Twilio’s success is driven by its unique platform business model where its products are provided to developers based on usage. Companies only pay for what they use with no contracts required and they billed based on whatever is the fundamental value driver of the product they are using.

Recently, Jeff Lawson, Twilio CEO, discussed their innovative products and business strategy on CNBC’s “Squawk on the Street“:

Why is Twilio a Successful Business?

It’s really the continued success of our platform business model. Platform developers can use Twilio to solve a wide variety of problems inside of their companies and how their company communicates with their customers. Whether that’s voice phone calls in a contact center or that’s text message alerts, even real-time video communications and things like Facebook Messenger, you can incorporate all those things using Twilio.

It’s the broad breadth of things that developers can build on top of Twilio coupled with our usage-based pricing model which really aligns our success with our customers’ success, so we get paid when our customers use Twilio more and build things on top of our platform. The combination of the breadth of things you can build as well as the alignment we have with their customers, that’s the platform business model that has worked so well.

Every Company is Getting Reinvented Because of the Power of Software

Uber is one of our largest customers, they represent about four percent of our revenue today, but we have many different companies on our platform. Whether it’s Lyft and other rideshare companies as well as everything from Silicon Valley tech companies to Fortune 500 companies including major banks and insurance companies.

In fact, one of the customers we noted at our Q2 call was U-Haul which is not a company you typically think of as a software company. Every company is getting reinvented because of the power of software. Every company realizes that they too are a digital company now and if your business is U-Haul you have to reinvent yourself with software and when they do the software developers who work at those companies bring Twilio in.

Customer Engagement is the Lifeblood of Every Company

I think that every company regardless of what they do is always investing in their own growth and their customer relationships. So when you think about customer engagement, how a company talks to its customers, that’s a source of growth for every company. That is the lifeblood of every single company.

How you engage with your customers and what they think of those interactions, that is the brand perception and that is the reality of the product delivery.  

The Platform Business Model is a Unique Business

We think that our business model, the platform business model, is a unique business. It’s not software as a service, it’s got a lot of different attributes, it’s not traditional on-premise software, it is a new kind of software company. Because of that usage-based model we can sustain a nice expansion rate and nice growth rate.

How Are the Services Measured?

Things like phone calls and text messages and video sessions are measured in gigabytes and our new contact center Twilio Flex is measured in the amount of time the agents spend using it. Each one of our products we break down into the fundamental value driver for our customers and we bill for that and what that does is it aligns our customers’ success with our success very nicely.