- With the paperwork for Pinterest’s IPO, Pinterest has revealed the terms of a long-term contract with Amazon Web Services.
- The contract, signed in 2017, requires Pinterest to spend at least $750 million on Amazon Web Services by 2023.
Pinterest has officially filed for its IPO, giving us a look at the social media site’s financials and business.
Of note is that Pinterest has a long-term contract with Amazon Web Services.
The contract was first signed in May, 2017, and requires Pinterest to spend at least $750 million on Amazon Web Services by July, 2023. Like fellow IPO candidate Lyft, AWS hosts the majority of Pinterest’s software and apps on its market-leading cloud, according to the filing.
As of December 31 of last year, Pinterest still had to spend another $441.1 million on AWS in order to meet that minimum. Some quick napkin math shows that this means that Pinterest has spent approximately $308.9 million on Amazon’s cloud since May 2017.
Also of note is that the May 2017 deal was an extension to a previous contract, and it appears that Pinterest negotiated with Amazon for a better deal at the time.
"Cost of revenue for the year ended December 31, 2018 increased by $62.9 million compared to the year ended December 31, 2017. The increase was primarily due to higher absolute hosting costs due to user growth, which were partially offset by lower relative hosting costs due to the May 2017 amendment of our enterprise agreement with AWS," says the filing.
The filing also says that Pinterest paid $125 million to AWS in an initial commitment through June, 2018, but is not otherwise obligated to meet monthly cloud purchase minimums.
In the filing, Pinterest says that expects to use up the remaining $441.1 million which is good because, per the deal, Pinterest would have to pay the difference between what it actually spent and the $750 million mandated by the contract.
Intriguingly, Pinterest says that if it were to be acquired by "another cloud services provider," it would be allowed to end its AWS deal early, provided it paid "liquidated damages" to Amazon.
It's a good reminder that while cloud computing can often be cheaper than maintaining your own data centers, it's still a big cost center for any internet company. At a certain point, some large-scale web companies, including Dropbox, have actually moved from Amazon's cloud into their own data center.
Additionally, Pinterest says that as of December 31, 2018, it was on the hook for "approximately $731.1 million of long-term contractual commitments that are not cancelable." It's not immediately clear if the AWS deal is part of those obligations, but it does show the financial scale at which the company operates.