What does it take to build enterprise martech in data management?
We’ve been speaking to Peter Reinhardt, CEO and co-founder of Segment, to find out how he and his team built the customer data infrastructure business.
Reinhardt spills the beans on how he and his co-founders realised they had a viable product, to what the platform does now, and where the company is headed in the next five years.
What is Segment?
Peter Reinhardt: “Segment provides the first-party customer data infrastructure that businesses use to put their customers first. We help companies record, understand and act on their interactions with each customer.”
Who is in your team?
Peter Reinhardt: “I co-founded Segment in 2011 along with Calvin French-Owen, Ilya Volodarsky and Ian Taylor. Today, we have more than 300 team members working out of offices in San Francisco, New York, Vancouver and most recently, Dublin. We have worked hard to create a collaborative and inclusive culture that everyone can feel proud of, and plan to add another 100 people to the team by the end of 2018.”
What were the biggest challenges involved in building the tech or growing your team?
Peter Reinhardt: “Our biggest challenge was finding initial product-market fit. Believe it or not, Segment started out as a classroom lecture tool. My co-founders and I dropped out of university, joined a startup accelerator, and set out to build a product that would allow students to anonymously communicate when they were confused during a professor’s lecture. Hundreds of thousands of lines of code later, we realised the product was not going to work: most of the time, students were opening their laptops and going straight to Facebook instead of paying attention.
“Our next idea was to create yet another analytics tool. This product didn’t get a lot of traction either, as it was quite a crowded space. We had to go back to the drawing board.
“Then one of my co-founders remembered a small software framework that we had created early on that would send data from our classroom lecture tool to Google Analytics, Mixpanel and Kissmetrics. He thought this idea might make for a good product. I thought this was a terrible idea and there was no way to build a business around it. We fought all day about it.
“Finally, I came up with a way to kill the idea: we’d publish an open source version of it to a website called Hacker News. I was sure it would drop to the bottom of the ratings, but ended up being completely wrong – we had a huge influx of interest within 24 hours of the post going live. We built the first version of the product over the next five days, and launched to all the interested signups. We haven’t looked back from there.”
What problems does Segment solve?
Peter Reinhardt: “Smart use of first-party data is key to providing a consistent customer experience, but it is a huge and unexciting data, infrastructure, and engineering problem. Most companies are currently unable to solve this problem, unless they are Facebook or Airbnb and have limitless engineering resources. The reality is that building even just one integration requires hundreds of hours of engineering work and countless weekly hours to maintain.
“Picture it this way. The marketing team just wants one little integration done. No problem. Next, the product team needs a different pipeline to a different tool. Pretty soon, marketing needs another couple of integrations built – and next thing you know, the support team also wants some integrations. These pipelines multiply like rabbits, and you quickly end up with a rats’ nest of data pipes running every which way. Segment takes care of all this infrastructure, so companies don’t have to.
“At its core, Segment allows companies to collect, unify and act on their first-party data using just a single API and pipeline. With just a few lines of code, first-party data can be gathered and unified from 40+ sources (e.g. mobile, web, cloud applications and backend servers) and sent easily to over 200 marketing, analytics and data warehouse tools. This saves engineers valuable time and provides marketers with a frictionless experience as they build their marketing stack.
“Personas, our customer data platform, helps solve the problem of personalisation by enabling businesses to intelligently organise, synthesise and act on their customer data. Built on top of our customer data infrastructure, Personas allows companies to gain a complete understanding of each customer from all touchpoints, to effectively provide individualised customer experiences at scale. For example, the marketing team at a clothing retailer could quickly identify all their customers who have spent more than £100 in the past six months, then automatically sync this data to tools for email, ads, site content, or even in-store systems. Without Personas, this characteristic about users would need to be computed in each individual tool, by each individual team or user of that tool – that takes exponentially more time and yields inconsistent results, especially if the customer data that lives within each tool is different.
“Segment also makes it easier for companies to achieve GDPR compliance and meet key end-user rights requests. Using just a simple API, customers can manage user deletion and suppression requests, as well as automatically forward them to their integrations.”
Where would you like to be in one, three and five years’ time?
Peter Reinhardt: “The market opportunity for customer data infrastructure is in the billions of dollars, and we have ambitious plans for Segment in both the short and long term. In the next year, we plan to continue our rapid expansion in Europe. We’ve already seen strong traction in this market, and some of our most innovative customers are headquartered here. Looking further ahead, we picture Segment as the backbone of customer-first businesses everywhere.”
Other than your own, what are your favourite websites/apps/tools?
Peter Reinhardt: “There are hundreds of tools out there that are useful for companies who want to really understand their customers. Segment integrates a lot of these and helps them work together, so we’ve learnt a lot about which tools work best in which situations.
“It’s hard to name just a few – but for basic, top-of-the-funnel marketing analytics, Google Analytics really is a powerful tool. Mixpanel and Amplitude are great for more product analysis. Adjust is strong for attribution analysis, and Optimizely is good for A/B testing.”