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Telco execs: Are you jealous of Twilio?

With a $10 billion market cap, the CPaaS provider has become a category-defining company. With revenue of ~$4 billion, growth of 15% YOY, it took the unsexy work of SMS messaging and turned it into a growth company.

How did it do this?

Easily, and right under our noses.

There are three reasons Twilio was able to build a successful company built on the huge network investment of telco:

1. API-driven communication: Twilio’s cloud-based platform has easy-to-use APIs that allow developers to integrate messaging services into their applications quickly. It did the hard work of integrating to networks around the world and then put an easy to use API layer on top for run-of-the-mill developer to use. This seamless integration has enabled enterprises to create custom communication solutions without complex telecom infrastructure.

2. Flexible pricing models: Unlike telco providers that require long-term contracts and fixed pricing plans, Twilio offered pay-as-you-go pricing, which enables businesses to scale up or down based on their needs.

3. Excellent developer experience: Twilio’s focused on creating a killer developer community with a plethora of easy-to-use resources, including doc, tutorials, and SDKs, making it easy for developers to build and deploy applications.

Telco couldn’t keep up with Twilio’s disruption—at least not on our own. We didn’t have easy to use APIs to offer developers and each telco STILL has its own offering. We aren’t easy to do business with—STILL! And the developer experience BLOWS.

So Twilio was able to swipe big enterprise customers from telco and was able to commoditize messaging services with least cost routing of SMS across the networks of the world. OUCH.

It’s not a surprise that most telco execs talk about Twilio with disdain.

But the grass is not always greener. Twilio has problems of its own. Its gross margin for the main part of the business, messaging, sits at ~45%. “Excellent” SaaS companies sit closer to 80-90%—almost double Twilio’s.

Why is its gross margin so low? In a word: telco wholesale. It still needs to buy all those telco wholesale contracts, upfront, in bulk. This part of its unit cost economics it cannot optimize. But believe me, it wants to. Telco should wake up to the fact that Twilio is trying to figure out how to deliver their product WITHOUT telco networks.

Since Twilio has stolen your enterprise relationships from you and gotten all its code into all of those enterprise applications, once it figures out a way to deliver messages without you, you can wave bye-bye to all that awesome wholesale revenue.

So what are we going to do about it? Is Open Gateway the answer?

Totogi wants to help telco take Twilio down. Is all lost, or do we have a shot?

See the original post and discussion on DR’s LinkedIn!


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