Table of Contents
The five companies I watch—Bandwidth, LinkMobility, Sinch, Upland, and Twilio—ended 2023 with $9.2 billion in revenues. Collectively, they are projected to end 2024 with a 5-10% increase. Klaviyo has set a target for a 28% revenue increase, while Twilio is gunning for 5-10% organic growth. Klaviyo’s ambitious goals suggest rapid market expansion driven by deep investments in its product. Despite Twilio’s revenue being six times that of Klaviyo, its modest target, compared to Klaviyo, still strongly signals its market maturity and market leadership. The rest are somewhere within that range.
What can we learn from their earnings reports? What can the struggling startup, the aggressive upstart, and the privately held competitor learn from its publicly traded peers? One approach is to look at the investments these companies are making and see if they make sense for you.
Investment in Data
How well do you know your customer? How well does your customer know their customer? The answer to both questions comes down to the data you possess and your engagement with it. Investing in data is now a baseline strategy. Twilio is keeping and investing in its Segment business; Klaviyo is building a Customer Data Platform (CDP) and so is LinkMobility.
While everyone wants to be a data company, a SaaS company is naturally primed to be one. Any SaaS organization is dealing with high data density. They are swimming in data that their customer and their customer’s customer are constantly sharing be it voluntarily or inadvertently. The key is to organize, collate, correlate, and protect the data in a way that unearths actionable insights. Investing in such data management activities will also help make the most of the other must-have investment: AI.
Investment in AI
All data becomes meaningless if we don’t show customers how to use it. Both Twilio and Klaviyo are showcasing how AI will propel their growth.
The entire industry, including this cohort, understands the significance of AI and is making large investments in AI. The early reports are impressive. For instance, Klaviyo reported how its customers are using AI to craft SMS subject lines. Proozy, one of its customers, saw its SMS unsubscribe rates drop by 20% after implementing this feature. Moreover, leaders not yet public like Attentive, Dialpad, and Ringcentral have all rolled out major AI upgrades to their product roadmaps.
Whether AI leaves you frustrated or fascinated, thrilled or terrified, the fact is as a technology it will never be worse than it is today. Like all emerging technologies, AI will improve and its impact will expand.
The message therefore is clear: get serious about your investment in AI, but be playful with the process. Use OpenAI, Anthropic or other commercial LLMs to get some early wins and build shiny Proof-of-Technology use cases. But also invest deeply into generative AI. Build a skunkworks team that trains an LLM using RAG, or trains a child LLM or (gasp) uses an open source LLM. It is too early in the AI game for vendor lock-in.
Investment in Use Cases
Messaging is more than just notifications. The future is in directed workflows that push messaging to be more conversational and multimodal. Klaviyo is an example of e-commerce workflows done well.
The other avenue is DIY use cases. Often called low-code/no-code development, it underpins a core philosophy: make the user the creator, provide tools so they can build what they want. Even Twilio offers user experiences where it is possible to build workflows without writing code.
Traditional notifications like 2FA have taken a beating from artificially inflated traffic (AIT) and high costs. However you’re seeing from Twilio, Vonage, and Sinch that are using phone number metadata to build frictionless authentication solutions breathing new life into these bread-and-butter use cases.
Investment in Unified Messaging
Like I said, here, here, here, and here, invest in RCS today! LinkMobility’s margins and Sinch’s product are proof that the conduit is getting a major upgrade, and everyone downstream must be ready to use it. The killer RCS feature will be the delivery confirmation, not the product carousel.
But unified messaging is more than just RCS. It is using WhatsApp, Viber, and Signal when possible. It is reaching the end-user in a platform that resonates with them with a message that is short, timely, actionable, and relevant (STAR). WhatsApp for example, is very popular with young people everywhere and especially with the hispanic population in North America. As a messaging provider you have to be willing to use all the mediums to get the message out. IYKYK.
Finally
Whether they like it or not, leaders are forever bailing out the past. However, investments are about the future. If the cuts in spending, the layoffs, the sunset products are any indication, the mistakes of the past have been paid. But the dependence on the successes of the past always linger longer than that of failures. The reliance on the success of simple APIs and rudimentary use-cases has to end. The growth imperative pushes us to invest in data, in AI, in new use cases and in unified messaging. To bet on new products and new partnerships.