In Ben Thompson's interview with Twilio CEO Jeff Lawson, Lawson discusses the three great eras of software:
The era of enterprise SaaS led to data silos across the company. Employee data was stuck in Workday, customer information was stuck in Salesforce, and business spending was stuck in Coupa. ServiceNow solved this problem by building a unified data layer on top of services like Workday and Coupa and creating an interface to manage the data.
What ServiceNow did for enterprise SaaS, Twilio + Segment will do for developer-led services. The problem is the same: data from your products running on AWS sits in one data silo, Twilio's customer interaction data sits in another, and payments and subscription data sits in yet another.
Another key parallel is how ServiceNow monetized their unified data platform. ServiceNow built out-of-the-box workflows on top of this platform. Twilio + Segment can monetize this in much the same way. Twilio is a powerful communications toolset with voice, text, and email capabilities, that can be integrated into Segment to provide out-of-the-box customer communications workflows. You combine the how you talk to customers and who, what, and why with zero configuration.
ServiceNow built a $100b business by breaking down enterprise SaaS data silos across the organization. Twilio + Segment sits at $45b market cap (as of October 2020) and is breaking down the same data silos across developer-led services. Developer-led services unlocks a new customer within the business, empowering individual engineers to build solutions without need executive approval. With 18.9m developers in the world as of 2019 with projects of 45m developers by 2030, the size and complexity of stitching together disparate developer-led services grows exponentially, making Twilio + Segment an indispensable business tool. Considering this explosive growth of developer-led services, the Twilio + Segment synergies have at least 2x room for growth in terms of market cap.
However, I believe the opportunity is even bigger if you factor in Twilio + Segment building advertising into their services - not just how, who, what, and why, but who else? Not only would Twilio + Segment help business manage and grow existing relationships with customers, but acquire new ones as well.
Facebook and Google are the current dominant players in digital advertising, especially for direct to consumer (D2C) businesses. But in an increasingly digital world, D2C advertising has gotten more and more competitive and less and less effective.
If we combine Twilio + Segment's ability to communicate with a customer and acquiring new customers through advertising, then Twilio + Segment has the potential to capture some of the Facebook and Google's market share. While Facebook on its face is a social media company, ads are their bottom line. In 2019, Facebook generated $69.7b in revenue, accounting for 98% of its total revenue. Google is very much the same: advertising revenue accounted for $134.8b of its $162b 2019 revenue.
Twilio + Segment, by allowing business to build a single view of a customer - from product usage across different data sources to customer engagement across different media - can build an advertising engine that rivals that of Google and Facebook.
Facebook today sits at an $800b market cap. Even being half as successful with digital advertising as Facebook means Twilio + Segment has 10x upside in terms of market cap.
Yet, I think the opportunity is bigger than even that. Facebook and Google own digital advertising because they own all the customer data. Businesses use them not because they’re lazy because its the most cost-effective and easiest way to engage with new customers.
Instead of outsourcing advertising to Facebook and Google and having them manage the customer relationship, Twilio + Segment can empower businesses to do it themselves. In a world increasing built on digital relationships, businesses can’t outsource the digital relationship to Facebook and Google. By giving developers the tools to build a digital relationship, the most cost-effective and easiest way to grow and engage your customer-base is no longer going to be Google and Facebook. It's going to be Twilio + Segment.
It's better than Facebook and Google because instead of them owning your data and the customer relationship, you do. Just as Facebook and Google made analog advertising (print, website banners) obsolete, Twilio will do that to digital advertising by building digital relationships.
So my hot take and bold prediction: Twilio has 20x upside and is going to be bigger than Facebook (an $800b market cap company).
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