Twilio Expands Into Marketing With First New Product Born Of $3.2 Bn Acquisition Of Segment

Founded in 2008, Twilio has grown to a $60 billion market cap business for cloud communications on the strength of its "building blocks" that allow developers to build apps tailored for their own businesses

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From the patio of his house on a hill in San Francisco’s Noe Valley, Twilio chief executive officer Jeff Lawson gestures toward the massive Salesforce Tower that dominates the downtown skyline. He is differentiating Twilio from the industry giants in customer relationship management software that he soon plans to challenge.

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“The major difference between Twilio and everyone else is that everyone else is trying to sell you an app,” Lawson said. Founded in 2008, Twilio has grown to a $60 billion market cap business for cloud communications on the strength of its “building blocks” that allow developers to build apps tailored for their own businesses. Also known as APIs, they function as connective code which allows a developer to easily integrate different apps into their own product. “I think this is more realistic,” he said.

That philosophy is apparent inside Lawson’s house, where a couple dozen “Zoom cubes”—3D-printed boxes with switches and buttons to mute or end a meeting—lay just out of the frame of his neat Zoom backdrop. Lawson sometimes brings his two sons in on the soldering and coding in an attempt to instill in them the same builder’s mentality on which he’s hedging his business. His next bet: a decade-long plan to overturn CRM for consumer-oriented companies using even more building blocks.

Preparations began in early 2019 when Lawson approached Segment, a startup that clobbers together and analyzes data about a business’s customers, to consider an acquisition. The badgering went on for a year before Segment came to the table. “I started to notice customers using the same words that Jeff had been using,” shared Segment co-founder and then-chief executive officer Peter Reinhardt. Last October, Twilio acquired Segment for $3.2 billion.

The first fruits of the deal: a new product called Twilio Engage, which moves Twilio beyond its communications stronghold into the marketing space. Marketing was one of four potential sectors to move into that the San Francisco company identified in a presentation to investors on the benefits of the Segment deal, with the other three being customer service, product, and sales. Segment’s co-founder and former chief executive officer, Peter Reinhardt, says that in brainstorming after the acquisition, he and Lawson quickly realized that marketing was the logical first step forward.

“What we noticed is that most of the data that Segment brings to bear today is used for marketing, and most of the communications that Twilio sends are used for marketing. That became the most natural overlap point,” he shared.

Reinhardt, who continues to lead the Segment business within Twilio, says Lawson presented to him a vision of “customer engagement” that would unify Twilio’s tools for a company to send communications to its customers with Segment’s software to analyze customers’ data. Companies using Segment, meanwhile, had been Reinhardt for better ways to engage the customers from whom they were collecting data.

Twilio Engage, which is currently in pilot and slated to launch early next year, is designed to help marketers personalize the experiences of their consumers. The new tools are built on top of Segment and will allow consumer-facing companies to create personalization akin to Netflix’s algorithm for entertainment recommendations or the curated shopping suggestions that users see on Amazon, Lawson says.

“In some ways, the worst thing a company can do is send [customers] impersonalized interactions,” Lawson commented. “If you lose your voice to talk to your customer—if they hit that unsubscribe button—you really lost your customer relationship.”

Although Lawson wants to disrupt CRM, he maintains that Salesforce is not a direct competitor. Twilio is going after businesses that sell to consumers, not other businesses, he says. Still, big marketing clouds like Salesforce and Adobe have consumer-focused email marketing tools that Reinhardt believes are “not solving the problem anymore,” providing room for Twilio to swoop in.

The new product will continue Lawson’s longstanding vision of providing building blocks—now, developers will be able to build software for their marketing colleagues’ needs. It proved to be a seamless fit with Segment, which has also focused on an API model. But this building block approach has rapidly become the norm in the industry; for example, Salesforce paid $6.5 billion to acquire Mulesoft's app-connecting software in 2018. Twilio’s entry puts it into the same space as companies like Salesforce, Adobe, and Treasure Data that are also trying to create a “360-degree customer experience” by corralling data from disparate sources, shared Daniel Newman, principal analyst of tech analyst firm Futurum Research. He notes that Twilio’s advantage may be in its early API pedigree, which has resulted in a robust ecosystem of developers already used to the company’s products, as well as its strong footing in communications software, particularly for messaging.

For consumers, Twilio Engage will allow them to see offerings that are personally relevant to their interests. It leverages Segment’s ability to create a profile of a customer from data such as purchase history and click path on a website, then uses those insights to tailor the website experience, emails, and messaging that the customer sees.

“We realized we had already done the hard parts,” Reinhardt noted. Segment had figured out how to collect and compute large data sets in real-time, while Twilio had unified a messy infrastructure network for communications. “So, let’s do the easier part now: stitch it together to bring the value through to the marketer, not just the developer.”