Twilio Buys Segment, Expanding Its Customer Data Reach

Twilio, a cloud communication platform, has acquired Segment, a customer data platform, in a deal that will significantly expand its reach in the customer data space.

This acquisition marks a major move for Twilio, allowing it to tap into Segment's vast customer data network.

Twilio's acquisition of Segment is expected to bring in over $300 million in annual recurring revenue.

The combined entity will have a vast network of customer data at its disposal.

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Twilio wrapped up its $3.2 billion purchase of Segment after a remarkably quick courtship.

The deal was officially announced three weeks ago, and it's astonishing how fast it closed, especially for an acquisition of this size.

Twilio CEO Jeff Lawson and Segment CEO Peter Reinhardt knew each other before coming to terms, which might have helped speed up the process.

The two companies are a nice fit, as they both deal with the API economy, providing tools to help developers add specific functions to their applications.

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Twilio focuses on communications APIs, while Segment focuses on customer data.

The combined toolset has the potential to build more complete applications for interacting with customers at every level.

Twilio's 2018 SendGrid acquisition also plays a role in this vision, enabling customized emails and ads based on customer interactions.

Twilio's CEO believes the biggest roadblock to digital engagement has been data being locked in silos, which is exactly the problem Segment has been trying to solve.

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Segment is a company that's been around since 2012, initially starting as a segmentation tool before pivoting into a tag manager that leverages streaming data.

It's now the gold standard for web and mobile tracking, with over 20,000 customers and $150MM+ ARR. Segment has built a reputation as the largest non-marketing cloud player in the CDP space.

Segment has had an uneasy relationship with the category, which is why it rebranded itself as "Customer Data Infrastructure" last year, emphasizing its developer-first orientation.

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This rebranding effort aimed to separate Segment from other "CDPs" with varying functionality and maturity.

Twilio's CEO Jeff Lawson is a big fan of the term "CDP", and in the press release announcing the acquisition, he wrote that Segment is a key part of Twilio's strategy to own the "pipes" that drive all customer communications.

Segment sells mostly to developers, and views itself similarly to SendGrid, another company Twilio acquired in 2018.

Twilio's acquisition of Segment marks a significant shift in their strategic orientation. They're no longer just a one-stop-shop for marketing infrastructure.

The press release highlights the importance of customer experience, which requires data solutions, orchestration solutions, and pipes to send messages. Twilio has been controlling the pipes, and it's been profitable.

Controlling the data flowing through those pipes is a major opportunity for Twilio, and the public markets seem to agree. Twilio's share price spiked on Monday, and Snowflake's IPO suggests that controlling data is a valuable asset.

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Twilio's acquisition of Segment means they can expand beyond being a one-stop-shop for marketing infrastructure.

By controlling the data flowing through their pipes, Twilio is betting on significant additional opportunity.

Twilio is likely building a developer-first experience cloud, with Flex as their orchestration offering.

This move positions Twilio to take on Adobe, Salesforce, and Oracle through a developer-first product suite designed for modern organizations.

Twilio Flex will be their orchestration solution, tailored for developers.

The public markets seem to agree with Twilio's strategy, as Snowflake's IPO and Twilio's early share price spike on Monday confirm.

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Segment's sale to Twilio was likely a strategic decision, not just a matter of getting a good deal. The valuation of around 20x is impressive, but businesses like Twilio are trading north of 25x, suggesting Segment may have been leaving money on the table.

Segment's revenue growth has been tremendous, but they struggled to expand outside of their initial market. This could have made it difficult for them to sustain growth rates and meet public market expectations.

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The deal was reportedly an all-stock transaction, which is unusual but may have been a savvy move given the initial spike in Twilio's share price. This suggests that Segment's board believed in the upside of the combined company.

It's possible that Segment's board and leadership team felt it was time to cash out and avoid the risk of future down rounds, especially in uncertain macroeconomic times.

Twilio's acquisition of Segment will bring together two powerful platforms to create a seamless customer experience.

Twilio's cloud communication platform will now integrate with Segment's customer data platform to provide real-time customer insights.

This integration will enable businesses to create personalized customer experiences across multiple channels.

With Segment's CDP and Twilio's CPaaS, businesses can now collect, unify, and activate customer data in real-time.

Twilio's CPaaS will provide the infrastructure for Segment's CDP to collect and transmit customer data.

This integration will also enable businesses to use Twilio's APIs to trigger personalized customer experiences based on real-time data.

Segment's CDP will continue to operate independently, but will now be powered by Twilio's CPaaS.

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Twilio's acquisition of Segment is a game-changer in the marketing cloud space. The demand for messaging in marketing automation products has grown significantly and is only growing, so it's natural for Twilio to expand its offerings.

Twilio already owned the SMS/push channel, and with the acquisition of Sendgrid, they covered the email channel. This left them missing a crucial piece of the marketing puzzle.

The Segment acquisition gives Twilio the data collection and audience building capabilities it needed to complete the marketing use case. This transformation will allow Twilio to reinvent significant pieces of the marketing cloud as API-first.

Twilio's team is well-positioned to take on the market currently owned by Adobe, which has a TAM in the hundred billions and a $250 billion market cap. This is a huge opportunity for Twilio to make a significant impact in the industry.

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