The TC article is light on details compared to the actual call and 10-K.
Uber was 12% of total rev at the start of 2016, and 17% later on. WhatsApp was the next largest at 9% for the year. Concentration falls off from there, with the 3rd largest customer at 2%.
Twilio's initial (unamended) S-1 filing uses Uber as a customer case study [1]. They called out WhatsApp as a business risk given that they were and are a variable account (15% of their business at the time). Uber was not, potentially because they're a Base Customer Account, but as noted in in the 10-K [2]: "its usage historically has significantly exceeded the minimum revenue commitment in its contract, and it could significantly reduce its usage of our products without notice or penalty."
To me, that seems like an excelent risk profile, and no reason to sell. Uber seems to have a stench to it lately, and to be free of that large customer influncing your growth is a net positive. But stocks react in real time.
You know where I am nearly every single time I get an Uber or Lyft? Right outside my building, where my phone is hanging onto a Wi-Fi connection that won't work from there. Maybe it's not as common as it is in my life, but SMS seems essential until phones figure out how to deal with the Wi-Fi limbo state.
This is very accurate. I've gotten in the habit of manually killing my phone's WiFi as I leave my apartment and start walking down the hall calling a Lyft/Uber, and the same when outside my office. This remains an unsolved problem.
It really isn't. It'd be trivial to allow mobile data to always supplement wifi data. There are apps that do this already ([1] and [2]), and some phones have the option as well (either stock or as a ROM). The problem are cellular data caps, nobody wants to blow their caps by using cellular when they could be using wifi only. There is no way for wifi to know when you're about to lose coverage, or have spotty coverage; the only way around it is to always have the mobile antenna connected to towers so it can take over. But that costs money, many mobile phone companies even disable these options on their phones to reduce congestion in their towers ([3], though it may be out of date now).
One day we might solve this problem, if we're ever able to pressure phone companies into reinvesting into their infrastructure instead of their investors.
I get that this exists, but it literally never seems to trigger for me. The situation GP brings up happens constantly despite this feature being enabled.
I think the problem is that by the time your phone knows WiFi is non-viable (e.g. it's sent, retried, timed out), you've probably screwed whatever connection you were hoping to make.
Short of hammering the AP with test transmissions (oh no, battery life) when the connection starts to get below a certain level, not sure how it could solve this before the user attempts to do something.
I think the onus is on devs to implement it. So far, the only app I've found with robust reconnect is XiiaLive Pro (a music-streaming app). I use it daily for streaming radio stations and I often forget to disable WIFI when I leave the house, so by the time I'm down the block, the music usually cuts off for 1-2 seconds before the app realizes WIFI is gone. Amazingly, it auto-retries using the 3g/4g connection. I've used 10s of music streaming apps, and ALL of them required a manual stop/start after WIFI signal is gone.
I have that enabled and the setting states that ~70MB have been downloaded in this way, but I don't know over which period and it also never does "feel" like it's working.
I disabled it after my phone freaked out one day and kept re-downloading the same few hundred iTunes songs over and over, blowing past my data cap and costing me $30 in overages, all while it was asleep on my desk (albeit mysteriously very warm).
There are also consequences to your battery for utilizing cellular data instead of/in addition to WiFi. I'm an atypical user in that I don't really care about cellular data costs, but it annoys me when my battery begins dropping at a visible rate and my phone becomes toasty warm.
I considered that, but thought the impact would be inconsequential. If you want to save battery life you'd turn one or both antennas off (or GPS, vibrations, screen brightness, etc.). Maybe running both would be too much for the battery though, I don't know.
My phone lasts nearly 24 hours on a charge, I wouldn't mind it last considerably less (18 hours for example) if I used both antennas though.
I don't know how regular web-browsing / app use from the phone with two antennas would affect it, but I frequently use my phone as a WiFi hotspot for a laptop, and that's rather battery intensive.
You are only scratching the surface. The real problem is not for mobile to take over, we can do it, but when to consider wifi down. It is all fun and games if your wireless network is connected to good fiber, but it is not always the case. Internet uplink may be high RTT or flaky itself, it may be low speed and someone started torrent client and video call, it may as well be the very same mobile broadband with "unlimited throttled home" plan, wifi AP can be connected to gateway over multiple wireless hops, etc.. Platform always has to question "is it problem with remote end or uplink? is uplink 2 better than uplink 1?"
