UPDATED 12:50 EDT / OCTOBER 12 2020

BIG DATA

Twilio to acquire Segment for $3.2B as it takes aim at new $17B market

Twilio Inc. today said that it will be spending about $3.2 billion to acquire Segment Inc., an Accel-backed unicorn startup focused on helping companies extract more value from data they collect on customers.

Twilio expects to wrap it up the all-stock transaction by year’s end. Its stock is up more than 6% in trading today on the Segment acquisition news.

Publicly traded Twilio provides a set of cloud services that enable enterprises to develop communications features for their applications. Its services can be used to build a chat function into a mobile app, process support calls made to a contact center and send email marketing campaigns, among other functions.

Segment, in turn, operates a customer data platform of the same name. Segment can pull customer records from the disparate systems inside a company and combine them into a single dataset that’s easier to work with. A retailer, for example, could use it to match Google Analytics website visit logs with in-store purchase records to gain a more complete picture of shoppers’ buying preferences.

Buying Segment will allow Twilio to move up the value chain. Twilio’s communications services, when they’re used for customer-facing tasks such as processing support requests, are a valuable source of customer information. After the acquisition, the company will be in a position not only to help its enterprise clients collect information about their customers but also to help them process that information using Segment’s platform.

“Segment provides the data platform to add intelligence to Twilio’s digital engagement channels that currently power 1 trillion interactions per year,” Twilio Chief Executive Officer Jeff Lawson wrote in a blog post today.  

Twilio sees the deal adding $17 billion to its addressable market. In an investor presentation, the company specified that this figure includes $2 billion in enterprise spending on customer data platforms and $15 billion spent on other software tools used for integrating customer information.

The presentation also provides a glimpse into the deal’s financial details. The $3.2 billion Twilio is spending for Segment is described as being at a similar revenue multiple as the $2 billion it paid to buy SendGrid, an email delivery platform the company absorbed in 2018. Twilio also divulged that Segment has adjusted gross margins of about 75%.

SendGrid, the company notes, has seen its revenue growth rate accelerate from 31% to 36% since the acquisition in 2018. Twilio hopes to replicate that success with Segment by promoting the startup’s platform to its more than 200,000-strong customer base and enhancing its feature set with more product integrations. 

The customer data platform market Twilio is entering is crowded. Salesforce.com Inc. has its own customer data platform, as do Oracle Corp., Microsoft Corp. and other major players in the enterprise software market.

Twilio is also expanding in other markets as part of its quest for new sources of revenue growth. Notably, in July, the company acquired a startup called Electric Imp Inc. that provided software and chip modules for enterprise “internet of things” projects.

Photo: Twilio

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