Nexmo may not have quite the reputation as its larger and older rival Twilio, but the company has been quietly building a name for itself among a key group of developers, messaging apps and e-commerce businesses.
Like Twilio, Nexmo bridges the new world of IP communications with the old world of telecom carriers. While Twilio focuses on voice and SMS, Nexmo has keyed itself into the texting world. It powers the SMS services for Viber, Korea’s Kakao Talk, Japan’s Line and ICQ. And it ships the SMS confirmations, alerts and booking communications for Airbnb. This month Nexmo handled 250 million app-to-person messages, CEO Tony Jamous told me in a recent interview.
Nexmo’s current run rate is 2 billion SMS transactions annually, but since its traffic is growing 20 percent each month, it will far exceed that number this year, Jamous said. Couple that with a developer base of 35,000 subscribers, and Nexmo looks to be carving a small but growing chunk out of one of Twilio’s core businesses.
If you’re still a little confused by what companies like Nexmo and Twilio do, don’t worry, it’s not an easy business model to grasp. There’s a fundamental disconnect between the networks built by telecom operators, which traffic in old-school signaling protocols like SS7 and SIP, and the IP-and web-centric world of app developers. Twilio and Nexmo develop the APIs that act as universal translators between those different languages. With a few lines of code, an app can suddenly make phone calls or send and receive text messages.
Twilio is unquestionably the leader in the field. It’s recruited more than 200,000 developers to its side and on track to become of Silicon Valley’s big success stories in cloud communications. Last year at its developer event, Twilio revealed it had processed half a billion phone calls from its cloud-based communications platform. At the time it was handling 1.5 million API calls to Twilio Voice a day. When Twilio updates its numbers at its next dev conference in September they’re sure to be far larger.
Twilio started with voice and then moved to SMS, but it so far hasn’t revealed any SMS numbers. Meanwhile Nexmo has taken the opposite approach. It started with SMS and — at least for now — it’s sticking with SMS. Nexmo runs a text-to-speech API that lets developers convert messages into phone calls, but Jamous is still cagey about when and if Nexmo will release a full-fledged voice API. “I’d prefer to not answer that question right now,” Jamous said.
The lowly text message, however, has proved a lucrative business for the startup. Nexmo raised a $3 million in its Series A round in February, but according to the company it’s already profitable and cash flow positive. Jamous wouldn’t reveal exact figures, though he said annual revenues were in the tens of millions of dollars and they’re growing in line with its traffic at a rate of 15 percent a month.
Nexmo, however, continues to seek VC funding because it ultimately has to invest big in infrastructure, a key point of difference between it and Twilio, Jamous said. Today the company has a physical “messaging hubs” in 90 countries, and it’s able to reach 5 billion phones, many of them on networks built on networks more than a decade old. It’s also built its infrastructure in anticipation of massive scale.
“We’re only at 10 percent capacity in usages,” Jamous said. “We have a lot of room to grow.”
Ultimately Nexmo wants to have a presence in nearly every country in the world, making it a kind of global virtual carrier that can link any application to any service providers network through the cloud, Jamous said. As it builds up that infrastructure, Nexmo’s developers can build truly global customer bases, he said. Considering Nexmo has just 27 employees divided between London and San Francisco, those are some pretty lofty ambitions.
Message photo courtesy of Shutterstock user Brian A Jackson