Simplifying and Automating Customer Engagement

How Twilio is positioned as the leading one-stop-shop for customer engagement, freeing up software developers to improve the products those customers use.

At any company, from large corporation or small startup, a problem that inevitably needs to get solved is engaging with customers as they perform actions in real-time. We're talking instant email confirmations of transactions, reliable multi-factor authentication, and automation of text communications that close deals while customers are on the go. These typically aren't the main problems that businesses are trying to solve, but they eventually always have to be implemented successfully.

This is where Twilio comes in. It provides a series of APIs that any application can hook into to deliver these services reliably and securely when a business sees fit. We'll dive more into what APIs are, what Twilio's look like specifically, and how they will be utilized by the companies of the future.

In my opinion, Twilio has an advantage in the automated customer engagement space because their products run the gamut of what could be required for a growing business, and they know how to reach key decision makers. CEO Jeff Lawson preaches a simple philosophy of simply "listening to your software developers," which leads to both internal company synergy and an excellent marketing funnel to propel future growth of the company.

What Does Twilio Actually Do?

Twilio makes its money by providing software that helps businesses "do the little things." These are the things that every company must do, but generally falls outside of the business owner/operator's area of expertise. Or, these are tasks that business operators simply don't want to do. If software can make it easier and cheaper, Twilio is there to provide a solution that takes it off the business operator's plate.

Automated Text Messages

Ever received a text saying your DoorDash order is confirmed? A text to set up or use multi-factor authentication? A text saying your table is ready? These are becoming a more common in today's digital user experience, and Twilio has APIs that power all of it.

A customer can simply plug into an API and have instant access to the plumbing required to automate sending and receiving text messages. Most firms will not take the time and resources to build such functionality themselves, but it is functionality that is required to be modern and secure when dealing with customers.

It's not just SMS text messages either. Twilio allows users of its API to choose how they want to engage with customers, with a variety of popular options which include WhatsApp as well as Facebook and Google's Business Messing Clients:

Being able to provide exceptional, secure, and compliant communication via mobile messaging makes Twilio an obvious choice for growing businesses.

Instant, Beautiful Emails

On a related note, customers of today's businesses expect instant confirmation when any action is taken on their account. Twilio has abilities to set up email templates, provide triggers for when to send them, and customize email styling to represent a brand whenever communication is required.

As the company says on its website, "email is the backbone of your customer engagement." Twilio acquired the firm SendGrid in 2019 to become competitive in this space alongside its phone voice and text messaging. With robust email capabilities, Twilio is still making its all-encompassing customer engagement platform a must-use for growing businesses.

In the tech startup world, it's extremely important to be able to reliably and instantly send email communications as actions occur within a customer portal. Most startups don't want to spend the time and energy required to bootstrap an email operation from the ground up, especially as its working to find its specific product-market fit. Twilio SendGrid makes its super easy for a startup to use a simple API to trigger email template sending.

This type of communication has always existed, but the increasing automated nature of it makes businesses smarter, more agile, and better able to generate revenue. We can see that Twilio is responsible for a great deal of customer outreach:

Email is another facet of what makes Twilio the place to go for all-in-one customer engagement at scale.

Analytics Driving Communication Decisions

Being able to send customer communications is great, but how do you know what to actually send? How about when to send it? How do you even collect that data in the first place?

Twilio aims to help customers answer these questions in the future thanks to their acquisition of Segment in late 2020. The idea is that companies collect vast amounts of data throughout the course of a customer's journey. This data unfortunately gets "siloed" into different departments and rarely gets unified to create the whole picture.

Segment is a platform that allows developers and companies to easily set up customer data pipelines that can be consolidated and analyzed. According to CEO Jeff Lawson's blog, "Segment enables developers to unify customer data from every customer touchpoint, and empowers marketing, sales, and customer service leaders with the insights they need to design and build relevant, data-driven customer engagement."

These capabilities make a good deal of sense for a company like Twilio. With over 1 trillion customer touch points in a given year, a customer data platform enables the firm to make sense of what is happening before, during, and after communications are sent.

I believe this strategic acquisition is a logical next step for a company with a vision as grand and focused as Twilio's.

Who are Twilio's Customers?

Now that we understand a bit more about Twilio's business, let's look at who its customers are.

The company has most of its customers in the tech space, with notable names such as Uber, Airbnb, and Reddit. These customers utilize Twilio's technology to perform actions such as notify drivers and passengers in a timely manner, check into housing, and provide software account security. It's no secret that having an easy API to hook into saves developers time, and companies money. It allows the sole focus of the company to be the core products.

As an engineer, I've worked with SendGrid to send client emails via Twilio's API (again, Twilio owns SendGrid). There was a Java API that allowed us to create a client in code and send communications based on a template with injected personal information. Templates can be designed in the background by a team such as design or marketing, and when ready it can be sent as certain actions happen within a website or application.

That's one use case for a flexible set of API that developers can hook into. Twilio's marketing centers around writing content that is noticed by developers looking to solve a business problem. For example, an engineer googling "automated email sending APIs" would find content published by the company explaining to how easily accomplish that task.

By helping developers easily automate non-core business requirements, Twilio is primed to continuously add large clients looking to be real-time and secure in today's increasing connected world.

Financials

Twilio ended 2021 strong. The company reported full-year revenue of $2.84 billion, which was up 61% year over year. After Q4 2021 earnings were reported CEO Jeff Lawson said "I've never been more excited about the future of the company than I am today."

An interesting tidbit from this most recent earnings call (as of this blog) was revenue from Twilio Segment. Twilio acquired the company Segment in late 2020 to bolster its customer analytics platform, which helps Twilio's clients understand where and how to use its engagement tools. Revenue from the Segment acquisition came out to $200.9 million in 2021. It seems like having this as an extra growth engine will really make Twilio's customer engagement and analytics tools second to none.

The firm grew its client count by 35,000 in 2021, to 256,000 Active Customer Accounts as of December 31, 2021 compared to 221,000 Active Customer Accounts at the beginning of the year. As the firm grows organically and acquires mobile startups in the space, we can see Twilio has room to run.

The outlook for Q1 2022 looks promising, according to company leadership:

Twilio has also started a $50 million venue fund that aims to "unlock the imagination of builders fueling the future of customer engagement." The firm's focus on developer content, startup acquisition, and investing in the leaders in customer engagement at the ground floor make Twilio a promising investment for the future.

The Bottom Line

In my opinion, Twilio can continue to deliver strong earnings for two main reasons:

1. It allows for a simple, modern, and programmatic way for companies to communicate with customers

2. It specifically tailors marketing materials to developers in charge of making these communications happen

Simply offering a way to automate these communications isn't enough for Twilio, however. The company also has a mission to allow clients to set up analytics pipelines so they know exactly which communications are working and which aren't. This is being fulfilled by the recent acquisition of Segment.

Delivering at the cutting edge of automated communications, making strategic acquisitions, and constantly innovating make Twilio a stock you can buy and hold forever.