Twilio has announced it is acquiring Segment, a leading customer data platform.
Like many communication companies, Twilio has experienced significant growth during the pandemic. The company’s APIs make it easy for developers to add voice, text, video, chat and email communication to their services and products.
The acquisition of Segment will help companies better know their customers and use data to build a complete profile. This, in turn, will help them better meet their customers’ needs.
“Data silos destroy great customer experiences,” said Jeff Lawson, co-founder and CEO of Twilio. “Segment lets developers and companies break down those silos and build a complete picture of their customer. Combined with Twilio’s Customer Engagement Platform, we can create more personalized, timely and impactful engagement across customer service, marketing, analytics, product and sales. We are thrilled to welcome Segment to the Twilio team.”
“Together, Twilio and Segment have an incredible opportunity to build the customer engagement platform of the future,” said Peter Reinhardt, Segment’s co-founder and CEO. “We created Segment to help businesses set themselves apart in the digital age and deliver rich, connected customer experiences built on high-quality data. By joining forces and applying our customer data platform to Twilio’s engagement cloud, we’ll be able to make the entire customer experience seamless from end-to-end.”
The deal is an all-stock deal worth approximately $3.2 billion and is expected to close Q4 2020.
“Even ahead of COVID, the market for companies who are undergoing digital transformation and who need to use digital technologies to compete and win in the modern economy was enormous,” says Twilio CEO Jeff Lawson. “COVID has been a tailwind to Twilio business but really is an acceleration of the trends that have gone on for the last 10 to 20 years as a result of digital transformation in nearly every kind of company.”
Even ahead of COVID, the market for companies who are undergoing digital transformation and who need to use digital technologies to compete and win in the modern economy was enormous. What COVID did is it accelerated many of the initiatives, many of the use cases, the things that companies needed to build to be competitive in this digital era were accelerated.
They were accelerated because of COVID, because of social distancing, work from home, and migrating a lot of these business processes to software and into the cloud and modernizing all of this. COVID has been a tailwind to Twilio business but really is an acceleration of the trends that have gone on for the last 10 to 20 years as a result of digital transformation in nearly every kind of company.
I’m Not Very Concerned About Microsoft
I’m not very concerned (about new competitors like Microsoft). It’s the same reason that (I wasn’t concerned) when Amazon started building products in the communication space or Facebook or Google or even Blackberry once announced that they were going to compete with Twilio. First of all, we’re no stranger to competition. This is a huge market. It’s no surprise that a wide variety of companies have products in the communications domain.
We compete by focusing on our customers, listening to what they need, and building differentiated APIs, a differentiated platform, and a differentiated super network. We’ve got a 12-year head start on anybody entering the space. The last thing I’ll add is that we are not a company that is very focused on competition. We’re focused on our customers. That focus has driven us for the last 12 years and has served us very well. We will continue to focus on the things our customers need in this enormous market and be able to take a lot of market share.
Digital-Native Companies Want APIs That Work
Strangely, I don’t think Microsoft CEO Satya Nadella wakes up every day thinking about Twilio. But we are also no stranger to pricing competition. In fact, that is how most companies have tried to compete with us through our 12-year history. They come in with an inferior product and they say we’re going to be cheaper. But it turns out that the biggest enterprises on the planet or digital-native companies, what they want are APIs that work, mature, scalable, and that work everywhere around the world.
We’ve invested a tremendous amount of time and money to build the leading platform out there and what we found is that customers value that. So we’re no stranger to people trying to undercut us on price. What we think and what we hear from our customers is that they want quality, they want reliability, and they want HIPAA compliance. They want all sorts of capabilities that let them power their business and that’s what we offer.
Low-Code, No-Code, and Yo-Code
Low-code is a really exciting area. There are three buckets. There’s low-code, no-code, and then yo-code for the people who love to write code, developers. We’ve got products really for that whole spectrum. The typical way a developer might build on top of Twilio is to write code and host it themselves. We have a Twilio Functions product that allows us to host the software for our customers. Then we have Twilio Studio which is a drag and drop designer for the non-developer to be able to build out sophisticated workflows like interactive voice response systems on top of Twilio.
We have embraced really all three of those categories of builders. We do believe that at every enterprise there is a large number of builders with different skill sets who are building the future of how those companies engage with their customers. We want to enable all those people to succeed on Twilio.
Twilio CEO Jeff Lawson: COVID Accelerated Digital Transformation
“We are starting to see companies where not only can they text you but you can text them,” says Twilio CEO Jeff Lawson. “That’s the nature of a conversation. That’s how you build relationships over time. It’s two way. The leading companies are figuring out that actually if you create this dialogue it creates great customer relationships and ultimately creates loyalty with customers. They feel connected to you.”
