EUR 850.00 For Business Accounts Only

Morningstar | Twilio Competitive Positioning Solid but Valuation Rich

Twilio’s platform-as-a-service offering remains on the rise. The customer experience spans multiple touchpoints, and enterprises are increasingly looking to digital transformation for engagement and service to maximize customer satisfaction. Twilio’s technology enables omnichannel communications by overhauling (or completely replacing) legacy systems, resulting in substantial cost savings longer term. While this means Twilio is frequently pitted against large, incumbent vendors, we think the firm has established itself as a leading vendor in communications PaaS.Twilio’s value proposition aims to solve the customer engagement problem by providing multiple building blocks for developers to build communication functionality into applications. This functionality can span multiple channels, including text, voice, and video, allowing firms to modernize legacy contact centers or create new avenues for customers to engage with brands. Twilio has built out a global Super Network that dynamically routes communications through the most efficient routes. This global software network is predicated on a coagulation of numerous carrier relationships negotiated by Twilio, allowing the firm to provide low-latency communications at low cost while collecting usage-based fees from customers.Companies such as Uber use Twilio’s platform to allow drivers and riders to communicate instantly and anonymously via text or voice, leveraging both the Super Network and the building blocks Twilio provides to developers. Two-factor authentication is a popular use case as well, as firms such as WhatsApp use Twilio’s platform to verify users via SMS. Twilio’s services have been most popular with modern technology companies, though established brands such as Coca-Cola and large software vendors such as Salesforce are also embracing Twilio’s platform.While Twilio’s $45 billion addressable market is large, we expect a battle to maintaining share as the company faces large legacy networking vendors such as Cisco, and both niche vendors such as Vonage-Nexmo and large software companies pose a threat. Still, we think there are enough opportunities to support Twilio’s growth trajectory long term.