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Making Markets EP42: Twilio CEO Jeff Lawson on Customer Engagement, the Macro Economy, & the Signal Conference
by Daniel Newman | November 2, 2022

In this episode of Making Markets, Jeff Lawson, CEO and co-founder of Twilio, talks with host Daniel Newman about the company’s Signal conference in San Francisco, what the future of customer engagement looks like, how to make customer experiences more personal and targeted, and his outlook on the current macroeconomic environment.

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Transcript:

Daniel Newman: Jeff Lawson, CEO of Twilio, joins making markets this week as Twilio holds its signal conference in San Francisco. I had the chance to sit down with him and talk about what does the future of engagement look like? How do we make those messages that all of us receive more personal and more targeted? And of course, because this is Making Markets, I talked to him all about what he sees as the economy, is there a recession coming, and what should the people be looking ahead to? Tune in, excited for this one. You’re joining Making Markets.

Voiceover: This is the Making Markets Podcast brought to you by Futurum Research. We bring you top executives from the world’s most exciting technology companies, bridging the gap between strategy, markets, innovation, and the company’s featured on the show. The Making Markets Podcast is for information and entertainment purposes only. Please do not take anything reflected in this show as investment advice. Now, your host, Principal Analyst and Founding Partner of Futurum Research, Daniel Newman.

Daniel Newman: Jeff Lawson, CEO Twilio, welcome to Making Markets.

Jeff Lawson: Thank you, Dan. Great to be here.

Daniel Newman: It is good to have you here. Lots going on. Excited to be spending some time with you this week, last week. It depends. It’ll probably be published this week and that’s the beauty of the real time world that we live in. And being out in San Francisco, you guys have a great big event coming up. But quick introduction, I assume on Making Markets, a lot of your colleagues from Bill McDermott to Darius Adamczyk have joined me here on this show. CEOs of great public companies. Twilio is a name that everybody is affected by but not everybody knows. So when somebody hits you straight away and says, “What’s Twilio?” How do you answer that question?

Jeff Lawson: Well, we help companies that you do business with every day. We help companies to build relationships with their customers with great digital communications and great digital understanding of their customers. So I’ve often given just countless examples. We have 280,000 customers on our platform. And so with that many customers, it’s like when you fly in an airline and they are send you a text message, “Your flight’s boarding, go to this gate,” or do a ride share or a food delivery and you’re getting a message or a call from the driver saying, “Hey, I’m delivering something,” or if you stay in a hotel and you can now text with the front desk or even just companies who are doing a really good job of understanding who you are and then personalizing their services and making their sites more relevant in their marketing, more relevant to you, Twilio is powering all those experiences. And the key insight I think that we’ve had that has enabled us to serve so many customers, 280,000 customers. A cross section of the entire economy is that every company is becoming a digital company.

And as part of that, they need to actually become builders of mobile apps, of web apps. They need to use these digital technologies to understand. And so what our platform does is empower the builders of the world, software developers and product managers and marketers, all the people who would need to really understand and leverage this technology to go build great digital businesses, well, they come to us and they use our platform to go execute on their digital visions. And we like to say our mission as a company is to unlock the imagination of builders. Because with the internet and the digital world that we now live in, really, one’s imagination is the only limit to what companies are doing every day. And so we’re here to unlock that imagination and make it so that every idea that companies have, whether it’s executives or developers or product managers, whoever it is, that they’re able to churn those ideas and make them into a reality using the power of software in the internet. And that’s how every great digital business that I’ve ever seen has been built.

Daniel Newman: Yeah, that’s a great answer. And I always say touched by Twilio. There’s so many times each day that you’re probably touched by Twilio and you don’t always know it because, of course, the companies aren’t going to be like, “This message came because of Twilio.” But you built a massive developer ecosystem that built the connectivity tissue that really enables brands and individuals to have meaningful interactions, and hopefully even better interactions. We’re going to talk about how you’re working on that in just a minute.

Now, this is a podcast I call Making Markets. The reason I call it that is the intersection between technology and markets. And while you’re in a period of time I can’t really talk to you too much about numbers, in fact not at all because of the time of the quarter it is, I do love to ask CEOs that are running companies about their perspective on the macro environment. We went through a huge period of rapid acceleration since about November of last year. It feels like we’re in this decelerating period, but it seems to ebb and flow. Just curious, what’s your overall take on where things are at right now in the economy?

Jeff Lawson: Yeah. Well, obviously, it is a choppy environment in the macroeconomic sense. And you see it in all the various earnings reports that are coming out or the macroeconomic data that’s coming out. And the way that affects us or the conversations that I’m having with customers is at the C-suite and beyond inside of pretty much every company you can imagine, folks are being asked to do more with less. Budgets are getting scrutinized. There’s more focus on bottom line profit generation for every company. And therefore, as leaders in companies, there’s hard questions that people are getting asked. “Hey, how can we continue to grow top line but spend less doing it?” Or, “How can we continue to achieve our business goals but have less people available to do it because our hiring rates are slowing down?” And so every leader basically is asked, “Show me the ROI of your investments and do more with less.”

