You've Probably Used a Twilio Service and Didn't Even Realize It

By Markets

Twilio (NYSE: TWLO)saw explosive growth after its initial public offering earlier this year -- but, as befalls many tech companies, a lot of would-be investors don't have any idea what the company actually does.

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In this clip from Industry Focus: Tech, Dylan Lewis and David Kretzmann explain what services Twilio provides, why they're so popular, and how you've probably used a Twilio product before without realizing it. Also, the two take a look at a few of the company's many impressively huge customers, and why developers from established giants and little start-ups like the platform so much.

A full transcript follows the video.

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This podcast was recorded on Sept. 30, 2016. All comments about current share price reflect where the company was trading that day.

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Dylan Lewis: Twilio is one of the big IPO names this year. It's one of those names that a lot ofpeople may have heard of, but they probably have no idea what they actually do.

David Kretzmann:Yeah. This has been,I think it's pretty easy to say, the hottest tech IPO so far this year.I think they went public in June, and the stock hasdefinitely been on a tear.I'm excited to dig a little bit deeper. But,taking a high-level view of Twilio,this is a company that describes itself as "communications as a service." Think of it as anAmazonWeb Services [AWS], butfor developers working with communicationstuff with different apps. I think we'll talk about some use casesthat give a very high level of you that will dig a bit deeper into.

Lewis:Yeah, they really like that AWScomparison. They bring it upa couple different times in conference calls, prospectuses. They're thiscloud communication platform, and they're notoffering up this single software application. What they're doing instead isbuilding a platform of building blocks thatallow developers to add communicationfunctionality into different software applications, which is aroundabout way of saying, cloud communications.(laughs) But, if it sounds like an in-the-weeds tech company,that's because it is. They describe themselves as "acompany founded by developers for developers,"and I think that shines throughin the solutions that they offer. As we hinted at,since going public in June, the company has been on a tear. Theoriginal offering price of $15 per share,first day trading sent it up to the mid $20s andthey have not lost steam. I think shares are currently in the high $60s.

Kretzmann:Itkeeps going up.

Lewis:So,a lot of interest there. To get a better sense of what they do, and use anillustrated example here, we'regoing to touch a little bit on howLyft andUber do very similar things, integratingTwilio into their services. Lyft has this on-demand service where you are able to hail rides andhave them show up at your doorand you're ready to go. Of course, in order to do that,they need real-time communicationbetween passengers and drivers. So, they've integrated Twilio's software-powered communications,and they have this custom solutionthat basically allows for real time SMS, oras we most commonly know it, textupdates from drivers to passengers to let them know aboutwhere they're going to be.

Kretzmann:Thebenefit for Twilio, it makes it a much more scalableand secure solution for Uber or Lyft,because you're not actually a passengercontacting the actual number ofthe driver. It's basically a virtualphone number that's owned by Twilio,in this case. So you're calling that number,but it's still connects you to the driver. So it's a moresecure way. That way, if you're a passenger,you're not giving up your phone number to someone you don't know,and vice versa with the driver. That's part of the appealwith the platform.

Lewis:Yeah, they use the masked phone numbers product that Twilio offers. Basically, like you said, it letsindividuals use their phone numberwithout actually sharing theirspecific contact information. So you don't have to worry aboutsomeone harassing you afterwards,or chasing you down because you didn't offer them a tip on Lyft, or anything like that. They use the service to sendnotifications for when drivers accept requests,and when they arrive at a location,if the ride status changes. It's funnyusing this as an examplebecause a lot of people probably use Twiliowithout even realizing it.

Kretzmann:Probably. Twilio hasa pretty impressive list of customers. Just to name a few -- we already talked about Uber --WhatsApp, owned byFacebook,is actually their biggest client. Then,we're talking aboutHome Depot,Netflix,Airbnb,Nordstrom,Intuit,Box,Venmo, You can go on and on.TripAdvisor,Expedia. They really areserving customers across the board. Not just tech companies. A company like Home Depot might use Twilio'ssolution to do automated customer service to customers,things like that. So they're across the board.

Lewis:Yeah,a lot of names you wouldn't expecton that list. Just togive you an idea of some of the different usecases that Twiliooffers to its customers, two-factorauthentication is a very popular one. Basically, you have a secondform of password,or a second way of identifyingthat you are the person you say you are. Most of the time, that happens through a user's phone via SMS or text. ETA alerts, if you're talking about Lyft and Uber, so,estimates on when a ridewill arrive, confirmations, order tracking, that kind of stuff, masked phone numberslike we talked about before. I've also seen automated surveys. So,you can receive customer feedbackusing either automated voiceor SMS surveys,and those integrate with the existingcustomer relationship databasesthat some of these retailers use. So, not just a tech company that servestraditional tech companies. They're kind of bridging out and becoming an all-encompassing provider.

Kretzmann:And the appeal of Twilio fordevelopers,they let you scale with the platform. We'll talk more about this later. Essentially, you pay as you go. Youdon't have to pay a flat, high monthly subscription fee for this. But,if you're developer, you can play around on Twilio for free,you can register,and in a matter of minutes,you can create one of these different products, two-factorauthentication or something with the voiceor messaging or video. So it's very easy to use,intuitive platform. And I think that's a part of the reasonyou're seeing a lot of big namesdrifting to Twilio,because you don't have to worry about the infrastructure for this. Twiliobasically gives you the software and the platform. If you're a developer,you have all of these different building blocks that Twilioprovides and helps automateand simplify the whole process, so you can spend a lot more time developingand scaling that product really quickly.

David Kretzmann owns shares of Facebook, Home Depot, Netflix, and TripAdvisor. Dylan Lewis has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook, Intuit, Netflix, and TripAdvisor. The Motley Fool recommends Home Depot, Nordstrom, and Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.