Enterprise

Why Segment is central to Twilio’s path to enterprise software stardom

Given Apple's recent changes to third-party tracking technology and Google's looming changes, the customer data platform provider is poised to play a central role in Twilio's product vision moving forward.

Twilio Inc. Chief Executive Officer Jeff Lawson

The launch of Engage points to the critical role Segment will play in Twilio's future.

Photo: David Paul Morris/Bloomberg via Getty Images

This week at Twilio's annual conference, it's Segment, the company it acquired last year for $3.2 billion, that's poised to take center stage.

Signal kicks off on Wednesday. Alongside Michelle Obama, one of the highlights of the two-day event is bound to be Twilio Engage, a new product that showcases the combined capabilities of the cloud communications provider and Segment, the customer data platform vendor that Twilio bought last November.

While just an early taste of the potential ahead, the launch of Engage points to the critical role Segment will play in Twilio's future. And if CEO Jeff Lawson can successfully navigate the risks that accompany his recent acquisition spree, those moves could propel Twilio into the upper echelons of the enterprise technology industry and help solidify the company as a leader in the fast-growing customer experience market, which is expected to reach $27 billion by 2028.

"We think Twilio is executing on a transformational market opportunity," Macquarie senior analyst Fred Havemeyer told Protocol. "Segment is good technology alignment and something that can enrich Twilio's platform across the board."

Announced in October 2020, the Segment acquisition closed the next month, a lightning-fast timeline that moved with the same urgency that customers of both companies were feeling in their own businesses.

Given the changes in Apple's policies regarding tracking technology that went into effect in April, as well as Google's own looming removal of cookies, the writing was on the wall that third-party data would no longer be a viable foundation for marketing operations. But many organizations were failing to build their own customer data platforms, or CDPs. Overworked IT teams were tasked with the difficult and expensive task of building and managing connections to applications and other information sources around the enterprise in an effort to gather together potentially decades of first-party data into a common repository.

That's where Segment came in. The vendor was one of just a handful with an out-of-the-box CDP, one that could sit on top of a company's complicated IT landscape and serve as a neutral landing spot for all things related to customer data. And while some acquisitions, like Salesforce's purchase of Slack, take the buyers in an entirely new strategic direction, Segment seemed to fit perfectly in Twilio's journey.

"It's going to become part and parcel to their customer strategy," said Wolfe Research managing director Alex Zukin. "For every product that they make that touches a customer, Segment will be the core of that."

Before Segment, if a company wanted to use Twilio to create an automated process that sent an SMS message to an individual when they spent their first $100 at a store, that information would need to be pulled from an external data warehouse, according to Twilio Segment CEO Peter Reinhardt. It was exceedingly difficult to do that quickly, according to industry analysts, and almost certainly required manual intervention on the part of engineers.

Engage was designed to solve those problems.

By combining Twilio's communication products with Segment's ability to pull information in real time from webpages and applications, Engage aims to let companies build hyper-personal marketing campaigns based on both demographic and behavioral information, according to Reinhardt.

"Effectively, there is a highly-optimized data warehouse under the covers that we have spent three years tuning and scaling," he told Protocol.

All about the data

In Reinhardt's view, the product helps level the playing field with tech giants like Amazon, Facebook and Google that use internal tools which noticeably outperform those available in the marketplace.

Amazon, for example, can very clearly target advertisements based on past shopping behavior instead of simple information like the gender of the customer or where he, she or they are located. But most companies don't have Amazon's expertise.

"What actually enables personalization — and what Amazon, Facebook and Google have figured out — is it's actually about the data. And it's about getting the data structured in the right way," he said.

And marketing is likely only the first place where Twilio plans to infuse Segment into its product suite.

Twilio doesn't break out sales for Twilio Flex, the company's contact-center software, but in July Lawson touted it as "one of the fastest-growing SaaS products on the market." Overall, Twilio's revenue grew 67% last quarter to roughly $669 million.

But contact-center software is a sector where many other providers, including AWS, Genesys, Five9, Salesforce and others, also see an opportunity. Linking Segment to Flex could give customer service agents the ability to provide more tailored assistance by surfacing specific information about the person on the other end of the phone. That effort requires a substantial engineering investment, but it could be hard for other vendors to match without the assistance of a native CDP platform that Segment offers.

"That's where Genesys has a challenge: Where does that data live, where does it integrate without that system of record," said Valoir principal Rebecca Wettemann.

Reinhardt declined to say whether such a product was in the works, instead hinting that "we'll have more to talk about there in the future."

"If you look at the overall trajectory of Twilio, it started with communications and now we added the data to make those communications smarter … and now there's the applications starting to come across the top," he said. "There's a lot more work for us to do in bringing Twilio Segment's data to bear in each of those."

It's clear there's a massive runway ahead for Twilio in terms of selling Segment to its existing customer base — and vice versa. But the release of Twilio Engage is just one part of the burgeoning powerhouse company that Lawson is building.

Alongside Segment, Twilio bought toll-free message provider ZipWhip in May for $850 million and ValueFirst in March for an disclosed sum. Back in 2018, it also spent $3 billion to acquire mass email communications provider SendGrid.

Investors and industry analysts appear bullish on Twilio's future. Its stock has soared 253% since January 2020. But a key question remains: Can the company successfully combine its recent purchasing spree into a coherent product suite? And outside of putting the pieces of the puzzle together, meeting that challenge will also require Twilio to sell to many different audiences.

