Commodities

Is Twilio Stock Just Selling a Commodity?

Twilio (TWLO 1.19%) has the scale and depth to serve its customers’ needs. In this clip from “3 Minute Stocks Updates” on Motley Fool Live, recorded on May 11, Motley Fool contributor Brian Withers makes the case for why Twilio is more than a commodity business and offers a broad ecosystem of solutions.

Toby Bordelon: Twilio is essentially a communications facilitation platform. That’s what they do. They have tools for communicating via phone and text messages and whatnot. Help me understand this, how is this not a [laughs] commodity business in 2022? Where is the moat? Does this remain a high-margin business for the next decade? How?

Brian Withers: I love when you simplify complicated tech companies as just the commodity text messaging business. But, absolutely good question. When investors look at a company like Twilio and you don’t work in an IT organization and really don’t have insights into IT companies, you tend to put a consumer lens on things and try to understand it from your perspective. You might get a text message from your local doctor, or dentist office that comes from a Twilio competitor, and you’re thinking, “Wow, is this a commodity? These local businesses aren’t using Twilio?” But this is what you really need to understand about Twilio. When you look at large enterprises, Twilio has the scale, the breadth, the depth to serve their needs way better than these one-off apps. Let’s take a look at a recent customer win with a company called Allergan [AbbVie(ABBV -0.47%)]. The company had historically built their communications around doctors. One of their products is Botox, you may be familiar with that. But now, they wanted to create a loyalty program and have a direct relationship with the ultimate end users of their products, the patients across their business segments. Well, when they went to go look at this because they’ve been acquisitive and built their company through a number of actions over the years, all of these different brands had legacy applications and their applications were all segmented and their data was disconnected into different silos with no central record of customers in any common format. They faced a big decision. Do we overhaul our entire business and spend years trying to consolidate this stuff, or can we go with a product like Twilio and its segments customer data platform which can connect to all those disparate data sources and provide one central communication and loyalty portal? Without Twilio’s broad ecosystem of solutions, Allergan never would’ve been able to do that and would have had a massive issue, and maybe not even chose to tackle this problem, leaving millions of dollars on the table. I really like this large ecosystem Twilio brings to large company enterprises.

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