There is a gold rush of sorts in customer engagement and one company, Twilio ((TWLO) -Get Report), is building the best storefront for the tools application developers need.
On Monday, Twilio execs announced a $3.2 billion merger with Segment, a key competitor in the application programming interface marketplace. The all stock deal will create an API juggernaut.
In this case, bigger is way better — and Twilio is a buy.
At its heart, the San Francisco, Calif.-based company is a cloud communications platform. Its software engineers have developed APIs, modular sets of code, that developers can easily plug into their online applications to make and receive telephone calls, text messages, video and chat.
If you have ever requested an Uber ((UBER) -Get Report) car or sent a Facebook ((FB) -Get Report) message to a friend on their birthday you’re probably engaged a Twilio API.
The beauty of the business model is that Twilio gets paid a small fee every time one of its APIs is employed. Keep in mind, the Twilio API platform was used 1 trillion times during 2019, and growth is only getting started. My own newsletter business uses Twilio gateways several times a day to send notices of new reports to customers by text message.
Adding Segment is a master stroke. Since 2010, Twilio’s cross town rival has been helping companies collect and manage their internal customer data using APIs.
Segment APIs work by allowing developers to pull customer data from one application as a building block, then seamlessly fit that information in another. Most companies use these APIs to integrate their customer service, marketing and analytics software.
The deal follows the 2019 purchase of Sendgrid, a large email API developer. Although email marketing may seem dated in the era
Twilio is making its acquisition of fellow cloud computing company Segment official.
San Francisco-based Twilio announced early on Monday that it had signed a definitive agreement to acquire Segment for $3.2 billion in an all-stock deal. The deal is expected to close in Twilio’s fourth fiscal quarter, the company said.
Forbes first broke the news of the pending acquisition on Friday.
In a joint interview with Forbes on Sunday night, Twilio CEO Jeff Lawson described the deal as the next step for a service that’s spent the last decade-plus “taking communications and breaking it down into building blocks” for developers to reach their own business’ customers.
“Communications was just the entry point for the real opportunity, which has been really providing a comprehensive platform for customer engagement,” Lawson said. “The one thing that’s always been missing from Twilio as we’ve been building up this customer engagement platform is understanding of the end users themselves. We power the communications, but we don’t actually know who the customers are.”
Founded in 2011, Segment was last valued by private investors at $1.5 billion and had emerged as a leading startup in a category of software known as a CDP, or “customer data platform.” Segment will serve as a business unit within Twilio, with cofounder and CEO Peter Reinhardt reporting to Lawson and some features integrating into Twilio over time. “It’s going to accelerate our vision by five to 10 years,” Reinhardt told Forbes in the interview.
Both companies declined to provide Segment’s revenue, noting instead Segment had reached 20,000 customers. But in a presentation prepared for Monday, Twilio noted