But what I’m trying to get at here is that we’re midway through earnings season. And we’ve heard from a couple software companies this quarter that specifically called out that headwinds got incrementally worse in the third quarter. Some software companies called out that there was a material drop in spending from certain customer verticals. Others called out diverging spending trends in enterprise versus SMB customers, noting that SMB got incrementally weaker over the course of the quarter. So curious to hear a little bit more about how Twilio’s business compares to that commentary from some other companies?
Aidan Viggiano: Sure. So why don’t I start and then Khozema or Jeff jump in as well. So as it relates to, let’s talk about communications that’s the vast majority of the business. So we continue to see volumes remain stable in the quarter. So that’s been two quarters in a row, second quarter and third quarter, we’ve seen volumes stabilize, and that played out through the third quarter. Now, when you look at it at an industry level, we do see some verticals presenting a headwind. We talked about crypto and social and messaging. But when you look at the other kind of larger industry verticals, we are seeing growth in those. And so our overall growth rate is somewhat masked by the headwinds that we are seeing on crypto and social media as well.
So we do feel good about where the business is. I’d also say, as you think about the dollar based net expansion rate for that business. So it’s lower than it historically has been. It’s 101% in the quarter, and it’s an 8% growth rate overall, right. So the vast majority of the growth is coming from the new customer base. The other thing to consider on the dollar based net expansion rate is what we’re seeing is churn has been historically low. It continues to be low. We’re seeing really higher contraction and lower expansion relative to historical levels. And this is where something like crypto comes into play. So it’s a good example in terms of understanding what we’re seeing. So obviously, when there’s less crypto volumes on our customers platforms it results in less verification messages on our platform.
So we are seeing some specific industry headwinds, but overall feel pretty good about how the business is performing from a stabilization perspective and across most of the industries.
Jeff Lawson: Yes. Well, I basically agree with Aiden said. I mean, I think you specifically asked about headwinds in part of your question, and I think the one that we’ve pointed out a number of times now is crypto. We’ve also historically kind of talked about social and messaging and some of the headwinds associated with those categories. But I think if you look at several of the other industries in which we participate; we are seeing pretty good growth and I think that generally makes us feel pretty good. As Aiden alluded to volumes have been stable. That certainly feels pretty encouraging and I think the way that we’ve dialed the business and the way that we’ve addressed our cost structure, I think in spite of whatever it is that kind of comes at us for the foreseeable future, we feel pretty good about the way that the business is sized. And so I think now we’re prepared to kind of execute through whatever that environment is.
Unidentified Analyst: Perfect. Thank you. I mean any difference in spending for enterprise versus SMBs at this point?
Jeff Lawson: Nothing specific that I would really point to there, I mean, we gave you a little bit of additional color on self serve earlier. I mean, I think there were some short-term dynamics with 10DLC for example that created some friction at the time. We’re past that now. So I wouldn’t really expect that to persist. I wouldn’t call out anything specific with enterprises.
Unidentified Analyst: Perfect. Thank you very much. Appreciate it.
Jeff Lawson: Thanks.
Operator: Our next question comes from Ryan Koontz with Needham & Company. Please go ahead.
Ryan Koontz: Thanks for the question. I want to drill down on kind of where we are on the cost out journey for the comps business. Obviously a lot of great work there in terms of expanding profitability. How much room is there to go either through the self service efforts or other programs that are still in place and what you’re working on? Thank you.
Jeff Lawson: Yes. Obviously we’ve come quite a long way in a short period of time. I do think that there is some additional opportunity in terms of driving efficiency. I think that, as you’ve seen in the published results our businesses responded quite well as a result of some of these structural changes that we’ve made. We did two that we’ve kind of talked about over the last year or so, and as a result, we’ve been able to take out quite a lot of cost. I think we’ve also driven a lot more discipline, focus, simplicity and all of that has created greater efficiency. In terms of additional areas, I think, we talked about self serve a little bit. I think that’s always an area that will allow us to drive ongoing efficiencies.
I think in that category in particular, what we’ve really been focused on is simplifying the on-boarding the experience – the user experience that kind of product journey, so that a lot of the kind of high touch human interactions that would have happened historically, that those have waned and that’ll help us reduce our cost of sale. I don’t think we have to really add any material incremental headcount to the communications business to get after growth, so that feels pretty good as well. AI is obviously an area that you can imagine both externally and many of the remarks that Jeff shared and Aidan shared earlier. In terms of customer AI, like we definitely see that being a growth accelerant at some point; but I think know two, we’re also looking at some internal opportunities in which we can drive efficiencies there as well.
And so I think to just put a wrapper on the whole thing, we feel like that we can continue driving incremental growth without really any sort of meaningful increase in the operating expense profile and that’s how we’re running the business.
Ryan Koontz: Super helpful. Thank you.
Operator: Our next question comes from Pat Walravens with JMP Securities. Please go ahead.
Pat Walravens: Oh, great. Thank you. It’s really great to see the success of the communications business at nearly $1 billion quarterly run rate. My question, Jeff is, I mean, even with new leadership the TD&A business performance doesn’t improve. Do you think Twilio could drive sustained long-term shareholder know just with the communications business and without the TD&A business?
