Why Data Is The New Oil? Part 6
Abraham George Essay Series
Breezy Briefings is pleased to present a brand new essay series by Abraham George titled Why Data Is The New Oil? Subscribe using the button above or Telegram to receive the latest updates as soon as it is published. This is the final installment - Part 6 - if you missed the previous parts, check out Part 1, Part 2, Part 3, Part 4 and Part 5.
While Twilio has made many small acquisitions, the two major ones are SendGrid and Segment. SendGrid offers an email API that enables businesses to manage complex email campaigns and send emails with enhanced deliverability.
SendGrid collects data as people go from prospects to customers. They help marketers with metrics like open rate, bounce rate and unsubscribes, etc. This data is very important for marketers to track and analyze.
From a customer’s perspective that transitioned Twilio’s product from a cost centre to a profit-generating market platform. The dollar-based net expansion rate (DBNE) has risen to 131%. This means they have spent on average $131 dollars this year for every $100 that they spent last year. All else being equal, Twilio could continue growing at 31% without finding new customers. That’s very impressive. They could also continue upselling services from their acquisitions. Twilio has spent jointly $5.9 bln to acquire SendGrid and Segment, both of which are complementary. Segment, the CDP company should propel SendGrid and the rest of the Twilio platform to a new level. While SendGrid gives data at the aggregate level Segment has the ability to go granular.
Breaking down data by customer, Segment can map out each communication in the customer life cycle: from a prospect to a new customer to a happy customer. The CDPs can run the data through their AI/ML model to keep the prospect or customer happy. They are able to execute the plan with hardly any human intervention. This is like a marketing team working 24/7 and now you can see why this space can grow close to 35% for the next five years.
Segment is the leading CDP company in the world. It has a market share of 10.2% and its closest competitor is Treasure Data with 7.8% of the market. When Twilio acquired Segment in Oct 2020 they had 5,000 paying customers but with the help of Twilio’s cross-selling, that has risen to 20,000. For a CDP, having scale is a big advantage. The CDP will be able to train its AI/ML models on more real-world data and rely less on simulated data creating better customer profiles.
Once these businesses have profiles of their customers, they can market in entirely new ways. They can send personalized texts, emails, videos, or phone calls directly to the customer. They no longer have to go through Google or Facebook. Instead, they can use Twilio’s ecosystem.
This creates a flywheel effect. The more the customers use Twilio’s system, the more data it collects. More data means better recommendations on how to market those customers. The better the data, the more messages they can send through Twilio’s platform.
The growth in this sector should be incredible and that’s why the prospects for Tanla Platforms are also huge. I do not know which will be the equivalent of Segment for Tanla. I presume it is Gamooga but we have so little information on what Gamooga does. Whatever it is, the cost advantage Tanla has will be its competitive advantage against other international players as Tanla soon goes global.
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund. Currently, he is setting up a hedge fund where foreign citizens can invest in Indian growth stocks like Tanla operating in hyper-growth markets like CPaaS.
Highly informative series
First four parts in major topics on digital advertising are may be sute to AFFLE INDIA.