The One learning from Q1 Earnings and Google’s (Other) Big Announcement
Q1 Earnings
Twilio's earnings concluded the Q1 earnings releases of the public CPaaS companies I track. These reports offer substantial insight into the individual businesses and the overarching macroeconomic conditions. For example, it has become evident that the slowing economy is finally showing up in decreased messaging volumes. Moreover, after a few big years of organic revenue growth and M&A deal heat this downturn is forcing a drive towards efficiency.
More than cutting travel budgets, kitchen snacks, and paid sabbaticals, efficiency is user retention. When new customers are hard to come by, you try and keep (and grow) the customers you have (and want). Twilio's emphasis on developing new products and prioritizing profitability over growth suggests a willingness to forego revenue that doesn't fit their profile. Bandwidth, with an average monthly revenue of $14.3K per customer and a relatively static customer count, is focused customers whose traffic patterns aligns with their goals. Upland, the only company experiencing both negative QoQ and YoY growth, attributes this to foreign currency exchange rates. Yet, they’re trying to sunset old licensing terms that are not core their future business.
The focus on retention mirrors the larger SaaS sector. SaaS Capital reports Gross Revenue Retention (GRR) is highly correlated to Annual Contract Value (ACV). They claim it is because customer service has become a core competency for most SaaS businesses and they are realizing that it is table stakes.
This is something I mentioned last year when discussing NRR and GRR and how they help figure out the health of your growth.
What we’re seeing now is that NEW is getting harder, for everyone. So the efficient play is to focus on improving retention and improving upsell.
Finally
Google just announced that 800 M phones were RCS enabled. This is big, and sets up perfectly my next blog post as to why every Brand should have an RCS strategy.
Happy Tuesday!
TJ