Segment's lucrative engineer-focused message, valid story or pure spin?

Segmentation vendor Segment is today announcing $27 million in Series B funding. But is their engineer-centric message a valid one?

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Segment is a platform for collecting customer data wherever it’s generated. The rationale for Segment's existence is that, while organizations increasingly want to use data to better tailor products and services to their customers, the work involved in capturing and transporting that data is a barrier to realizing that ambition. Segment's hypothesis is that, just like aqueducts in days gone by, there is a latent demand for data (or water) but that the infrastructure to provide that data is the missing piece.

Every vendor under the sun, however, promises to help collect and transport data; Segment is differentiating itself by saying that its solution is engineer-centric. Whereas many companies are creating a narrative around data tools for business users, Segments story is around data tools for engineers.

What Segment does is to consolidate an organization's data-tracking activities down into a single API, meaning that the engineering load to integrate new tools is minimal. An organization's engineers need only code to a single authoritative API to integrate all the different solutions they can combine with their tools. Instead of using engineering resource to set up data analytics, gather data and transform it into a usable format, Segment provides a centralized platform for collecting user interaction data and sending it out to more than 160 third-party tools and databases.

Segment claims customers such as DraftKings, Bonobos, and HotelTonight. The company, which had previously raised $15 million from Accel Capital last year, is today announcing a further $27 million Series B investment, this time led by Thrive Capital with participation from existing investors Accel Partners, Kleiner Perkins Caufield & Byers, and Jon Winkelried, former president of Goldman Sachs. The company already processes 50 billion API calls per month and has rapidly increased its user base, revenue and integrations.

This idea that different services run on the same core data is a valid one -- by reducing the engineering burden to utilize data, Segment should not only reduce time to value, but also reduce costs since a single source of truth doesn't exists for data.

It is, however, the engineering-centric messaging that is interesting. Peter Reinhardt, CEO and co-founder of Segment, said that "...engineers love Segment -- our API empowers them to easily collect and structure their data, so teammates in product, marketing and business intelligence can flip a switch to push data to tools they need." This is a fairly drastic difference from other analytics companies who, rightly or wrongly, are articulating a vision that sees business users able to harness data.

It's kind of intriguing, but I suspect Segment is onto something here. The reality is that their solution is no different to other similar tools out here, but by drawing a line in the sand around their engineer focus, Segment perhaps points to the elephant that is apparent in the room -- that despite all this talk about democratizing analytics so it becomes a process that a regular business user can leverage, the reality is that most of these actions are, in practice, undertaken by IT departments. It may not be sexy, but IT still handles the vast majority of data analytic functions.

Whether Segment can take what is essentially a marketing message and translate it into a truly defensible product platform remains to be seen. In the meantime I suspect that some of that $27 million will be spent on more marketing initiatives to further leverage this engineering-centric story.


Copyright © 2015 IDG Communications, Inc.

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