Network switch comes with non-zero cost that all connections must be treated reset and have to be reestablished, so even if the platform monitors quality of all uplinks, we still need some uplink stickiness to avoid constant switching between uplinks in places with spotty coverage or flaky uplinks. I'm not saying current status quo is the best, but currently we cannot have it work perfectly.
It's be good if at the TCP level you could send multiple request packets across different connections on mobile and have whoever got back first was chosen for a while as the default. You have to admit currently this is very clunky.
I would also add that specifically for things like Uber it'd be good to set very low network timeouts for Wifi and allow certain apps to suggest to the device they'd like to switch.
True, however when you're leaving the building, the most common case ought to be that you stop being able to ping the upstream router. Easy for the phone to find out, since single-hop ICMP doesn't need a long timeout.
There are other possible failure modes, of course, but fixing the common case has value.
Now I'm not too experienced, so correct me if I'm wrong, but isn't a signal strength reading part of the wireless protocol? If your signal strength takes a consistent dive over a small period of time (as you walk out of the building) you could engage the cellular connection to at least supplement the pope wireless connection.
Or how about if some x% of packets were lost/failed checksum you revert to cellular?
Both of these would likely require changes to the wireless drivers but they don't seem too unachievable.
Sure, but that's assuming you can detect the weak signal, boot up the cellular antenna, negotiate a new connection to the nearest towers (after discovering them) and connect to the internet.
I'm making a bit of an assumption here, but I think if Apple or Google could detect spotty wifi quickly enough to boot up the cellular antenna, they would be. I think the issue is more that by the time the phone can tell there is a problem there isn't enough time to bring up the cellular antenna and connect before service is interrupted.
I can't say I know much about cellular networks either, but in my opinion having the cellular antenna connected to the network at all times would greatly simplify the handoff when wifi gets spotty. The ability to use both to download/upload is just icing on the proverbial cake.
I'm not sure how it works exactly, but Google's own cellular company, Google Fi, promotes the fact that they use WiFi when available, even for phone calls, but can switch quickly to cell when needed. Phone calls are not interrupted when switching. I especially like this setup because my cellular reception is poor at work, but I can use my employer's WiFi to receive calls and data. Phone call clarity is better on WiFi than cellular but sometimes there is a bit of lag that reminds me of calling overseas using geosynchronous satellite connections in the 90's.
Great prices also. Since I'm almost always using WiFi, the $20 a month for global unlimited text and phone calls with a $10/gig data rate means I only spend about $25 a month for my smartphone service. You can only use a subset of Google phones, but I find my Nexus 5x fits my needs. I also always get Android updates right away, if I want to install them.
Google's Project Fi wireless service prefers WiFi whenever it can right out of the box. That coupled with rock bottom prices & the ability to hop onto whichever network you like make it the best mobile provider around imo [just a user, no affiliation]
Can you elaborate? I just did a cursory Google and it's not clear to me why this is true.
They're $10/gb flat with refunds for unused GB. At what usage levels do you think they're 'some of the highest rates in the industry?'
I use <3 gb/MO, mainly because the mobile <-> WiFi switching is so seamless, and I've never paid more than $50/mo off contract. The UX is also top tier, which i couldn't say about Straight Talk (my last provider).
I'll buy that they're not the cheapest, but which plan offers substantially cheaper?
I pretty much don't turn on WiFi unless I'm doing streaming audio or video.
Having wifi on is pretty bad for my battery life in general, because I'm moving around a dense city and my phone constantly is trying to connect to open wifi hotspots that are going in and out of range. Keeping it on only extends battery life if my phone is staying in one place with good wifi.
As a general rule, I always turn off the prompt to join open networks. At best, it's annoying as you move around; at worst, you accidentally join a malicious open network.
Settings > Wi-Fi > Ask to Join Networks (at the bottom of that screen)
Airplane mode, Wifi only, Mobile data (LTE) only, Wifi + Mobile data (LTE). This listing is in order of battery consumption AFAIK.
The user I responded to uses only Mobile data (LTE). His Wifi is never on, but his Mobile data always is. I suggested that since he uses mobile data instead of wifi, he would be using more battery.
