How Twilio Is Shaping Segment

The biggest news coming out of the Signal conference was the launch of Twilio Engage,  a “growth automation” platform built on top of Segment, which they acquired last year. In the announcement, Twilio highlights its plan to leverage Segment to push more deeply into the marketing space.

As I wrote last year, Twilio is positioning Segment to go after the big marketing budgets usually spent on enterprise SaaS tools like Salesforce (CRM and marketing cloud), Adobe, Braze, Iterable and HubSpot. Current customers rely on Twilio for email (via Sendgrid) and SMS messaging infrastructure, and leveraging Segment as a marketing tool is a way for Twilio to go beyond APIs (and low-margin pricing) and move up the stack to increase their wallet share and margins.

The focus on “growth automation” functionality comes as no surprise. In recent years, marketing has been re-labeled with terms like growth hacking and digital optimization, so it’s not shocking to see the term “growth automation.” Fundamentally, growth automation platforms are marketing automation platforms, albeit modern ones that are powered by data pipelines and APIs.

It’s a smart business move by Twilio, but what does this mean for Segment’s core customer data infrastructure (CDI) platform that was the foundation of their success? How are Segment’s downstream partners, like Braze, going to react to this? And, most importantly, what does this mean for Segment’s end users?

Let’s start with downstream partners. With this launch, Twilio Segment is now competing directly with customer engagement platform companies like Braze, Iterable, and Customer.io. According to Segment, these marketing automation systems are the second-most popular destination for their users, which means a lot of their customers are sending data to them to drive customer experiences through messaging, push notifications, and more. For a company like Braze, the change means that a direct competitor now owns the data pipeline that feeds their system. Their huge customer base also gives Twilio’s sales team an initial target list to aggressively sell Twilio Engage. This also applies to single-purpose email marketing tools like Mailchimp and Marketo. Needless to say, if I was running one of those marketing automation or communication platform companies, I would be worried.

Next is Twilio’s long-term strategy around Segment’s core CDI product. Segment is a customer data platform, but their foundation is customer data infrastructure and integration automation. My personal hypothesis is that the CDI component (first-party event streaming via SDKs) isn’t part of Twilio’s vision for Segment. If enterprise marketing dollars are the goal, the product will follow that roadmap and stack-wide CDI will be deprioritized. More importantly, a huge driver of Segment’s growth was their mutually symbiotic relationship with vendors, who would take them into deals to simplify data integration. Now that Twilio Engage is competing with those vendors, that template for driving growth is greatly diminished for Segment. It’s unlikely that Twilio will keep investing in a product that has lost a key foundation of their go-to-market success.

Lastly, what does this mean for Segment’s customers? Data is what makes any marketing automation tool valuable, so Segment’s core pipelines aren’t going anywhere, but innovation and investment will focus on marketing products like Journeys. Ironically, with marketing automation as the primary use case, the most valuable destination for Segment data is now...Segment.

At a high level, Segment customers can expect to see the product evolve to serve more marketing use cases and marketing users. Inevitably, there will be less focus on data integration across the stack, especially as it relates to core infrastructure like the cloud data warehouse (like Snowflake), data lakes and real-time databases like Redis, all of which are now core components of the modern customer data stack.

The narrowed focus on marketing users means engineering teams running Segment will likely experience data integration challenges over time as they manage stacks that are increasing in size and complexity, which will impact their customer loyalty.

This news makes me more excited than ever to be building RudderStack, where our core mission is helping developers solve those very data integration problems across the entire stack.

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