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Twilio's Acquisition of Segment.io Is Starting to Pay Off

By Brian Withers - Updated Jun 22, 2021 at 5:17PM

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Buying this customer data platform was just the right move for the communications specialist.

Sometimes when a company makes a large acquisition, investors cringe. These big bets take a tremendous amount of work to integrate the new company into the acquiring organization, and there's a chance that it won't work out. Twilio (TWLO -6.04%) recently made a massive $3.2 billion bet on the customer data platform specialist Segment.io. Even though investors initially cheered, the success of this move was far from certain.

On a Fool Live episode recorded on May 12, Fool contributor Brian Withers discusses recent results from the combined company and why investors should be excited about the future of this partnership.

Brian Withers: Wrapping up with Twilio. The communications platform, to me, known for enabling texts from your delivery service on your food or whatever or the reminder phone call that you have a medical appointment coming up. It bought Segment.io a couple of quarters ago. I don't know that people really understood and are giving it the benefit, what this customer data platform acquisition really does for the company.

The Segment contributed 45 million in revenue, it's only eight percent of the overall revenue for the company but the market size of this company is tremendous, or at least the Segment portion of it. It's 17 billion and growing and not only does this provide a huge opportunity for those customer data platform products but the link to its communication platform, to me, I'm going to use the dreaded synergy word here, [laughs] there is a ton of synergy. Think about it.

Twilio is great when powering communications and messaging but lacked really the smarts to engage with customers appropriately. What Segment does is goes out and finds all the information about the customers and all the different apps and across the websites and provides the customers [of Twilio] the smarts to engage with those [their] customers in more ways and more intimate ways than they have in the past.

As the customer accounts grow to 235,000, that's a 24 percent gain year-over-year, I'm looking at, there's tremendous cross-selling opportunity and certainly, the company has the fifth quarter of 130 percent dollar-based net revenue expansion. It says that the customers are spending more, so I think there's a tremendous amount of opportunity here as Twilio looks to engage its customer base even more with this acquisition.

Brian Stoffel has no position in any of the stocks mentioned. Brian Withers owns shares of Twilio. Toby Bordelon owns shares of Twilio. The Motley Fool owns shares of and recommends Twilio. The Motley Fool has a disclosure policy.

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