Windows Phone has a nice manual workaround to this. When you disable WiFi, you can say for just 30m or an hour or four. Excellent because I never remember I've disabled WiFi until I've eaten a ton of mobile data. Of course, it's still a poor substitute for not having proper switching.
It's not an unsolved problem, it's exactly what the iPhone's Wi-Fi Assist is for.
The problem is that Apple botched the roll out and everybody freaked out and complained about their iPhone eating their data plan and driving their phone bill to $2000.
There's an app that's basically IFTTT for phones. Let's you set your phone to do things like silence itself or disengage wifi based on location. For the life of me I can't remember the name but it's out there and hopefully someone replies with it.
I really thought it was just me and my network. I disable my wifi daily starting my commute as Spotify chokes on loading songs as I walk away and lose the connection. I've been searching for a way to make it drop faster but no dice yet.
While driving for Lyft, dropping someone a good ways up Beechwood Canyon, I received a text message "You've fallen off the Lyft network, please drive to where you have better data coverage"
This is very much the opposite for me (and quite common in Argentina).
I've no signal at home. Can't receive SMS or calls. So I need to leave my phone next to the window to get the SMS. And then, generally, wait, since verification SMSs take from minutes to hours to reach.
I wish companies abroad would stop taking instant SMS for granted. It's also the stupidest second-factor you can ask me for: if I ever lose my phone, then I lost my number too.
I get get Wi-Fi from home up to about half a block down my road. Then there's the cafes and stuff, and of course, 4G.
It's also the stupidest second-factor you can ask me for: if I ever lose my phone, then I lost my number too.
This is a known probem, and most good 2FA services have solutions. For example, Google offers a small number of "recovery codes" you can store for times when your 2FA device isn't available. https://support.google.com/accounts/answer/1187538?hl=en
> if I ever lose my phone, then I lost my number too.
The assumption is that your phone is PIN-protected, and you can contact your phone operator to get the old SIM blocked and a new SIM issued. This breaks down when it comes to prepaid though.
> you can contact your phone operator to get the old SIM blocked and a new SIM issued
I know this works for some companies in some countries, and this brings me back the same thing I keep seeing all over: stop assuming the entire world works exactly like your city/provider/contract.
Of course there was a massive online campaign when it was released last year to turn it off, because Apple was costing you money because the phone might use more 3G data! People... [in AU at least you pay by the GB for data]
you then have the option to enable "Aggressive Wi-Fi to Cellular handover"
> It just artificially reduces the WiFi RSSI (received signal strength indication) to encourage the WiFi state machine to decide to switch the connection from WiFi to cellular network.
Anecdotally, I have had fewer headaches with the phone holding on to poor wifi-signals since I enabled this. Ideally the phone would handle this in a smarter way, e.g., by monitoring the strength of both the wifi and data signals and switching to whichever is likely to have the least packet loss.
> Ideally the phone would handle this in a smarter way, e.g., by monitoring the strength of both the wifi and data signals and switching to whichever is likely to have the least packet loss
The tradeoff here of course is battery life. The phone OS doesn't want to switch on a second radio until absolutely necessary for obvious reasons.
As someone who works in a building with four underground stories, this cuts both ways: there are plenty of times when I've had seemingly zero bars and full wifi yet no ability to conjure network access until I manually disable cellular data. Why it's trying to prioritize cell over wifi in the first place, god only knows.
I'd imagine it could have something to do with the incentive to take up as much cellular data as possible, the same reason many providers don't let your phone access the built in antenna.
I turn it off when I get into my elevator because if not it'll be in a 1x limbo state for about five minutes, even once I am completely out of the building.
Phone apps in general have a huge problem with extremely high timeouts and no user-facing cancel/retry buttons.
My intuition for whether a request that's not done yet is ever going to complete seems to be much better than what's written into most apps. It's really annoying when I have to entirely kill and reopen the app, rather than just have that one operation retried.
The answer to that of course is that the underlying network protocols need to be aware of this dilemma. It's wasteful for every developer to try and solve this problem on their own.
The main culprit here is of course TCP's session based view of the world which was invented for a completely different era. An era when "cable got cut" was a catastrophic event that was almost never going to happen. It's a pity that the native app world is still mostly stuck with TCP/HTTP based networking stack where a UDP/mobile-specific-protocol is what's needed.
I've set my home access point to disconnect the client when signal drops below -78. It means it might spend more time on cellular, but at least I avoid that limbo state at the front of my house.
