Congratulations to the personnel at Segment for their big acquisition by Twilio. From being founded in 2012 to getting received in 2020 (for billions) is a immense success and a testament to their personnel’s prominent execution.
When Segment on the muse launched
analytics.js, it turned into as soon as criticized for being easiest marginally better than a tag manager nevertheless builders on HackerNews cherished the premise. Because of the this fact, Segment’s success can even be a testament to the energy of the developer community on HN—hats off to every person who supported the mission, especially within the early days.
Twilio & Segment
Segment now no longer too prolonged ago published a CDP document where they shared some data spherical high destinations. Curiously, the SMS & push class turned into as soon as in a miles off 11th region, with easiest 13% of firms leveraging those kinds of connections. Grand extra difficult is that within the SMS and push class firms like Braze & Customer.IO had been listed, nevertheless now no longer Twilio.
For sure, Twilio turned into as soon as now no longer even a high destination for Segment, that formulation there’s runt or no overlap between investors of Segment and Twilio. Or, to set up it in every other case, of us that clutch Twilio don’t procure a fundamental need for Segment and vice-versa. Twilio didn’t fabricate the acquisition simply to resell Segment to their existing buyer rotten.
So, Why Twilio?
To numerous of us, Twilio turned into as soon as a surprise acquirer. Many expected Segment to be picked off by one in all the same old suspects like Adobe or Salesforce. We predict about there are a few causes underpinning this as a edifying strategic acquisition.
API to Application Stack
Twilio’s Sendgrid acquisition supplies us a few hints into what’s going down here. Twilio turned into as soon as built as a platform offering telecom companies and products over an API and other firms invent purposes on high of their APIs.
Whereas Twilio has a approach-total monopoly on this API industry, it’s restful a low-margin industry where numerous the money goes to gateways, suppliers, and heaps others. Plus, the gateways like bandwidth.com started to compete by entering into the API industry themselves.
The discontinuance outcome has been aggressive discounting, which makes it laborious to compete. So, whereas Twilio also can just procure the most simple developer tools, the personality of the core product (low margin telecom) formulation that customers will naturally label shop as they scale and the offering becomes extra commoditized. To plug away from the low-margin API industry, Twilio desires to plug better up the stack and invent purposes.
Cease-to-Cease Marketing Cloud
The set up a question to for messaging in advertising automation products has grown severely and is easiest rising, so it’s pure for Twilio to plug after the advertising exhaust case.
They already owned the SMS/push channel and their Sendgrid acquisition covered the e-mail channel. In beefy originate, even supposing, the advertising exhaust case requires data sequence and target market building besides to messaging.
The Segment acquisition supplies Twilio the lacking half of the equation and can procure to restful allow them to invent a unified advertising platform. Perchance most severely, Twilio has the flexibility to reinvent fundamental objects of the advertising cloud as API-first, which would give them a foot within the door to the market at demonstrate owned by Adobe, who has a $250 billion market cap.
This is presumably the most difficult impact of the acquisition: as another of sitting in direction of the discontinuance of the stack as an API endpoint, Twilio has supplied a seat within the unparalleled front seat of the stack. No longer easiest will this give them fundamental perception into what’s being extinct effectively within the market amongst a plethora of tools, nevertheless would possibly presumably well potentially enable Twilio to invent/clutch the crucial verticals that are regarded as necessary, nevertheless are lacking from their stack. This would possibly presumably well— and would possibly presumably well just—fabricate a few of Segment’s companions cautious.
This isn’t a brand recent dynamic, as many firms within the ecosystem procure already developed a healthy distrust of Segment, and now Twilio, on the side of their roadmaps and product ambitions. Amplitude and Braze are examples of the many products sitting downstream of Segment that can now essentially feel the increasing stress of “the sandwich.” In consequence, we wouldn’t be shocked if Twilio continues so that you would possibly add extra of the “lacking heart” parts of the advertising stack, presumably via acquisitions.
Jeff is now fascinated with building a certainly iconic industry corresponding to Salesforce and Wall Avenue has given him the checkbook to develop M&A. Twilio’s stock label has snappy climbed from $100 to $300 within the final 6 months.
We procure heard that Segment is at approximately $150M ARR and given Twilio’s newest EV/ARR extra than one in all roughly 25x, Twilio will add about $3B-5B in market capitalization, making this a stable acquisition in phrases of total alternate of worth.
Moreover, Twilio’s margins in their core industry are arguably decrease than Segment. We procure also seen that Segment is struggling to fabricate the transition to both endeavor besides invent a product past the pipe that has meaningful traction. All in all, we predict about here’s a purchase for both occasions interested. Jeff is smartly on his formulation to building a as soon as-in-a-lifetime industry..
So over again, congratulations to Segment and all people interested. We procure a immense amount of respect for what their personnel has completed and for such a clear acquisition by Twilio.
Additionally, now to no longer dispute the glaring, nevertheless can procure to you’re fascinated with an open-source replacement to Segment, we’d adore to chat 🙂
Founder and CEO of RudderStack. Enthusiastic about discovering engineering solutions to accurate-world concerns.