Software developers are increasingly influential and essential within modern organizations. In the past, software was primarily used to automate back-office functions. Now, the software is often used to disrupt industries and transform products and services, redefining how many organizations engage with their customers.
In order for organizations to deliver differentiated customer experiences that build or extend competitive advantage, they are increasingly investing in software development. Purchasing widely-available out-of-the-box software does not generally offer the customization that organizations require to deliver these differentiated customer experiences.
Communication is fundamental to human activity and vital to building great businesses. While the software has transformed business, communications technology has largely failed to evolve. In fact, the phone app on today’s smartphones is merely a touchscreen representation of the push-button phone invented in the 1960s.
Software developers are reinventing nearly every aspect of business today. Yet developers repeatedly encountered an area where they could not innovate—communications. Because communication is vital to building great businesses, Twilio wanted to incorporate communications into Twilio’s software applications, but the barriers to innovation were too high.
Twilio was started to solve this problem in 2008 with a mission to fuel the future of communications. In this strategy story, we decoded the business model of Twilio. We will also understand what does Twilio do and how does Twilio work.
What does Twilio do? How does Twilio work?
Twilio is an American company based in San Francisco, California. It provides programmable communication tools for making and receiving phone calls, sending and receiving text messages, and performing other communication functions using its web service APIs.
Twilio spent over a decade building the leading cloud communication platform. Twilio’s vision is to become the leading customer engagement platform, ultimately providing businesses with the holy grail—a single view of the customer journey and the ability to take action, delivering real-time, personalized communications.
Cloud platforms are a category of software that enable developers to build and manage applications without the complexity of creating and maintaining the underlying infrastructure.
These platforms have arisen to enable a fast pace of innovation across a range of categories, such as computing and storage. Twilio is the leader in the cloud communications platform category. Twilio enables developers to build, scale, and operate real-time customer engagement within software applications.
Twilio has built a business model that offers a customer engagement platform with software designed to address specific use cases, like account security and contact centers, and a set of application programming Interfaces (“APIs”) that handles the higher-level communication logic needed for nearly every type of customer engagement.
These APIs focus on the business challenges that a developer is looking to address, allowing Twilio’s customers to more quickly and easily build better ways to engage with their customers throughout their journey. Twilio’s engagement platform also includes a set of APIs that enable developers to embed voice, messaging, video, and email capabilities into their applications.
Twilio’s Platform Approach
Twilio’s mission is to unlock the imagination of builders. Twilio plans to be the leading customer engagement platform. Twilio enables builders – the developers of the world – to build, scale, and operate real-time communications within software applications, ultimately empowering every developer and company to improve their interactions with their customers.
This enables businesses to create novel and creative new consumer experiences that delight their customers and differentiate their companies from their competitors. Twilio’s platform approach enables developers to build this future. Using Twilio’s software, developers can incorporate communications and customer data into applications that span a range of industries and functionalities.
Twilio’s technology partner customers also embed Twilio’s products in solutions they sell to other businesses. Part of Twilio’s core strategy is to provide a broad set of lower-level building blocks that can be used to build practically any digital experience.
Twilio’s Platform
Segment Customer Data Platform: Segment’s platform and APIs allow companies to collect, clean, and control their customer data, providing a single view of customers across channels for more effective engagement. When combined with Twilio’s communication channels, this insight enables businesses to delight their customers with personalized, timely, and impactful communications on the right channel at the right time.
Channel APIs: Twilio’s Channel APIs consist of software products that can be used individually or in combination to build rich contextual communications within applications. Twilio offers flexible building blocks that enable customers to build what they need. Twilio’s easy-to-use developer APIs provide a programmatic channel to access its software. Twilio’s Channel APIs include Programmable Messaging, Programmable Voice, SendGrid Email, Programmable Video, Live, and Conversations.
Solutions: Twilio brings Solutions, such as Contact Center, User Verification, and Marketing Campaigns, to a broader audience, including non-technical customers, in the form of higher-level APIs. These solutions are built on top of Twilio’s Channel APIs to offer more fully implemented functionality for a specific purpose. This saves developers significant time in building their applications.
Super Network: Twilio manages the connections between the internet and the global telecommunications network. Twilio calls this the Twilio Super Network, and it is a global network of connections with numerous carriers globally to provide connectivity in approximately 80 countries. The Super Network also contains a set of APIs giving Twilio’s customers access to more foundational components of Twilio’s platform, like phone numbers and SIP Trunking.
IoT: Twilio’s IoT offerings simplify connectivity and make the coding of connected devices more reliable so that Twilio’s customers can focus on building differentiated IoT experiences versus building and maintaining the required infrastructure underneath. Twilio’s customers use Twilio IoT for use cases such as asset or fleet tracking, smart building management, consumer wearables, predictive maintenance, and inventory management.
