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Twilio Q4 revenue surges 65% on back of SMS revival

It was a good year to be in SMS.

Political candidates in America, prevented by coronavirus from knocking on doors, texted instead.

And political traffic contributed $22.7 million to the revenue of SMS cloud platform Twilio.

New York City said in late May it was using Twilio to power its contact tracing initiative. Lots of businesses were contributors, too.

Using its Twilio Flex programmable platform, the company built a coronavirus contact center so that patients and their known contacts could be called, messaged and emailed.

And as a result of all this, Twilio now reports its fourth-quarter revenue soared 65% from the fourth quarter of 2019, to $548.1 million.

That beat Wall Street analysts' predictions of $454.7 million.

Jeff Lawson's 13-year-old company, which listed on the New York Stock Exchange in 2016, will now sell $1.54 billion in fresh shares after earnings sent its stock to record highs.

Its share price has vaulted to $443.49 from $89.49 last March, valuing the San Francisco company at more than $70 billion.

Apple of my API

Twilio revolves around APIs, application programming interfaces, letting developers easily access functions and data on offer from other sources.

And it's become the go-to APIstandard for SMS messaging, like (for instance) Stripe is for payments, and the platform Plaid is in open banking.

Companies like these are valuable because they reduce "the permissioned nature of traditional banking and telco networks by an order of magnitude," Los Angeles-based tech angel investor Dan Romero says.

To put that slightly differently, any business can use Twilio to send customers an SMS when their order status is updated, and the warehouse another one when a new order arrives.

They don't need to work this out with their telephone network provider.

Today, "17 year-old developers in college dorms have the same (nearly free) access to the same stack as the largest corporations," tweets Ruchin Kulkarni from tech investment firm Sequoia Capital.

Going cloudbusting

Twilio already has hoovered more than 10 million developers into its ecosystem, Kulkarni says on Twitter.

As well as the SMS APIs, it has voice and wireless ones too.

But it's text messages that it has made its name with.

"Sometimes I think about how much setup and infrastructure it used to take to send a text message from a website," says Jason Lengstorf, a software engineer in Portland, Oregon.

But now, "we can use Twilio and a Netlify Function and fire off SMS in 17 lines of code," he adds.

CEO Lawson has said he expects the company to sustain a 30% annual organic growth for the next four years, something which Rosenblatt Securities analyst Ryan Koontz calls "achievable."


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Cloud communications platforms like Twilio will remain "at the forefront of a global shift to digitalization," argues Koontz.

And "today, your bank is an app on your phone," says Lawson, who previously worked in Amazon's cloud services business.

You like your bank because the app runs well, not because it has clean wallpaper and gives you lollipops, he says.

It's a Sinch

It's such a good niche to be in right now that Twilio will have to fight new competition.

Sweden's cloud communications company Sinch has just bought US voice communications provider Inteliquent for $1.14 billion to take on Twilio in the American market.

Sinch has just received a $690 million December investment from Japan's SoftBank Group, which told it to go shopping.

But for its part, Twilio's been shopping, too.

It acquired customer data platform Segment for a cool $3.2 billion.

And it acquired SendGrid, an e-mail API platform, in February 2019 for $3 billion. Buying big seems part of its style.

"Twilio has been a smart acquirer," says Peter Wagner, founding partner of Wing Venture Capital in Palo Alto.

And for now, at least, it faces no credible competition at its scale.

Put differently, while other cloud communications providers like Sinch, Amsterdam's MessageBird, Plivo, Voxbone and Telnyx will all try to gain altitude, Twilio is riding for the moment on cloud nine.

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— Padraig Belton, contributing editor, special to Light Reading

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