Twilio Acquires Segment, Good or Bad?
Jason Katz • October 12, 2020 • MarTech & Personalization, Paid Advertising & Digital Marketing, Revenue Operations
October 9th, 2020, in the early evening, a shot was heard round the MarTech world. Twilio announced its plans to acquire Segment for $3.2 billion. Is this a good thing for customers? Let’s dive in.
Next Generation Marketing Cloud
The largest marketing clouds are Adobe, Salesforce, Oracle, IBM, and Nielsen who sell high-priced enterprise plans to the largest companies in the world. They offer modules to orchestrate paid media, messaging, website, analytics, automation, and customer databases all from one provider (usually who acquired and then integrated this functionality). Emerging marketing clouds Braze, Leanplum, Blueshift, Selligent, Blueconic, Bluevenn, ActionIQ, Lytics, and Optimove offer subsets of these modules (usually messaging and customer data platform (“CDP”) unifying and activating individual user profiles - thanks David Raab for creating the CDP nomenclature & community) with more advanced functionality and tighter integrations. They aspire to dethrone the largest marketing clouds by capturing an increasing percentage of high-priced enterprise plans. They also tend to be more open to the ecosystem than the largest marketing clouds who are investing to catchup with transactions like Salesforce’s acquisition of Mulesoft.
Common to both the largest and emerging marketing clouds is a level of prescription. There are specific ways to do everything from integrating with other systems to setting up campaigns. If you don’t follow these specifications, the applications do not work properly. You’ll need to consult with customer success specialists to solve the issues. You may be able to solve it on your own but it’s not guaranteed. They may need to adjust settings on their side before you are able to use the application as you wish.
With modern vendors like Twilio and Segment, these limitations were relaxed more than they’ve ever been previously because of their developer-friendly, tech-forward, and ecosystem-friendly approach. The API-driven approach allowed entire ecosystems to be created around these companies. Developers consult documentation for implementation and solving issues. Developer-friendly, tech-forward, and ecosystem-friendly are rarely associated with the largest marketing clouds so the unification of Twilio and Segment will be a shock to their system, creating a new paradigm for Marketing Clouds that they will struggle to compete with. As the workforce and society becomes more engineering centered, these new paradigm marketing clouds are going to gain substantial market share before or if the largest marketing clouds are able to adapt whether that be through massive acquisitions, culture changes, or whatever other means are necessary for them to have a chance. The legacy MarTech stakeholders at brands will hold on to the status quo dearly but the change is an inevitable, an unstoppable force.
The End of the Open Ecosystem
One of if not THE most important ingredient contributing to Segment rise to a $3.2 billion valuation is the open ecosystem it fostered with its set schema and APIs that nearly anyone could build upon; and that, they did. Segment officially lists 200+ integrations but unofficially it’s a lot more. New businesses thrive on this asset, this opportunity to provide user profile, data-driven services to entire customer bases. It’s almost like Salesforce’s App Exchange but it wasn’t tied into a single platform; at least, it wasn’t until now.
Twilio was already integrated with Segment. Like many integrations, it could have improved without any integration as many had done over time based on market demand and mutually beneficial circumstances between Segment and integrated platforms. This transaction is a brilliant move to leverage customer bases and increase the percentage of high-price enterprise plans that will dethrone the largest marketing clouds. But in the process, Twilio (which acquired Sendgrid not too long ago) and Segment will become one of the largest marketing clouds and take on some of the attributes that created the context for disruption.
The valuation multiples from Segment’s $3.2 billion valuation and excitement about M&A will likely lead to additional acquisitions and exits of the remaining independent ecosystem players and we’ll be back to where we started prior to the founding of Segment and Twilio. I know Peter Reinhardt is excited about the future of “Customer Engagement” and is excited to cash out as he well deserves after creating such an innovative company. But, I will miss the open ecosystem with unfettered access to the latest technology relatively easily constructed into a unified stack. While this won’t be immediate, Segment’s catalog will become less open as it focuses its resources on building the future of marketing clouds with Twilio versus collaborating with the 200+ partners on enhancing those integrations. Do you think Segment will keep partnering with Salesforce and Adobe as enthusiastically as it did before?
An Interesting Next Chapter
Ultimately integration is a means to an end, to commercialization; so while inevitable and somewhat disappointing, this WILL lead to more customer activation options in the marketplace which is a great thing. There will be even better customer experiences that emerge ironically in a time of heightened data privacy that is only going to increase further. And brands can decide which option is most appropriate and then negotiate for the best price.
The desire for more innovation, power, quality customer experience, and wealth will drive the next generation of entrepreneurs to create products we’ve never thought of. Will it be codeless platforms where everyone builds their own marketing cloud? Will it be voice, virtual reality, or neural user interfaces? Will it be governed by tech companies or governments or both?
The future is unknown. Let’s buckle up for an exciting ride and play our roles in shaping it for the better.