And therefore, in this environment, what we’ve started to see is just a lot of companies getting a lot sharper about the fundamentals of their business, which it’s not a bad thing obviously, but the pace at which it’s happened has caught, I think, a lot of leaders off guard. And therefore they are figuring out now how to answer some tough questions when you come off of, look, a decade of essentially free money in the market that has fueled a lot of growth in many different sectors and many different asset classes that now managers are asked to do better in terms of efficiency. And so we’re having a lot of conversations with our customers about how our customer engagement platform actually helps them to do that. And I think that’s really the name of the game right now is how do you help your customer? How do we help our customers?

But how does every company become more efficient at growth, at serving their customers? Because it’s not like nobody wants growth anymore or revenue growth, customer growth. We have to get more efficient in how we do it. And that’s every company out there. And that’s the conversation I’m having with a lot of our customers. And luckily, I think that our customer engagement platform can really help unlock that efficiency for our customers. But that’s a change in tone. A few years ago, we were talking to companies about, “Hey, how do we become the Uber of our industry? Amazing experiences.” It wasn’t about efficiency that was about creating these experiences for their customers. But now it’s about, “Hey, a lot of the same ideas and the same technologies, but how do we use them to more efficiently grow?” And I think that’s the biggest change that I’ve seen in last year.

Daniel Newman: Yeah, there is a lot of that. And actually, the pandemic was almost a bit metaphoric because when we all of a sudden saw tech taking off and companies were reinventing themselves, they just spent, spent, spent, spent, higher, higher, higher, grow, grow, grow. And it wasn’t because they didn’t want to make investments in data and engagement platforms and doing their transformation initiatives, it was because the growth came so fast that it was hard to throw purely technology. You had to throw everything at the problem. Now with this slowdown, companies are reassessing, they’re looking at that big picture that you talked about. Now they’re saying, “Okay, we can’t just throw the kitchen sink. We’ve got to be more intelligent about it.” And by the way, I made two macro observations I’d love to just ping your way. One is we’ve come to at least a temporary end of the feature becoming a company, meaning there was a lot of features that became companies during this pandemic period of time where they came out public. You have one thing and you’re really a part of a stack, not the stack.

And then the second thing is that I think in any economy, there’s growing on alpha and there’s growing on beta. And I think that there for a couple years with ZIRP, you mentioned zero interest rates, if you are cool and could show growth at any cost, you were getting more valuable. And I think alpha now is the good companies that have good products that know how to serve their customers, that serve their communities, their developers, their builders, they will grow. And the companies that were growing on beta are going to struggle. And I think that if you surmise what’s happened, I think we’re seeing it now. And I think coming out of this, it’s going to be all about being able to get close to your customer, overcome these challenges in the data landscape, and scale. So I wrote an article about the customer engagement platform. You and I had a little interaction on Twitter about it. We had some fun. We’re moving from a data platform era to an engagement platform era. Talk about what that means to you. I think it’s a powerful movement.

Jeff Lawson: Yeah, absolutely. If you think about what the internet enables, it enables a company to build a direct relationship with their customer. And for the last 100 years or so, you have huge companies. Think about a Procter & Gamble, the largest consumer products company in the world for 100 years, they basically didn’t know who their customers were. They produced a product, shampoo, soap, whatever, went on the shelves of a retailer. Someone came in and bought it and even the retailer didn’t really even know who the people were. And so they would do focus groups and things like this to try to understand who their customers were. But they literally didn’t know Jeff is their customer. “What can we sell to Jeff that he will like?” But along comes all this digital technology that enables that.

And think about the companies who are the leaders of this digital revolution over the past two decades. It is the companies who’ve really figured out, “How do you use data to understand your customers and therefore serve them better?” So Amazon, Google, Netflix, these are the giants of the digital era. And you can tell that they’re using customer data incredibly effectively because their products get better the more we use them. Think about Amazon. My homepage and yours, they’re completely different. Google, you and I can search for the exact same phrase, but we will get very different search results based on who we are, where we are in life, where we live, et cetera. That is an example of using the data that they have earned the right to have about us to actually improve their products that therefore make us more likely to use their products. And the interesting thing about it is if those small handful of companies are the ones who have the direct relationships with us, then every other company at some point will have to go through those folks to reach their own customers.

And I think that looks like an existential threat for the rest of the world. If I believe that in order to talk, in order to get the next transaction, I need to go buy my own customer’s attention back, whether it’s by transactions on an E-commerce platform like Amazon or by ads on Google or Facebook, that’s just a top line inhibitor of every business that’s out there. And then you throw in all the privacy stuff that has changed the last few years, it means that every company out there, it is an existential crisis basically, that they have to get to know their customer, they have to earn the right to have first party data, and then use that data to build more relevancy into all their communications and their product interactions with their customer. Otherwise, they end up having to go buy their own customers back from the Amazons, Googles, Facebooks of the world, and I think that’s really the danger that most companies see.

