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Comment by bkruse | Hacker News Reader

The cost of revenue is interesting. I want to shine some light from an insider perspective to the industry.

I operate a telecom company that mimics the twilio API and we are nabbing their bigger customers left and right. Being fully transparent - our average cost per minute of long-distance is $0.00014 (with 6 second increments) and twilio charges $0.0015/minute (with _60_ second increments).

Wholesale long-distance prices are falling MUCH faster than application providers charging per-call or per-minute. IMHO, That arbitrage will be squeezed eventually as telecom becomes more commoditized.

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Twilio has been very effective at the low volume end of the market with individual developers where simplicity and time to market is more important than price.

But that equation changes as a company grows. The question remains whether they can also play effectively at the high volume end of the mArket. I have heard of several other companies that mimic the Twilio API, but with much more competitive pricing.

AWS is successful because companies are deeply locked into their unique services and APIs. Twilio does not (yet) have the same deep lock-in of customers.

That's a great comparison between AWS and Twilio.

I think Twilio is going to try to get there - and they have made some progress that's made it difficult to mimic on the backend.

I would hope that their cost structure is flexible enough to allow them to be competitive in the high volume space. That may not be nearly as much margin, but at one point in time, only 2 years ago, 2 customers made up 35% of their revenue (from what I had heard).

Take any developer that knows nothing about telecom and start dialing in seconds. That's extremely addicting - but it is quickly replaced as those bills rack up with pretty small volume pricing discounts.

Switching from twilio to us? Easy. Change the URL.

Switching from AWS - with the insane amount of APIs and toolkits that entrench you into it's structure to someone like rackspace or google? Much more difficult.

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