Jeff Lawson, CEO of Twilio, discusses on CNBC how texting has evolved to two-way communications with customers which is helping drive loyalty and growth.
Every Company Should Build Great Digital Experiences To Compete
Focusing on customers and focusing on growth is the only way you can (hit a billion-dollar run rate). That’s the only way you can do it. I remember talking to the company several years ago when we crossed the $100 million run rate. I pointed to the billion-dollar number and said this is a market and this is a company that can be one of the rare companies that can graduate from the $100 million status to the $1 billion status.
I’m really proud of what we’ve accomplished. But every step of the way all you can do is focus on customers and continue to be attached to a secular trend. That trend is every company out there needing to focus on building great digital experiences for their customers in order to compete in the modern economy. That’s what we do.
Text Conversations Build B2B Relationships
We just launched a new product a couple months ago called Conversations. It’s not uncommon today, but a few years ago it was novel when a company could text you. Maybe a table is ready for a restaurant or your flight is boarding. Any of those kinds of things. Several years ago that was amazing. And we luckily power a lot of those companies.
Nowadays, we are starting to see companies where not only can they text you but you can text them. That’s the nature of a conversation. That’s how you build relationships over time. It’s two way. The leading companies are figuring out that actually if your create this dialogue it creates great customer relationships and ultimately creates loyalty with customers when they feel connected to you.
Text Messages Are Just The Beginning
Think about Tesla. Tesla’s a company where you can text the service manager. Your car is in service and they might try to call you your phone rings and when you don’t know the number you don’t answer it. Now they can text you and tell you what needs fixed and you can text your approval. The companies who really understand how to build a great customer experience are figuring out that text messaging, not just text messages and notifications, is just the beginning. Building relationships is a two way thing.
Every Company Needs To Use Digital To Connect With Customers
We just focus on the long term. We focus on customers. We focus on helping customers achieve their goals. We focus on the biggest trends that are going on in the industry which is every company needing to use digital to connect with their customers. When times are good and when times are bad every company needs to focus on growing their business, making their customers happy, and making their customers become loyal repeat customers. That’s the business that we’re in.
Text Conversations Build Customer Relationships, Says Twilio CEO Jeff Lawson
Twilio’s success is driven by its unique platform business model where its products are provided to developers based on usage. Companies only pay for what they use with no contracts required and they billed based on whatever is the fundamental value driver of the product they are using.
It’s really the continued success of our platform business model. Platform developers can use Twilio to solve a wide variety of problems inside of their companies and how their company communicates with their customers. Whether that’s voice phone calls in a contact center or that’s text message alerts, even real-time video communications and things like Facebook Messenger, you can incorporate all those things using Twilio.
It’s the broad breadth of things that developers can build on top of Twilio coupled with our usage-based pricing model which really aligns our success with our customers’ success, so we get paid when our customers use Twilio more and build things on top of our platform. The combination of the breadth of things you can build as well as the alignment we have with their customers, that’s the platform business model that has worked so well.
Every Company is Getting Reinvented Because of the Power of Software
Uber is one of our largest customers, they represent about four percent of our revenue today, but we have many different companies on our platform. Whether it’s Lyft and other rideshare companies as well as everything from Silicon Valley tech companies to Fortune 500 companies including major banks and insurance companies.
In fact, one of the customers we noted at our Q2 call was U-Haul which is not a company you typically think of as a software company. Every company is getting reinvented because of the power of software. Every company realizes that they too are a digital company now and if your business is U-Haul you have to reinvent yourself with software and when they do the software developers who work at those companies bring Twilio in.
Customer Engagement is the Lifeblood of Every Company
I think that every company regardless of what they do is always investing in their own growth and their customer relationships. So when you think about customer engagement, how a company talks to its customers, that’s a source of growth for every company. That is the lifeblood of every single company.
How you engage with your customers and what they think of those interactions, that is the brand perception and that is the reality of the product delivery.
The Platform Business Model is a Unique Business
We think that our business model, the platform business model, is a unique business. It’s not software as a service, it’s got a lot of different attributes, it’s not traditional on-premise software, it is a new kind of software company. Because of that usage-based model we can sustain a nice expansion rate and nice growth rate.
How Are the Services Measured?
Things like phone calls and text messages and video sessions are measured in gigabytes and our new contact center Twilio Flex is measured in the amount of time the agents spend using it. Each one of our products we break down into the fundamental value driver for our customers and we bill for that and what that does is it aligns our customers’ success with our success very nicely.