And that’s why so many companies are investing in this notion of knowing their customers, of a direct to consumer product evolution, and therefore needing to earn first party data and then really effectively activate it. And that’s what our platform is doing for our customers is to help companies take the first party data that they have the right to get and actually build, first of all, with the CDPs, so Segment is the leading customer data platform in the market, take all the signals that you’re getting from your customer, what did they click on, what did they scroll past and not click on, what did they buy, what didn’t they buy? And turn that into an understanding your customer that allows you to say more relevant things, whether it’s product recommendations, whether it is make your marketing more tuned so that they don’t unsubscribe. These are all the things that enable companies to stay top of mind for their customers. Because at the end of the day, I don’t know, if I’m a Nike, if I need a new pair of shoes, Nike wants you to type into your browser, N-I-K-E.com.

Not somebody else. They don’t want you typing in G-O-O-G-L-E. Because once you do that, you have to go buy ads for your own name. By the way, your competitors are also buying those ads in order to win back that customer. Every company wants to be top of mind for their customers in their category. That’s what building a direct and unbreakable relationship means. And I think it’s probably one of the biggest changes in the internet in the last 20 years because for the last 10 years a lot of companies were saying, “These platforms are great. Look, we can go buy ads. We can go put our products on Amazon. This is amazing.” And now people are realizing, “Oh wow, I’m worried about that future. Therefore, we have to go on our own path and actually build our own first party data asset, own our own customer relationships, so that we actually have the ability to execute further in this digital world.” And that’s what Twilio is enabling companies to do.

Daniel Newman: Yeah, I could spend a lot of time talking about this and digging in. Unfortunately, we don’t have a ton of time. But I will say you hit on two really important things. One is that this evolution is we relinquish control of our customers to big platforms. And now I think companies want that control back or should want that control back if they don’t. The second thing that we didn’t really think about is that technology and the privacy might movement that is going on may force us to have to do this. So it’s going to be a do it by choice or do it by force, and I think companies that are smart are going to do it by choice because they realize there’s a better lifetime value, a lower customer acquisition, a better cross sell, upsell. I only got two minutes with you because you’ve got to run. You’ve been super generous with your time. You’ve got a big event coming up. Signal, I’ll be out your way. Hopefully, we’ll get some time face to face, Jeff. Talk about what’s going to be announced, what’s exciting, why it’s a big deal for Twilio.

Jeff Lawson: Well, there’s a bunch of really cool things that we’re announcing. But basically, everything is aligning to this idea of how do you use a great customer engagement platform to both lower your customer acquisition costs and then increase the lifetime value of your customers? CAC versus LTV. That’s the equation that runs the internet because if you spend less to acquire a customer than you make back in the lifetime of that customer, that’s considered to be a good business. And if that’s not true, then it’s considered to be not a great business. And so CAC versus LTV, customer acquisition cost versus lifetime value, that’s the equation that runs the internet. And so we’re really focusing on, first of all, how do Twilio’s products help you lower your customer acquisition costs? And there, you’ve got our CDP that allows you to understand your audiences and then go very efficiently by ads.

We’ve got one customer who’s speaking who saw a 700% increase in their return on ad spend because they put in Segment. That’s what companies need right now. And so we’ve got that. But then how do you activate those customers once you know them? Once you understand your customers, how do you act on it, run campaigns? And so we’re really excited to be bringing Twilio Engage, which is our omnichannel orchestration product. It just recently went to general availability. And so we’re really excited to be showing that off to customers and showing how they can use the best data platform in the market, Segment, and then Engage, which allows you to activate that data. So say, “Oh, this customer just reached this point in their journey. Now, I want to send this text message, send this email, add them to this audience, do custom things, create a conversation with them.” This is what’s possible with Twilio Engage. And so Twilio Engage going general availability is really exciting and we can’t wait to talk to our customers about it. Plus, we’ve got some other exciting stuff too.

Daniel Newman: Well, Jeff, I’m super excited. I’m going to tell you right now, we’re going to have to have you back on the show. We’re going to have to have you back a little bit longer because there’s a lot of between the lines to read. But hopefully, this is a good preview for everybody out there about what’s going on, what’s the story of the customer engagement platform, and of course always good to get your sort of take on the macro. It’s a little bit of a different take because you really did zoom out a little bit and talk about, “Hey, this is what companies, customers, enterprises, CEOs, need to be thinking about.” And, of course, that’s the audience here for this show. So Jeff Lawson, CEO of Twilio, thanks so much for tuning in to Making Markets.

Jeff Lawson: Thank you very much, Dan. Great to be here.

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About the Author

Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio