To say the last two months have been busy for CLX Communications is perhaps an understatement. The communications platform-as-a-service (CPaaS) provider has acquired not one, but two companies in the last two months.
In March, it announced a deal to buy Danish company Unwire Communication for around DKK148 million (£17.5 million), adding more than 300 enterprise customers in the Nordics to its base.
Just a few weeks later, CLX announced the acquisition of Vehicle Agency, a mobile technology and custom video media company founded in 2010 in Seattle, Washington. Vehicle offers a dynamic video messaging platform for businesses, adding a new string to CLX's bow, according to VP of Marketing and Online Sales Rob Malcolm.
“One of the most important considerations going on across all messaging companies is whether we should try to add more value beyond just having an API,” he explains. “It's always something in the back of our minds and in the back of our competitors' minds. Basically, SMS is highly commoditized, so the theory goes, the more value you can add, the better you can differentiate yourself from the competition.”
The vehicle offers CLX "the opportunity to add value to our customers without competing with them," Malcolm adds. It also has a strong presence in North America and good relationships with a number of businesses there, according to Malcolm. This is supported by the company's website, which cites campaigns for brands such as AT&T, Macy's, MillerCoors, and Cricket Wireless.
“North America is an interesting market because MMS is very successful there—A2P MMS is very successful,” he adds. “It's true that OTTs have stolen market share from SMS and MMS, but mainly from the P2P side. So the US was very early in the development of MMS, and it's widely used, especially for marketing.”
Rob Malcolm
This is especially important given the expected increase in RCS adoption, he adds. The rich communication services combined with the opportunities offered by personalized video services create a powerful marketing tool. CLX sees "enormous growth potential" with RCS once it's fully online, he explains.
“Outside of North America, MMS has always been considered unreliable and too expensive, but in the US it managed to overcome these problems because it was relatively late to the market compared to other countries,” says Malcolm.
"For us, you could potentially leverage MMS to deliver personalized videos, send a link in SMS that offers a personalized video, but RCS Turbo charges for the entire proposition because it becomes a bespoke inline video just for you. So we're combining a much-needed delivery mechanism for the enterprise in terms of RCS, but we're also aiming to capitalize on macro trends because people want more personalized and targeted marketing and promotions."
The Unwire acquisition, however, was much more about regional opportunities and continues a trend CLX saw in 2017 of buying local SMS companies with the acquisition of Xura Secure Communications, a German technology company.
Upon the acquisition of Xura, CLX stated: “Since its launch, Xura Secure Communications GmbH has successfully built a strong market position and today holds a market share of over 30 percent in Germany. With the acquisition of Xura Secure Communications GmbH, the Enterprise division of CLX Communications has strengthened its significant presence in Germany.”
Malcolm says the thinking behind the Unwire purchase is similar as it offers CLX the opportunity to strengthen its position in the Nordics, particularly Denmark.
“Unwire is one of the largest A2P SMS companies in the Nordics and is particularly strong in Denmark. Most of the SMS world has historically been fragmented,” he explains.
"There have been local companies in local countries that have traditionally built strong footholds in their home markets. Unwire has established a solid customer base that includes most of the major Scandinavian banks, and they have many local contracts with the Danish government. We see an opportunity to acquire these smaller domestic players with a strong proposition in a particular country. This follows our acquisition of Xura (Germany) last year. If we see a strong company in a local market, we plan to add to our scale wherever we see an opportunity in a country where we don't have a particularly large presence, and that helps our growth."
So, is this consolidation a trend you expect to see continue in the SMS market? “We see an opportunity to remove some of the fragmentation in the global SMS ecosystem. We continue to benefit from this because we are one of the largest and most profitable companies.”
In a market where competition is extremely high, smaller companies often struggle to maintain profitability. This, according to Malcolm, represents an opportunity for companies like CLX.
“I think [consolidation] will be quite rapid—I expect us and our competitors to see about 8-10 acquisitions per year of major domestic players. This suggests to me that we should see the emergence of three to five major players operating on a global scale.”
Rob Malcolm
Does this mean we'll see more M&A activity from CLX? Malcolm uses the age-old trope that the company is always looking for the right opportunities, but he said the key word is "right."
He concludes: “Whether we acquire or not is largely determined by what's out there. When it comes to mergers and acquisitions, you always need to ensure you continue to provide quality service to your customers. You don't want to overwhelm or distract your team from delivering that service to customers. For us, not only are we looking for opportunities, but we have to work hard to ensure we find a scalable way to integrate these potential acquisitions into our company. But it's quite natural.”
