Twilio's $2 billion for SendGrid says that email's not dead

Phil Wainewright Profile picture for user pwainewright October 15, 2018
Despite the rise of messaging, chatbots and voice assistants, Twiio's $2 billion purchase of SendGrid sends a message that email's far from dead

Twilio SendGrid merger graphic 370px
In a surprise move on the eve of its annual conference tomorrow, communications services provider Twilio has announced a $2 billion all-stock deal to acquire email communications provider SendGrid. The transaction will bring together two companies that already work closely together, providing API-based services that developers call upon to add communications functions to their applications.

Adding email to the voice, messaging and video channels that Twilio already supports has been a constant refrain of customers, according to Twilio co-Founder and CEO Jeff Lawson. This has been intensifying as the vendor moves into offering more packaged offerings, as in last year's launch of its Engagement Cloud, which bundles its APIs with prepackaged business logic, or its introduction this year of Twilio Flex, an enterprise PaaS for the contact center, as he explained yesterday in prepared remarks to investors:

We started Twilio by building voice, then SMS, video, web and mobile chat, channels like FaceBook Messenger, and WhatsApp and more. Along the way, email has always been something that customers have asked us about ...

Since the launch of the Engagement Cloud, we are increasingly having higher-level, more strategic conversations with executives about how to reinvent their customer engagement. And more often, these discussions are touching upon email as well. This has become even more apparent since the launch of Flex, our contact center application platform, as email is consistently one of the top requests from customers in our beta program.

Twilio and SendGrid

Just as Twilio turns communications channels such as voice, SMS or messaging apps into programmable services that developers can simply hook into their applications, so SendGrid does the same for email. Its services are commonly used to handle transactional messages, such as shipping notifications, friend requests or sign-up confirmations, as well as marketing messages such as email newsletters. Since 2012, it has had a partnership with Twilio to integrate other channels such as SMS, voice and push notifications to mobile devices.

Shared customers include digital innovators such as Uber and Airbnb, as well as more traditional businesses large and small. In yesterday's press statement, SendGrid CEO Sameer Dholakia comments:

Our two companies have always shared a common goal — to create powerful communications experiences for businesses by enabling developers to easily embed communications into the software they are building. Our mission is to help our customers deliver communications that drive engagement and growth, and this combination will allow us to accelerate that mission for our customers.

The two companies are both growing strongly and announced today that they expect to exceed the guidance previously given for their third quarter results. Twilio's share price has tripled since the beginning of the year — although it dipped slightly in the wake of yesterday's announcement — while SendGrid's has more than doubled since its IPO last year. Twilio says that email represents a total addressable market worth $11 billion, to add to its existing TAM of $55 billion in programmable messaging, voice, video and authentication.

The acquisition, which has been agreed by both boards but still requires the approval of shareholders, is expected to close in the first half of 2019. The plan is for SendGrid to become a wholly owned and separate subsidiary of Twilio, and to retain its independent identity and current management.

My take

We've written a lot over the past year or so about the rise of conversational computing, driven by messaging platforms, chatbots and intelligent voice assistants. But for all the novelty of these fast-growing engagement channels, there's still no escaping the reality that many conversations still take place over email.

Even millennials still see a role for email, and not just for transactional messages such as authentication. As I heard one eighteen-year-old entrepreneur explain a few years ago:

Most people merely glance at their social media feeds, whereas they scan all of their email inboxes for action items. Send your daily offer to their Facebook newsfeed at the wrong moment and they’ll miss it forever. Send it to their email inbox and it’ll sit there waiting for their attention; unopened forever, perhaps, but never discarded unless they explicitly delete it.

While this year's consumer email survey from Adobe does find that alternative channels such as instant messaging, phone, face-to-face and video conferencing are on the rise, email remains the top engagement channel. That means brands must develop engagement mechanisms that straddle both email and all the other conversational channels. Customers have a choice, and many of them still choose email for some of their communications.

Ultimately, email probably will die out. But that's a long way off. So long as significant numbers of customers still find it convenient for certain types of message, businesses need to offer it as an option. The reverse is also true, and perhaps businesses like us here at diginomica should start thinking beyond the email newsletter as a means of keeping in touch with our signed-up subscribers (look for the 'Get more articles like this' tab on the right-hand side of the page to sign up).

For all such cases, Twilio and SendGrid's decision to blend their API platforms more closely together makes a lot of sense. I'm here in San Francisco for the Twilio Signal conference and will report further during the week.

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