Twilio's Spending Is Out of Control
It can make a lot of sense for a software company to pour a big percentage of its revenue into the acquisition of new customers. Software companies usually enjoy lofty gross margins because it doesn't cost very much to deliver software, whether it's perpetual licenses or subscriptions.
If a software company must spend $1,000 to acquire a customer who then spends $800 annually on a product that delivers an 85% gross margin, it takes just about a year and a half for enough gross profit to be generated by that customer to cover the acquisition cost. Knock the gross margin down to 50%, and now it's a 2.5-year payback period. That's not nearly as appealing.
That brings me to Twilio (NYSE: TWLO). Twilio's core product is a set of application programming interfaces (APIs) that allow developers to quickly and easily integrate text message sending and receiving into their applications. The company has expanded over the years, partly through acquisitions, and now offers email services, marketing solutions, a cloud-contact center platform, and a variety of other services.
Source Fool.com
