|   Business


  |   Business


With the SMS Service Market Heating Up, Sinch Is Breaking Away From Its Competitors

Communications-Platform-as-a-Service (CPaaS) has become an incredibly lucrative field, where billion-dollar companies compete for contracts from the world’s largest businesses. The cloud-based services offered by such companies are in high demand and form the often-unseen backbone greasing the wheels of online commerce.

Facilitating mobile and online communication between enterprises and their clients has become a big business, with companies such as Sinch reaching twelve-digit market caps in little more than a decade of activity. Offering services ranging from mass SMS communication to e-commerce verification, Sinch has made a name for itself as one of the main players ensuring trust between sellers and buyers. Founded in 2008, the Swedish company is now recognized as a global CPaaS leader and watched its stock price soar approximately 300% in 2020, making it a top performer in Europe’s Stoxx 600 Index.

Rapid Expansion

The increased focus on phone and online messaging that emerged as a feature of the coronavirus pandemic meant that the messaging market in general was less affected by the economic downturn. Sinch’s consistent growth, even as other sectors remained frozen in place, attracted the interest of investing giant SoftBank, whose SB Management arm bought a 10.1% stake in the Swedish firm in December 2020.

Since SB Management’s investment, Sinch’s share price has inched up by almost 50%, and the company has parlayed SB Management’s backing into a number of substantial acquisitions. The Swedish company recently expanded into Oceania through the acquisition of web-based service MessageMedia. With over 60,000 users and more than 5 billion messages handled each year, MessageMedia has already established itself as a major service not only in Australia and New Zealand, but also in Europe and the USA. The deal, worth around $1.3 billion, has strengthened Sinch’s position as a global leader in the ballooning SMS service provider market.

MessageMedia is only the most recent company to be added to the Sinch stable, following a string of acquisitions that included the Indian ACL Mobile, SAP’s digital interconnect business and the US-based Inteliquent in the last year alone. It doesn’t look like the acquisition trend is going to slow down any time soon, either, as SoftBank’s SB Management recently poured an additional $110 million investment into Sinch.

Sinch’s bonanza of acquisitions came about at least in part as a response to similar moves from the firm’s main competitor, Twilio. Over the last few years, Twilio’s M&A department has also been busy expanding its brand by buying Zipwhip, a US-based text messaging software company, among others.

The explanation is straightforward: the market needs to consolidate due to the expectations customers have from CPaaS providers with regards to quality, scale and reach. Clients want world-wide coverage from a single company, with a range of omni-channel capabilities that reaches all their customers.

A Busy Industry

While Sinch and Twilio are both expecting roughly $2.5bn in revenues by 2022, they are two very different businesses. While Twilio has sought to increase its business through acquisitions, it trails Sinch when it comes to flexibility, lacking both the external integration options and the multi-user friendliness that Sinch provides.

CPaaS has historically been fragmented, either geographically or by specific communication channels like SMS, voice or e-mail. The most glaring division, however, has to do with size, with different companies preferring a hands-on enterprise focus, a low-touch SME focus, or, by going “bottom up” and aim to build market share with the developer community.

Sinch’s decision to focus on large enterprises - rather than on developers - already appears to be the winning ticket. While Twilio has come under fire from analysts for burning through its cash pile, Sinch has already become profitable, with a growth rate of anywhere between 30% and 50%. Even more worryingly, Twilio’s business model makes it a direct competitor to several unassailable giants, such as Adobe or Salesforce, while Sinch has preferred to build partnerships with these industry behemoths.

A Growing Sector

Customer engagement and security are more important than ever, at every level and with customers of all sizes, particularly considering the emergence of entirely new product categories like telehealth and fitness at home.

While security concerns have been among the top priorities of cloud companies since the sector’s inception, the topic became even more critical in the post-pandemic world. A 2020 study has shown that one of the biggest issues plaguing the world of telemedicine is the tendency of patients to withhold important medical information from their healthcare providers due to fears over the security of their data. Their fears are not without reason, as the pandemic brought about an avalanche of scams and hoaxes from hackers looking to prey on the vulnerable.

Several large players have recently come together to tackle SMS fraud exploiting Covid-19 alerts. The industry initiative, which is backed by groups such as Mobile UK and UK Finance, as well as CPaaS companies like Sinch, Twilio and Vonage, created a SMS SenderID Protection Registry which allows organisations to better protect their communications from interference from SMS phishing attacks.

CPaaS is now an indispensable aspect of modern life, with everything from doctor’s appointments to take-away food orders depending on it. It’s not surprising, then, that savvy investors like SB Management are betting big on industry movers and shakers like Sinch, whose remarkable growth and strong industry partnerships have made it the breakaway company of this remarkably lucrative field.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes

  • Market Data

Welcome to EconoTimes

Sign up for daily updates for the most important
stories unfolding in the global economy.