Can someone who understands the problem summarize why switching over to another channel dynamically is so difficult?
My naive intuition would just say that if the wifi connection suddenly degrades, the networking stack should just automatically switch over and try cellular -- are there complications?
The way it works is that following: to check if wifi is in range, the only thing you can do is ping 'arthur you there?' to the router and wait for a response.
That wait time, unfortunately, is long on human timescales. Also, there's the chance your ping was lost, so your phone tries at least a few times before giving up.
My iPhone tends to remain connected to the downstairs WiFi even when I've gone upstairs and there is a much stronger connection available nearby. I'm not speaking milliseconds, this continues to happen for hours. I usually to turn off and on the wifi to ensure it re-connects optimally. Why isn't this a standard behavior? Forget milliseconds, even a 5-min re-check would be great.
I can't speak for your iPhone or the wifi software version on it, but the problem is kind of tough --- your phone would want to generally avoid hopping around different networks if it can get a decent connection from one, and it's not so clear-cut when you make that decision to check for other networks.
(I agree you make it seem pretty clear though, either it is silly or there are more details to be learned...)
I still cannot fathom why the wifi handshake process takes more than a millisecond. I have no problem with the idea that wifi signals should be unreliable since the frequencies interact with typical everyday objects like walls, but the connection strength should be known on sub-second timescales.
This Quora thread is a good example of the typical non-answers provided to this question.
Time-division multiplexing. The router has to wait for everyone else to stop using the band—and then take that opportunity to tell them to all shut up for a moment—before it can say anything. And it has to finish what it was saying before it does even this, because it has guaranteed its clients it would send packets of certain lengths by certain deadlines. (Plus QOSing: as the person owning a router, you almost always want your established wi-fi connections to take service priority, so that your phone coming gradually into range as you get home doesn't kill your family's downloads.)
Add more antennas, and you can say more things on more channels at once. "Enterprise-grade" multi-antenna routers (e.g. routers in conference halls) negotiate new connections much more quickly.
Cell towers are essentially a whole bunch of antennas (or a few antennae in highly-MIMO setups, so effectively the same thing) so there's comparatively next to no latency for sending "unexpected" packets to the tower.
(Establishing connectivity with a new cell is still hard, though, since it takes a moment for a handset to get the tower's attention when the handset doesn't yet know where precisely the tower is for MIMO-beamforming to kick in. This is ameliorated by many cellular ISPs mirroring connection state between neighbouring cells, so that when you move from one cell to another, the new tower is already "expecting" you.)
You have added to the list of differences between wifi and other standards, but you have not actually shown where the timescale comes from starting from first principles. Why 10s to connect? Why not 10 ms or 10 minutes?
I'm not sure why it's 10s; my point was mostly that, once you figure out exactly what part of the connectivity process eats up the majority of the 10 second delay, it'll be much easier to figure out the why.
Since connectivity takes (far) less than 10s on enterprise-grade multi-antenna routers, all that time is being spent in some component that's different between the two classes of hardware. So looking at the difference in BOM between average products of the two classes might be helpful in figuring things out.
Right, but there are multiple accounts of this floating around the web, many contradicting each other, and none that I've found that can explain what sets the actual timescale.
I should have mentioned something earlier, but I totally agree, and I'm not sure why these things happen on human timescales. =/. Looks like no one answered with a detailed-enough response to 100% understand it, but maybe that's an opportunity for a good blog post by an expert. (and hackernews karma from me!)
Otherwise, I hope things have been going well, btw =).
I seem to have missed it in the article and from reading the comments here, but what exactly is Uber's reason for moving away from Twilio? Are they building their own comms & SMS infrastructure in house? Are they big enough now to work out bulk deals with Telcos in each country? Are they spreading their load across multiple comms providers?
In any case, I would have thought the move would have been planned well ahead, giving Twilio time and notice to try and entice other huge customers, possibly even Uber's rivals to step in and take up the capacity?
Ex-phone company employee and someone who set up his own personal voip service (Asterix server) with DID & Termination for dirtcheap "cell phone" service here:
It's such an easy thing to do, but requires a lot of coordinated effort to do correctly. A company of Uber's size definitely should be in-housing this kind of operation and so should anyone with budget to hire engineers and a competent ops team. Heck, the hedge fund I worked at had a dedicated telephony team.
