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A little more than eight years ago, Segment almost died an early death when it seemed to be out of money and ideas. Last November, the company capped its improbable rebound and rise to stardom when it was acquired by Twilio in late 2020 for $3.2 billion.
The deal to put two customer data companies together seemed like a good fit on the surface. Both focus on developers and delivering solutions by leveraging APIs.
But Segment founder Peter Reinhardt told VentureBeat recently that there is much more to the deal, and he remains even more bullish about that potential almost four months later. Particularly with the pandemic reshaping daily life, it’s become more important than ever for companies to have insight into customers and to be able to deliver an engaging digital experience.
“Ultimately what we’re both trying to do is improve customer engagement and help companies engage better with their customer,” Reinhardt said. “We’re like the two halves of the coin that handle the two halves of that problem. One actually delivering communications and the other the data to figure out what to send in the first place.”
That proved to be a hit, and Segment quickly began developing its own commercial services on top of that on the way to raising $300 million in venture capital for a $1.5 billion valuation. Those services include an API that enhances the customer data centralization and expands the range of services where the information could be sent for further analysis or personalization.
At the start of 2020, Reinhardt said Segment getting 500 billion API calls per month. By the end of the year, that had grown to 1 trillion per month.
Meanwhile, Twilio CEO Jeff Lawson had started to make overtures. Twilio had built a big business around messaging APIs that help brands connect with consumers and manage interactions.
“He had been coming to me about once a quarter and making a pitch for how Segment and Twilio would be better together,” Reinhardt said. “And at first, I kind of just gently and politely dismissed it out of hand. But he’s very persistent.”
Over time, as Reinhardt listened to Lawson’s pitch, he also began to notice a pattern among Segment customers. Reinhardt would be discussing how they were going to use Segment data and customers would bring up the desire to have more integration with messaging.
“Some of my conversations with [Jeff Lawson] started to stick in my head, like, ‘Oh, yeah, I see they’re using the data to drive the communication channels,” Reinhardt said. “And then mid-last year, Jeff and I had yet another quarterly check-in and I was like, ‘You know what? I see it. And I actually think it is a much, much bigger opportunity.'”
Customer data management
After the intense entrepreneurial journey, Reinhardt has undergone some personal and professional adjustments following the decision to sell.
“I’ve been through the whole emotional roller coaster that every founder goes through in this kind of situation,” he said. “Relief, sadness, letting go of, excitement, fear. Like, everything all bundled into one two-week period. But now we’re super excited to be on the other side of that and have sort of a fresh beginning.”
The business is now dubbed Twilio Segment. Going forward, the goal is to develop a customer engagement tool that offers developers a more flexible approach to managing customer data than the customer management software tools that have been dominant. That tool is now available as a beta.
The idea is to blend the Segment and Twilio experience into a seamless customer data management system.
“I’m sending my customer an email and sending them an SMS and I’m doing a voice call with them,” Reinhardt said. “Whatever the mode of interaction, I’m doing that to engage them. The question is: ‘How do I do that better?’ If you’re going to do that better, it means sending a more personalized message that’s better targeted and that’s more interesting to them. You do that with data.”
For that reason, Reinhardt argues that Twilio’s communications tools and Segment’s data management tools “sit extremely adjacent to each other in the higher-level problem of customer engagement.”
To take advantage of these underlying capabilities, Reinhardt said the new product will become a feedback loop where data continually flows to improve communications and engagement, which in turn generates new data that can be used to shape the next engagements.
“The first thing is actually getting feedback out of the communications,” he said. “And that is already in beta. It takes data out of Twilio and sends it downstream for usage in Segment but also more broadly joining the concept of building blocks.”
The plan is to unveil more details around this evolution at Twilio’s Signal conference in late October.
Meanwhile, Reinhardt has felt a greater sense of urgency to expand these tools over the past year, both before and after the Twilio deal. As the pandemic put the digital experience front and center for companies, it became a huge area of investment. But it’s also one where many are struggling to stand out from competitors while meeting the expectations — and increasingly higher standards — of customers.
That has become even more challenging in a world where companies can’t rely on face-to-face meetings or other forms of traditional interaction. The answer is to get more sophisticated about how that data is being used.
“In a world where you need to compete primarily in a digital world, the question is, ‘How do you meaningfully differentiate?'” Reinhardt said. “It’s going to be something in that customer experience. And if it’s going to be different, then that means you’ll have to build something. You have to have an engineering team that’s building something and that’s pulling together some aspects of data about the customer experience that allows marketers to send more creative messaging than competitors. Fundamentally, at its root, that relies on developers. That’s why Twilio and Segment are so focused on being tools for marketers but are ultimately built for developers.”
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