Twilio has grown rapidly since it was founded in 2008 and it has become the largest Communications Platform-as-a-Service (CPaaS) business by revenue.
The company’s annual revenue in 2023 exceeded $4bn, and its number of active customers grew to more than 316,000 in Q2 FY2024 (ended June 30, 2024). The growth has partly been due to acquisitions and boosted by enterprises pivoting their customer engagement to digital channels during the Covid19 pandemic.
However, due to less favourable economic conditions since early 2023, CPaaS providers including Twilio experienced a significant slowdown in revenue growth. This led to business reviews which included reorienting its business strategy and focus, reducing costs to improve margins, and rationalising solution portfolios.
Twilio origins
Twilio started as a communications platform but the company had evolved its business before the pandemic to become a customer engagement solution provider. This evolution saw the company introduced solutions targeting different customer engagement functions including Flex (for customer support teams), Frontline (for sales teams), and Engage (within Segment for marketing teams).
While customer engagement remains the core business of Twilio, the company is now entering another chapter leveraging on data and AI.
The development of generative AI (GenAI) and large language models (LLMs) has already created use cases and solutions to enhance customer engagement. Twilio has been quick to tap the technology to enhance its solutions as well. It is now combining its communications platform with contextual data and AI to deliver real-time, personalized experiences. This means finding more meaningful ways to integrate its communications platform with Segment (its customer data platform business) and emerging AI technologies.
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By GlobalDataKey partnerships
Twilio has so far formed partnerships with OpenAI, Google, Frame AI, and Deepgram to embed AI into its solutions. It has also introduced AI-related products and capabilities such as CustomerAI (the use of LLMs and customer data that flows through Twilio’s platform to better understand customers and improve customer relationships).
Unified Profiles and Agent Copilot (Unified Profiles enables the collection and activation of real-time, consented data for personalised interactions while Agent Copilot applies AI to this data to enhance customer service agent productivity); and Linked Audiences (an audience builder tool to integrate real-time data enabling marketing teams to engage with data, to quickly create and refine audience lists without database expertise).
These products/features allow Twilio to further enhance its value propositions for marketing, sales, and customer service personas; and establish differentiators against other CPaaS vendors. GlobalData’s forecast for CPaaS indicates a CAGR of about 19% to reach $35.5bn in 2027.
Growth opportunities
There are still significant growth opportunities in the enterprise segment as well as geographies. However, the market is also evolving rapidly as CPaaS vendors expand the scope of their solutions to provide more comprehensive customer engagement and workflow automation solutions, not just providing APIs for developers.
Twilio is keeping pace with the changing market demand, and it is also differentiating with its CDP and AI integration. However, competition is also intensifying since a few CPaaS players have also gained scale through acquisitions and organic expansion. This also means more options for businesses looking to leverage AI to achieve better customer engagements.
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