It's not sexy technology, so nobody wants to do it and that's where Twilio makes all of their money. Expensive, but convenient.
I would disagree. Twilio should be able to do it better and less expensively than Uber. The only think I can think of is Twilio refused to lower its prices or there's a glaring deficiency that Twilio is unable or unwilling to fix.
Twilio should be offering Uber a price which is just below the minimum it would take for Uber to build it themselves.
Also, Uber management should be focused on other things which are much more important for the future of the company, like the user experience, or self-driving cars, or machine-learning algorithms to predict future traffic.
Uber should not be focused on pushing down costs because the opportunity cost of losing focus is huge. It reminds me of this epic rant from Bill Gates:
It's a funny story, but while Bill was focused details about a minor product he was missing the opportunity to develop a search engine like Google, or mobile devices like Apple.
Quite possibly time and attention too. Tech execs start by building. ("Why optimize on building my own tech when I can start quickly using someone else's. Let me worry about product/market fit") Over time the drive to optimize takes over, especially as companies look to show better profitability.
Well, here's what I actually wrote: "Twilio should be able to do it better and less expensively than Uber. The only think I can think of is Twilio refused to lower its prices or there's a glaring deficiency that Twilio is unable or unwilling to fix."
The folks old/experienced enough to know better are basically all retired and for various reasons don't care.
On the phone side of things, they generally all retired with great pensions/retirement plans and never had to get too deep in the computer side of things. On the computer side of things, their packet-switched networks had different enough requirements from circuit-switched that it evolved separately and who wanted to deal with all that regulation anyway?
There's still a fair bit of overlap between internet routing protocols and telephone routing (and even postal routing).
Now that content and deliverability requirements have changed for Internet users, we're having to solve old problems again and the infrastructure is becoming more the same.
All the recent work and talk about new transport protocols for VoIP? Guess what... Just about all of your TelCos basically had voip in their infrastructure back in the mid-90s and nobody noticed the difference. Your PSTN lines connected to your local and and they connected to each other via IP to share lines (and massively save costs). Look up FXO/FXS gateways if you're interested. Some of you have this in your homes on a small scale.
Is Twilio really leveraging low-level connectivity though, getting the cost benefit of "direct to telco"?
If I search around, it sounds like they use bandwidth.com as their upstream provider. Bandwidth.com released their own api, with lower pricing: http://dev.bandwidth.com/
I also don't see much high level difference between Twilio and their other competitors like Plivo, Nexmo, etc.
Especially for simple things like SMS, it would seem to make sense for large users to have a thin shim layer that lets them load balance across providers. Negotiation would be pretty easy when you can just turn the dial to show that you're serious. This field feels very close to being a commodity.
Twilio has a better consumer facing package. And it's in a really good place right now with brand name. If they leverage this well, they should be able to cement the market with enterprise just as well as they've done with smaller companies.
Love the spin the media is putting on Twilio's earnings call. Uber load balances its traffic across multiple providers. Moving their traffic off Twilio shouldn't be seen as a signal that they're distancing themselves from Twilio. Twilio has a model that's hard to predict long-term revenue. This will continue until they figure out how to get more high value companies to sign contracts.
As mentioned in the TechCrunch article, this is precisely Twilio's problem.
Revenue concentration is incredibly dangerous for long-term prospects of any operating business. Twilio needs to broaden their revenue base to stabilize it, not find a few more whales that will dictate their future.
Problem is that it's the whales that make them a $3 billion company. Snag one Uber or Facebook and that's worth about a million small SaaS companies (I actually don't think that's an exaggeration). Yes, if they leave you're in deep trouble, but that's the business they're in. To acquire the number of smaller companies that would account for the number of SMS messages that Whatsapp sends would require so much time I think this stock would trade to zero long before that would ever happen, if it were even possible to do.
We're probably spending close to $200k/year for another company's services that we're looking to build on Twilio to save money. We'd probably end up paying 1/3 of that on their service.
We're just one company but there are many tens of thousands of companies with the exact same LeadGen problems that we have to solve that just don't have dedicated engineering teams attached to them yet like we do.
There are many other things that we could do on Twilio that would increase our spend once that foundation is laid too that we can't do now and we would like to.