What is the business model of Twilio?
Value Proposition
- Twilio gives companies complete control and flexibility to rapidly deploy remote agents, digital channels, self-service, and integrations for lower costs and higher productivity.
- From delivery notifications to critical emergency alerts, Twilio provides the building blocks to develop critical communications across messaging channels.
- Customers can use a globally optimized multi-channel user verification solution to combat fraud, reduce fake user sign-ups, and authorize sensitive account actions.
- Twilio’s customers can use Twilio Conversations to ensure privacy with masked communications, provide granular session control over user permissions, session duration, and roles and keep private information private.
- Email and SMS campaign support to target, nurture and develop new customer relationships.
Twilio Marketing Strategy
Twilio’s sales and marketing teams work together closely to drive awareness and adoption of its platform, accelerate customer acquisition and generate revenue from customers. Twilio gets into new customers through its messaging and email products, often directly via developers. Then, it builds on those relationships to grow its footprint with broader adoption and higher-value products.
Twilio’s go-to-market model primarily focuses on initiating customer relationships by reaching and serving the needs of developers. Twilio reaches developers through community events and conferences, including its annual SIGNAL customer and developer conference, to demonstrate how every developer can create differentiated applications incorporating communications using its products.
Once developers are introduced to Twilio’s platform, Twilio provides them with a low-friction trial experience. By accessing Twilio’s easy-to-configure APIs, and self-service documentation, developers can build Twilio’s products into their applications and then test such applications during an initial free trial period Twilio provides.
Once they have decided to use Twilio’s products beyond the initial free trial period, customers provide their credit card information. They only pay for the actual usage of Twilio’s products, for a majority of Twilio’s products. Historically, Twilio has acquired the substantial majority of Twilio’s customers through this self-service model.
As customers expand their usage of Twilio’s platform, Twilio expands its relationships with them to include business leaders within their organizations. Twilio supplements Twilio’s self-service model with account executives and customer success managers aimed at engaging customers through a direct sales approach to expand usage and ensure satisfaction.
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To help increase Twilio’s awareness in the enterprise, Twilio has expanded Twilio’s marketing efforts through programs like Twilio’s Twilio Engageroadshow, where Twilio seeks to bring business leaders and developers together to discuss the future of customer engagement. Twilio has also developed products to support this effort, like the Twilio Enterprise Plan, which provides advanced security, access management, and granular administration capabilities.
Twilio’s sales organization targets technical and business leaders seeking to leverage software to drive superior customer engagement and competitive differentiation. As Twilio educates these leaders on the benefits of developing applications incorporating Twilio’s products to differentiate their business, they often consult with their developers regarding implementation.
Twilio’s acquisitions
- In February 2019, Twilio acquired SendGrid, Inc. (“SendGrid”), the leading email API platform. Incorporating SendGrid’s products into Twilio’s platform allows Twilio to enable businesses to engage with their customers via email effectively and at scale.
- In November 2020, Twilio acquired Segment.io, Inc. (“Segment”), the market-leading customer data platform. The segment provides businesses with a unified customer view to understand their customers better and engage more effectively, enabling Twilio to drive personalization at scale.
- In July 2021, Twilio acquired Zipwhip, Inc. (“Zipwhip”), a leading provider of toll-free messaging in the United States. Zipwhip’s customizable APIs enable organizations to text to enable their existing toll-free phone numbers in minutes and seamlessly fit texting into their workflows.
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Revenue Model
Twilio made $2.8 billion in 2021. Twilio has a usage-based business model. Twilio derives its revenue primarily from usage‑based fees from customers using the software products within its Channel APIs. These usage-based software products include offerings such as Programmable Messaging, Programmable Voice, and Programmable Video, among others.
Some examples of the usage‑based fees that Twilio charges include the number of text messages sent or received using Twilio’s Programmable Messaging products, minutes of call duration activity for Twilio’s Programmable Voice products, and the number of authentications for Twilio’s Verify product. Twilio made ~72% of its revenue in 2021 from usage-based fees.
Twilio also earns monthly flat fees from certain fee‑based products, such as Email API, Marketing Campaigns, Twilio Flex Twilio’s cloud contact center platform, and Twilio Segment, Twilio’s customer data platform.
Results of Operations
In 2021, total revenue increased by $1.1 billion, or 61%, compared to last year’s period. This increase was primarily attributable to an increase in the usage of Twilio’s products, particularly Twilio’s Programmable Messaging products, Programmable Voice products, and Email products, the adoption of additional products by Twilio’s existing customers, the additional A2P fees imposed by certain carriers, and revenue contributions from Twilio’s acquisitions of Twilio Segment, Zipwhip, and other businesses.