"The opportunity is massive," said Zukin. "The key is: Can they execute in different worlds? In the world of the developer, in the world of the enterprise buyer, the world of the customer, the world of the contact center, there's a lot of different personas that they are trying to manage and scale."

Twilio Engage is a taste of that future. But more will be needed to satisfy both customer needs and Wall Street. And if Twilio pulls off the integration challenge ahead, it could make the company a dominant force in the world of enterprise software.

Enterprise

Microsoft Exchange Online users face a key security deadline Saturday

The company will start disabling a highly vulnerable login option, known as "basic authentication," beginning on Oct. 1 — though customers will have one chance to buy more time to transition off the system.

Microsoft has been seeking to prod businesses to move off basic authentication for the past three years, but "unfortunately usage isn’t yet at zero," it said in a post earlier this month.

Illustration: Christopher T. Fong/Protocol

Microsoft is about to eliminate a method for logging into its Exchange Online email service that is widely considered vulnerable and outdated, but that some businesses still rely upon.

The company has said that as of Oct. 1, it will begin to disable what's known as "basic authentication" for customers that continue to use the system.

Keep Reading Show less
Kyle Alspach

Kyle Alspach ( @KyleAlspach) is a senior reporter at Protocol, focused on cybersecurity. He has covered the tech industry since 2010 for outlets including VentureBeat, CRN and the Boston Globe. He lives in Portland, Oregon, and can be reached at kalspach@protocol.com.

Sponsored Content

Great products are built on strong patents

Experts say robust intellectual property protection is essential to ensure the long-term R&D required to innovate and maintain America's technology leadership.

Every great tech product that you rely on each day, from the smartphone in your pocket to your music streaming service and navigational system in the car, shares one important thing: part of its innovative design is protected by intellectual property (IP) laws.

From 5G to artificial intelligence, IP protection offers a powerful incentive for researchers to create ground-breaking products, and governmental leaders say its protection is an essential part of maintaining US technology leadership. To quote Secretary of Commerce Gina Raimondo: "intellectual property protection is vital for American innovation and entrepreneurship.”

Keep Reading Show less
James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.
Fintech

Gavin Newsom shows crypto some California love

“A more flexible approach is needed,” Gov. Newsom said in rejecting a bill that would require crypto companies to get a state license.

Strong bipartisan support wasn’t enough to convince Newsom that requiring crypto companies to register with the state’s Department of Financial Protection and Innovation is the smart path for California.

Photo: Jerod Harris/Getty Images for Vox Media

The Digital Financial Assets Law seemed like a legislative slam dunk in California for critics of the crypto industry.

But strong bipartisan support — it passed 71-0 in the state assembly and 31-6 in the Senate — wasn’t enough to convince Gov. Gavin Newsom that requiring crypto companies to register with the state’s Department of Financial Protection and Innovation is the smart path for California.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Google Voice at (925) 307-9342.

Workplace

Slack’s rallying cry at Dreamforce: No more meetings

It’s not all cartoon bears and therapy pigs — work conferences are a good place to talk about the future of work.

“We want people to be able to work in whatever way works for them with flexible schedules, in meetings and out of meetings,” Slack chief product officer Tamar Yehoshua told Protocol at Dreamforce 2022.

Photo: Marlena Sloss/Bloomberg via Getty Images

Dreamforce is primarily Salesforce’s show. But Slack wasn’t to be left out, especially as the primary connector between Salesforce and the mainstream working world.

The average knowledge worker spends more time using a communication tool like Slack than a CRM like Salesforce, positioning it as the best Salesforce product to concern itself with the future of work. In between meeting a therapy pig and meditating by the Dreamforce waterfall, Protocol sat down with several Slack execs and conference-goers to chat about the shifting future.

Keep Reading Show less
Lizzy Lawrence

Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She's a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school's independent newspaper. She's based in D.C., and can be reached at llawrence@protocol.com.

LA is a growing tech hub. But not everyone may fit.

LA has a housing crisis similar to Silicon Valley’s. And single-family-zoning laws are mostly to blame.

As the number of tech companies in the region grows, so does the number of tech workers, whose high salaries put them at an advantage in both LA's renting and buying markets.

Photo: Nat Rubio-Licht/Protocol

LA’s tech scene is on the rise. The number of unicorn companies in Los Angeles is growing, and the city has become the third-largest startup ecosystem nationally behind the Bay Area and New York with more than 4,000 VC-backed startups in industries ranging from aerospace to creators. As the number of tech companies in the region grows, so does the number of tech workers. The city is quickly becoming more and more like Silicon Valley — a new startup and a dozen tech workers on every corner and companies like Google, Netflix, and Twitter setting up offices there.

But with growth comes growing pains. Los Angeles, especially the burgeoning Silicon Beach area — which includes Santa Monica, Venice, and Marina del Rey — shares something in common with its namesake Silicon Valley: a severe lack of housing.

Keep Reading Show less
Nat Rubio-Licht

Nat Rubio-Licht is a Los Angeles-based news writer at Protocol. They graduated from Syracuse University with a degree in newspaper and online journalism in May 2020. Prior to joining the team, they worked at the Los Angeles Business Journal as a technology and aerospace reporter.

Latest Stories
Bulletins