We need zero touch from Twilio salespeople to make this happen -- it really only costs them in infrastructure.
I would be willing to bet that Twilio spends huge amount of money wine & dine-ing Uber and WhatsApp. Our (big internet advertising company, you fill in the blanks) rep sure does take good care of us.
Twilio's concentration problem is different from their volatility problem with these big players if there isn't a long-term contract with minimums in place.
The revenue concentration problem is well documented and I don't think we add much to that discussion.
The revenue volatility problem is inherent to how short-lived their actual product is - SMS and phone calls are ephemeral, measured in seconds to minutes. As the result, without contracts, the only thing that is stopping the outbound traffic from flip flopping providers are some business rules baked into the implementation. (Inbound traffic has phone number lock-in, which is why we don't change cell providers on a weekly basis.)
For Uber, that business logic is pretty straightforward on their largest volume SMS, making multi-vendor flip flop based on rates fairly easy.
Long term contracts with guaranteed minimums will absolutely protect Twilio from this volatility. It's not lock-in or concentration, but rather way to have more predictable revenues and manage working capital.
In parallel to trying to get long term contracts/guaranteed mins, Twilio should be (and is) diversifying their customer base.
I believe they're doing that. They've introduced two new products out of beta these past two weeks. My hunch is that they'll continue to find paths to long-term and more predictable revenue to mitigate the anxiety we're seeing with the stock. A lot of people don't really understand what Twilio does and its value proposition within the investment community. It's tough to sell this as a viable investment option if you don't truly understand what the platform does.
I do think this is just temporary. They'll bounce back. It'd be a good time to double down on the stock.
I'll venture on the aggressive side and say they are even less than a commodity.
Communication companies like these are inherently highly competitive. Each one only cover some part of the world (for instance, SMS to USA and canada).
When you have a big company operating in multiple continents, like Uber, you MUST have multiple service providers to cover all your customers (and it will also come with costs savings so you really have maximum incentive to diversify).
Once you have diversified to 3+ providers, you mastered the abstraction good enough to plug them in and out. The next logical step is to take advantage of that to put providers in a same zone in competition with each other.
They're a SaaS play with no lock-in. Which is great for businesses who want to use Twilio on a small scale then grow strategically. Sucks for Twilio because they want to have as much predictable revenue as possible.
I disagree about the no lock-in. Twilio just works. You can set it up and then forget about it, which I think is very appealing to the SMB market. The hassle of moving off Twilio likely outweighs the cost savings. So LTV is prob high and churn pretty low. As long as they can grow accounts, (which they are doing and the pace is accelerating), I think they'll be fine.
I think they are just like stripe. When you get to a certain volume you start to do the cost benefit analysis of moving off the saas provider.
Until then they are the first choice for a large portion of the developer population.
After that, it's just a numbers game: will it cost more to redevelop the functionality they provide (either on your own or with another vendor) than you will save over a reasonable timeframe? If the answer is yes, you keep paying twilio, otherwise out migrate.
I have no first hand experience on what size makes sense for twilio, but this article gives us an upper bound (a huge one, to be sure).
I think there is a "no lock in" problem, depending on what their customers are using them for. One of Twilio's upstream providers, bandwidth.com, released their own api, and is undercutting them on pricing: https://www.bandwidth.com/pricing/
As a hobby, I have been studying "oversold" stocks for the past month and am starting to see that the market is prone to over reactions. AMD and RTTR for example are stocks that were drastically punished for no good reason. I am assuming here is where Warren Buffet like folks buy. That said Twilio does seem to have a reason to tumble. The risk of losing WhatsApp also is too high for this valuation
I think your assumption on Buffett is wrong. Buffett finds companies that have a significant competitive advantage (moat) and prefers stable, blue chip, traditional brand names, preferably with dividends, that are most likely to just keep growing. And then from that group, he finds the best pricing in industries he understands to be good businesses. Buffett wouldn't touch a company like AMD, punished or not. When Buffett does it right, he's specifically mitigated the risk of a stock getting punished well ahead of earnings.
I'm interested to learn what you've found on oversold stocks though - have anything written up?
I think there's maybe something tradable from over-reactions to short-term news, but buying on an "over-reaction dip" is fraught with peril that it's just the beginning of a prolonged fall.
