Twilio

[Happyhunting]

Below you will find a portion of post #102219 from the NPI board. The poster has a tech back ground and raises questions about if Twilio’s solutions are maybe more easily replicated that I thought and also questioning their price points.

A while back a poster on this board link to a Twilio presentation and when I learned that Twilio can basically replace a call center with all the associated wiring and hardware by doing the same work in the cloud I was impressed.

I think Twilio’s solutions may not be so easy to replicate and that they are grabbing all the market share they can to get customers hooked.

Interested in what more insightful articulate posters have to say.

I have designed contact center products as a technologist and had teams of contact center developers report to me as an IT executive. I have seen many companies large and small offer very similar solutions to what I perceive Twilio offers. What I have not seen is the price points Twilio offers the services.

Perhaps I am looking at this company through the wrong lenses. However the negative margins suggest otherwise.

I have looked at their pricing and I am amazed at how they can deliver a high quality solution for their published rates. Perhaps they are pricing to get market share with the prospects of raising rates once they get customers hooked. If this is truly their approach, and I have no knowledge that it is, the problem they will have is once they raise rates they could have many competitors.

Kindest Regards,
Steve

[RaptorD2]

On the surface your concerns are valid but I suspect that a deeper look might change your mind.

I view TWLO as somewhat like … are you sitting down? … like SHOP.

SHOP took a ubiquitous goal (Retail Portal) that most would assume has no moat and many competitors and decided to do it better and more complete than anyone else. That gives them somewhat of a moat, but to insure their moat’s effectiveness, they didn’t rest on their laurels by anyone’s standards. They continuously engineer solutions to the problems and challenges of their customers, then design software that solves the challenge and make the use of its solution so simple that any beginning entrepreneur can put it to very good use without any 50-page “how to” manual.

My take is that TWLO has a similar, ubiquitous niche (Communication) and that management is on a path very similar to that of SHOP. They do what they do as best of all who have similar solutions. They stay on top of customers wants and needs, and everything they do is predicated on making their customers’ jobs easy as possible, and at a reasonable price.

Some moats are obvious, and those are the ones “everyone” can see. Others are unexpected and exist only due to someone’s focus on customers and their needs.

So … Does TWLO have a moat?

The answer isn’t obvious, so everyone gets to vote. FWIW, I vote that they do have a moat and it is considerable. But it’s not due strictly to tech, it’s also due to people’s dedication and imagination. To simplify the idea, some moats exist simply due to management’s dedication and perseverance. I trust that as much or more than most of us trust technology.

Dan

ps: Management is also the simplified version for me selling PVTL. I don’t view that as a mistake at all, just a reaction to my first exposure to management’s reasoning under tough questioning by analysts. We use the information we have access to.

[Tamhas]

Does TWLO have a moat?

Based on both the Uber example and some knowledge of the area, I would say that what they offer is not wildly difficult to provide in-house, but that it is outside of the core competency of most companies, so the idea of acquiring that capability in a really top flight implementation is attractive … at least until it becomes a large enough expense that it becomes attractive to bring it in-house, which Uber seems to have done.

[brittlerock]

As Raptor pointed out, some moats are obvious, other less so. Twilio also has the advantages of first mover and network effect.

As being the first significant player in this arena they have recognition and favorable adoption rates. The network effect is a product of adoption. Twilio reduces a lot of the complex communication programming nightmare (believe me, it’s way down there in the weeds) to a relatively simple to understand and implement set of APIs (application programming interface). No need to get down in the weeds. No need to hire specialist in the communications field, no need to contend with different folks in the same shop developing independent solutions. You can just hire folks with Twilio experience and rest assured that most things will fall into place. And as the demand for Twilio experienced programmers increases, so too does the demand for Twilio.

So yes, a shop like Uber can develop an internal alternative and escape Twilio’s usage based pricing. And I’m sure that that decision made economic sense for Uber in that communications functionality is the very heart of their operations. But for the vast majority of companies, communications processing does not reside at the heart of the business model. Rather is a painful necessity with a high preference for handling as an addendum to more vital application needs.

[EricPrzybylski]

Does TWLO have a Moat?

Well, my opinion means little, but some may place more value in Elon Musk’s who addressed moats quite elegantly in the infamous Q1 conference call.

I think moats are lame. They are like nice in a sort of quaint, vestigial way. If your only defense against invading armies is a moat, you will not last long. What matters is the pace of innovation, that is the fundamental determinant of competitiveness.

I think this echoes your assessment, Dan, and this is why I place so much favor in companies like NTNX, SQ, or TTD. None of these companies are, obviously, resting on their laurels, and this fact is what makes the Susquehanna downgrade of NTNX yesterday so unnerving. I could foresee a similar justification placed upon SQ.

Not to branch off into a NTNX discussion, but the justification was hilarious, Xi Cloud Services has great potential, but is very ambitious. Like, REALLY, Susquehanna? Would you prefer the alternative?

Eric

[NajdorfSicilian]

What TWLO does is significantly more difficult than what SHOP does. Both well-run firms but TWLO has a bigger moat.

Long TWLO,

[RaptorD2]

What TWLO does is significantly more difficult than what SHOP does.

Can’t argue with that.

However, what SHOP did right is … everything.

Many people/companies have the skill and ability to build almost any of the app’s that SHOP uses to entice its customers, right?

But how many can do it right? How many can make it super easy for anyone to use and seldom fail? How many can build the next one so perfectly, and for a reasonable price? And the third, fourth and fifth. How many would still be around to build the 50th app, and have them be so effective and sturdy that people are standing in line to buy them?

At some point, maybe by the 75th or 100th app, anyone left standing is going to be in the running for best of breed IMO.

Look at Amazon. They “Sell things at retail online.” Again, many people/companies have the skill and ability to build almost any of the app’s that Amazon uses to entice and hold its customers. But after a certain level of success and acceptance by customers, it eventually becomes difficult for others to imitate. After another period of time, the infrastructure is so complete and so sturdy that it would appear to be suicide if any (smaller) business went after Amazon. Even the Walmarts of the world have trouble breaking the code to AMZN’s success.

Some would not call this a moat. It doesn’t matter what we call it. The question is, does Amazon (or SHOP or TWLO or …) have enough structure and culture in place to hold off most competitors for the foreseeable future? If so, what shall we call it? I agree, moat is a quaint old idea, and not exactly accurate.

Maybe some moats are even too deep. I think of Berkshire, whose moat has become an albatross, causing one of the best investors ever to have results that do little more than mirror the market in general. It’s awfully hard to buy shares of small companies like those we showcase here. How many shares of NTNX would you like at $40, if you’re trying to invest 10s of billions? Why bother?

Will Amazon become too big? Did Walmart? Sears? KMart?

Both well-run firms but TWLO has a bigger moat.

Again, I agree–for now. Technology changes so fast that no one can know how long the moat will stand. Maybe SHOP’s culture will outlast TWLO’s technology. Who knows?

Some moats aren’t so obvious. Some that appear deep are overrun in the end to the surprise of most all of us. But one thing is for sure. No moat is permanent.

Dan

[volfan84]

I haven’t read this Twilio-related post yet, but if you have a Premium membership it is likely worth checking out. Tom Engle (tmf1000) posts are generally pretty fantastic and in-depth.

https://discussion.fool.com/4056/twlo-page-and-template-34017480…

volfan84
no TWLO position