Twilio stock plummets as major client Uber distances itself
techcrunch.com
techcrunch.com
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...
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.
[1]: http://speedify.com/mobile-vpn
[2]: https://play.google.com/store/apps/details?id=it.opbyte.supe...
[3]: http://forums.androidcentral.com/samsung-galaxy-s5/402722-ho...
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.
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.
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.
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.
There are other possible failure modes, of course, but fixing the common case has value.
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.
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.
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.
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?
https://play.google.com/store/apps/details?id=com.cheekydevs...
Also helps me avoid worrying about spying... work has a right to monitor (blue coat) all comms so better to keep work and home stuff separate.
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.
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.
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.
On Android, if you unlock the hidden Developer Options, there is a toggle for "Aggressive WiFi to mobile handover".
But I wonder why the setting is hidden and not a default.
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.
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
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.
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 can tap on About Phone a few times to enable Developer mode.
I've gotten to the point where I'll manually turn off WiFi as soon as I set foot outside my front door. It should be automatic.
https://www.howtogeek.com/129728/how-to-access-the-developer...
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.
https://android.stackexchange.com/questions/90250/what-does-...
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.
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.
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 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.
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?
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.
(I agree you make it seem pretty clear though, either it is silly or there are more details to be learned...)
This Quora thread is a good example of the typical non-answers provided to this question.
https://www.quora.com/Why-does-it-take-so-long-to-establish-...
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.)
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.
Otherwise, I hope things have been going well, btw =).
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?
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.
You're saying it would have cost Uber more than $33 million and change to do their telephony?
I strongly doubt that. Uber doesn't need all of Twilio's features. They can build out just what they need much cheaper.
This is the same situation people find themselves in with AWS, etc. It's less expensive _initially_. There's a point where this becomes not the case.
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:
https://blogs.technet.microsoft.com/kaiaxford/2008/06/27/why...
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.
These days I don't even buy phone credit anymore. I just make calls on my phone using Skype - It's so much cheaper.
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.
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.
when was it written? it's frustrating there is no date on the post.
So they can further concentrate their revenues? I'm sorry, no, that's exactly the worst thing they can do. I'll refer you to this piece:
https://www.inc.com/magazine/201206/jason-fried/huge-account...
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.
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.
Yep, your job is then to ensure they don't leave. "All your eggs in one basket and WATCH THAT BASKET" and all that
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 do think this is just temporary. They'll bounce back. It'd be a good time to double down on the stock.
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.
And the interchangeable nature of their business is pretty much the definition of a commodity.
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'm interested to learn what you've found on oversold stocks though - have anything written up?
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.
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.
In cases where no response is prompted and I need to cancel, then I'll call (or email if that's available).
- 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 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?
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.
For the record, right now Google shows TWLO at $23.65 after hours from an end of day close at $33.94.
That said, it's already at $24.94, up 5% from the after hours price.
There's a sentence that should be written more carefully.
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.
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.
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.
(disclaimer: former Twilio engineer)
They take care of all of that. That's worth something.
Twilio is the market leader for developer SMS, and voice.
They are not the market leader for any of the other categories that they are trying to expand to.
Edit: if I recall correctly from many years ago, this is who Twilio uses for their US telecom/CLEC interface.
Edit 2: yep, bandwidth.com now even competes against Twilio: https://getvoip.com/amp/blog/2016/06/01/twilio-alternatives/
Twilio is good at one thing. And that is the developer experience.
If you are willing to pay 100X the price, in order to have awesome documentation, then Twilio is the right solution for you.
Otherwise.... Well.... Anything else is probably better.
[0] https://www.twilio.com/sip-trunking/pricing [1] https://www.flowroute.com/pricing/
Also their SPA app is what you'd expect from JavaScript apps—buggy and prone to slowness once it reaches a certain scale.
So, in the same sense: at medium scale, is Twilio "more expensive than" a PBX + business SIP line + custom glue programming?
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.
Just wanted to point out that the author is a bit of an idiot.