I bought a bunch of UAL after the UA3411 incident came out and sold the last of it today for a tidy profit. Now, if their earnings had been lackluster or worse, that trade could have gone poorly.
I have also made money in aggregate on 3x oil ETFs, but the swings can be long and deep.
The reason companies move away from SMS is because they are using it wrong. SMS is for two-way communication and not notifications.
I have a small company that is having great success with a niche product that uses SMS as a two-way customer communication platform. SMS is perfect for customer service (universal, no app to install), but it hasn't caught on yet.
SMS notifications are like noreply@ email addresses.
Perhaps I'm not a typical person but I strongly prefer SMS for my one-way notifications from service providers for appointments I've set up. I don't want to have to answer a call to hear a recorded voice tell me about the appointment or, worse, actually respond to a real human. E-mail is okay but I don't check it often. For me SMS message notifications fit just right.
- My local garage sent me an SMS notification when my car's MOT was due. The notification included the number to call to book it in.
- My bank sends me SMS notifications if my current account goes overdrawn, giving me time to log in to their app or online to transfer funds before I incur any charges.
- A couple of the local taxi services send SMS notifications when my taxi is arriving (this isn't Uber - it's made it to Cambridge but they have very few vehicles so it's hopeless).
These are all perfectly valid uses of SMS for one way communication/notification, or communication where the response isn't another SMS.
I'm really not. I see the impact 2-way texting is having on hundreds of retail stores everyday. It is a paradigm shift that seems obvious once you experience it.
I mean it's bad news, but they may probably lose 12% of their business vs a 30% stock price drop while still hitting estimates (admittedly at the low end) for revenue this quarter. The price should definitely drop, but why is this not an overreaction?
Stock price is about expectations for the future. The last quarter only matters insofar as it offers insight into the future development of a business. And that 30% drop is also not necessarily about a single issue like Uber leaving.
TWLO guided lower for Q2, coming in below expectations on both profit and sales. Furthermore, Uber may be 12% of their business now, but that company is growing, and this means the market expected TWLO to make even more money with them in the future, which is not happening anymore. This also highlights how concentrated TWLO's business is, and how quickly they can lose a meaningful chunk of their revenue. Lack of diversification means more risk, and maybe the market had not fully priced that in.
Might be an overreaction, might not. If Uber dropping out is a leading signal for "major clients aren't getting value out of their business relationship with Twilio", then that's a major problem going forward.
It's great for those that targeted their puts at the $25 range and definitely for those that have been sitting on the sidelines waiting to jump in. It's not going to stay down here for long. I agree. Total overreaction.
Twillio's business made no sense to me until now. I can build the exact same apps for customers using SMS gateways for a lower rate. Sure, they provide a single provider for a small company, but there are better features and rates offered by local companies in each country. So how many small companies have an SMS app that requires global SMS gateways?
From a technical perspective, I think what they built is great, but at rates around a penny per message, how could I make a profit? A single large customer such as Uber makes sense, but if your business success is based on a unicorn, then good luck to you.
I really think that Twillio is first to market because of the inept management of telcos, but how do you compete when they figure it out? Further, the rates per message drop dramatically on a contract for volume, especially in the wholesale market.
Then of course there is O365 Microsoft Skype for business, and I expect that all of these capabilities will be available with their UCWA api.
Before I worked for Twilio, I worked for an tier-1 SMS aggregator. Integrating with the various providers - even in the US - was a pain in the ass and connectivity fees started in the $10k+ range with monthly minimums and 10c/message iirc. When I played with Twilio then, I knew they'd win, it was just a matter of when.
When I joined Twilio, I focused on use cases that connected communications to revenue.. either on the sales side or the customer support side. Sure, 1c/message in isolation seems expensive until you realize that by sending a handful of messages (aka pennies) and being more transparent with customers, your churn drops (aka dollars). At that point, it's not even a debate.
On the international front, it got even more complex. The aggregator I worked for had contracts in the US, LATAM, and throughout Europe, each one had different interfaces, connectors, and agreements. Twilio has one. Once again, not even a debate.
Disclosure: I've been out of Twilio for 3.5 years, so no inside info here but I still have shares.
I've been a Twilio customer since 2011. We use it to send alerts to our customers (both voice and SMS). I like it because it's easy to use. Even if we're paying more than we could be, having an easy-to-use and stable API is well worth it. Also, Twilio is a minor expense in our budget compared to what developing and maintaining a multiple-provider solution with SMS gateways would cost.
