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By March 2020, the pandemic had shut down the world. Its effect on businesses was swift and brutal. Airlines, hotels, restaurants, manufacturing, retail, health, and fitness—no industry escaped the loss of jobs and the hemorrhaging of cash. For example, Delta Airlines saw its revenues plummet to 5% within 60 days, continuing to lose $100 million a day for 90 days.
The pandemic years propelled the CPaaS industry to unprecedented levels. After years of being considered essential services, voice, video, and text became critical for everyone and every business. Zoom evolved into both a verb and a noun. Voice calls got a new life, and mediums began to converge. In fact, Zoom would later acquire Five9, integrating voice capabilities into its offerings.
Companies were scouring for how best to connect to customers and employees. Last-mile companies such as Instacart, DoorDash, and Amazon needed to give you updates on your grocery or food order. It seemed the text or the phone call was the only way to be sure you got the item substitution update or delivery confirmation.
Consumers, businesses, and investors were captivated by the medium. While other assets floundered, SaaS was a bustling metropolis with CPaaS as its vibrant district. Everyone wanted a piece of the action, and it showed in asset valuations and M&A activity.
Growth is identifying a wave and riding it as long as one can. It also breeds copycats. The big players—Twilio, Sinch, Cisco, Bandwidth, and Infobip—had to get better at what they were doing, and everyone else wanted to copy what they were doing. Naturally, the entire industry got wrapped up in the frenzy.
When you see a wave of 2FA business coming because everyone is logging on from home or trading on crypto, you have little choice but to make the most of it and defer thoughts of “What happens when the lights go out?” to a later date.
Like a beach in a receding tide, the mess that unprecedented growth created—the inefficient go-to-market, the bloated staffing plans, and stale products—were out in the open. The very players that could do no wrong, commanding valuations upwards of ten times their revenue, were suddenly the problem children incapable of doing anything right. By late 2021, deserved or not, the industry was punished.
Finally
In times of shared adversity, the human desires to connect, to communicate, to know go into overdrive. And in a once-in-a-century pandemic, the industry delivered. Even though the pandemic officially ended in May 2023 all you have to do is look at valuations to see the actual recovery.
Post pandemic, people started eating out, visiting friends, and going back to the office (perhaps grudgingly so). Naturally, this reduced the demand for video, email, text, and voice. Layer on events like the formalization of 10DLC, the pullback on Crypto, and the lockdown on political messaging, and the drop in demand was jarring. While revenues, on the whole, continued to grow, the lights went out on the sky-high growth rates.
2020-22 were the abnormal growth years. 2023 was the year of penance to make up and prove the efficacy of the business. In 2024, we need to figure out what normal growth will look like.