off?

When Snap disclosed earlier this month that its server bills, on a per user basis, rose in the second quarter, it reignited a longstanding question about whether the company can scale up its business while relying on public cloud services run by Google and Amazon Web Services.

Snap revealed that the amount it paid out to these services jumped 10% in the week before the end of the quarter as the app launched a new product, Snap Map. That contributed to Snap’s hosting costs ticking up to 61 cents per user from 60 cents in the first quarter.

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And the next few quarters then should be crucial in understanding whether this strategy is working. If the company can keep a lid on hosting costs while growing revenue, its continuing reliance on the cloud will look prescient. If it fails to do so, pressure on Snap to take a different approach could mount.

—Kevin McLaughlin contributed to this article

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“Increased time [by users] is a strategic benefit for our business, but we pay more for additional usage.”