On the note of "I really think that Twillio is first to market because of the inept management of telcos, but how do you compete when they figure it out?", the time for them "figuring it out" has come and passed imo.
All the big players tried to create their own offerings to compete with Twilio years ago, but they didn't catch on because they weren't developer-friendly. At this point, they prefer to remain the platform that companies like Twilio build upon from what I can tell.
You can, but if you have significant volume or a diverse customer base, it can be a huge pain in the butt. Sort of like running your own mail server in some ways.
They take care of all of that. That's worth something.
As someone looking to work with both programmable video messaging and SIP trunking in the very near future, can you name competitors that do it better?
100X the price? When it comes to SIP trunking at least, Twilio is one of the cheapest[0] if not the cheapest pay per minute provider. Compare with Flowroute[1] for instance, another popular SIP trunking provider, Twilio is significantly cheaper, especially on origination.
For the observable future telephony is the only thing that guarantees that a connection will get to you now. And sms-s have very good track records of getting them while your coverage is spotty.
Not really. If you're a business that needs to text your customers, you'd much rather use one API to send SMS messages than have to dick around with FB messenger, WhatsApp, etc.
WhatsApp would be huge. A WhatsApp PBX, auto-responders, etc. But it seems like FB would nix access pretty quickly so you'd constantly be playing whack-a-mole. They might even terminate the underlying account, making it too risky for businesses to even consider.
What are the margins on Twilio's business model, anyway? People are always saying that at medium-scale with a non-spiky workload, IaaS is way more expensive than your own servers.
So, in the same sense: at medium scale, is Twilio "more expensive than" a PBX + business SIP line + custom glue programming?
I have no idea, but profitable companies use it regularly. The larger question is whether enough smaller, profitable companies exist to backstop losses from larger, (unprofitable) companies abandoning ship to continue their growth.
IMO, the market is vastly overreacting. It's only natural that the customers that grow very big (e.g. Uber) eventually build a proprietary alternative to cut costs. That doesnt mean that the need for the service is generally declining
For the record, working with a company because they fill a need in which you lack expertise and then creating your own version that reduces your need on them is called a switchback.
Which totally makes sense from a game theoretic standpoint. I rent a car while mine is getting fixed. I stay in a hotel for a week while a renovation is done. I rent to own while I look for the right thing to buy.
The cloud is literally rent-a-wreck or rent-to-own furniture. As a cloud provider you constantly have to be adding more features and "value", otherwise the customer will build in house. And not just to cost reduce but to get transparency of ops. Clouds are opaque, companies are wise to launch on cloud then bring in house for lots of reasons.
From the cloud providers side, view each individual customer as ephemeral. When you have a single huge customer, you aren't a business anymore, you're a contractor.
(That being said: they are priced competitively, do have a great API, can do things may others can't (ie MMS), and have great deliverability across carriers.)
Twilio is perhaps one of the most expensive of all SMS gateways.
Twilio's achilles heel is their value-added approach to pricing what should instead be priced as a commodity, i.e. cost-plus pricing supported by vertical integration and economies of scale.
One of the big barriers to entry in the space is spam whitelisting. Every time you send an SMS message, there's a chance the carrier flags it as spam and doesn't deliver it. Twilio and others try to give customers a higher chance of successful delivery. That comes with direct carrier relationships and stuff.
As far as I know Uber goal is to replace all of the 3rd parties APIs/products they're using with built in-house. So I guess any company having Uber as a major customer should be concerned.
Uber was 12% of total rev at the start of 2016, and 17% later on. WhatsApp was the next largest at 9% for the year. Concentration falls off from there, with the 3rd largest customer at 2%.
Twilio's initial (unamended) S-1 filing uses Uber as a customer case study [1]. They called out WhatsApp as a business risk given that they were and are a variable account (15% of their business at the time). Uber was not, potentially because they're a Base Customer Account, but as noted in in the 10-K [2]: "its usage historically has significantly exceeded the minimum revenue commitment in its contract, and it could significantly reduce its usage of our products without notice or penalty."
[1] https://www.sec.gov/Archives/edgar/data/1447669/000104746916...
[2] https://www.sec.gov/Archives/edgar/data/1447669/000104746917...