Mixed messages in the chat about Slack

Will a high growth rate and VC capital aplenty be enough to ensure Slack's longevity?
11 May 2018 | 5629 Shares

Everyone uses Slack these days, including hundreds of officers in the Hartford Police Department. Source: Facebook /SlackHQ

Messaging, chat and collaboration app Slack has found what it thinks to be a winning formula in the enterprise, according to figures released recently. The company claims it now has eight million daily users – and three million (around 40 percent) of those pay for the privilege.

Six months ago, the San Francisco-headquartered company’s use figures were around a third less in terms of both total users and revenue-generating punters. Around 65 percent of Fortune 100 companies use Slack – according to the company – although it’s unclear as to whether use in those lofty climes is widespread, or limited to the odd workgroup or department.

The subtext is one that has blessed Slack since its early days; the company has massive growth, impressive investment figures, and is pushing a product that is pretty good at what it does.

Estimates put Slack’s income from paying enterprise at around US$300 million per annum; whether that’s enough to offer a return on the reputed US$700 million invested in the company so far, and pay its 800+employees, is unknown.

The company’s preferred splash screen. Source: Slack

A spot of back-of-envelope calculation shows that each employee, therefore, generates a cool US$250,000 – although the company’s recruitment efforts seem aimed currently at an even spread of product promotion & support vs. engineers. Engineers, IT folk and developers are, as we all know, a terrible drain on resources and make profit margins cigarette-paper thin.

The world of venture capital investment is one closed to most of us mere mortals, of course, but the amounts of money being literally bet on Slack show that the monstrous cabals of hedge-fund managers and their ilk opine that something worthwhile is going on.

But do the investors care whether Slack succeeds or fails?

Those with a financial wedge of the pie will be pleased that big enterprise players like Salesforce and Workday have built integrations to the app, but if Slack ends up going the same way as Yammer – bought by Microsoft in 2012 – then the investors win, too. Even if the company looks like it’s going broke, the canny investor should be able to flip quickly, if they haven’t already.

The difficulty which Slack may experience in the future is that although getting enterprises to pay for services isn’t necessarily a difficult hurdle to jump, organizations know there are decent alternatives from Slack’s competitors.

And the competition has other revenue streams and reams more to their business credential role-calls than a high growth rate and more VC money than it can burn.

Microsoft’s Office 365 subscribers receive Teams as part of a suite of products for which they’re already paying.

Likewise, Hangouts is right there, among the paid-for Sheets, Docs and Drive.

Facebook’s Messenger for Business is now three years old, and Zuckerberg’s earlier acquisition of WhatsApp is gradually rolling out its business version across the globe.

Messaging isn’t a core product to Slack’s competition, and big business is partial to a little internal cannibalization if the necessity arises: if Teams (recently pushed hard at Build 2018) doesn’t take off and is left to wither on the vine, then Microsoft lives on.

Slack, therefore, may well be expanding its user base, so how else might it make some income? If it’s depending on apps/integrations with other enterprise systems, it may struggle: you can’t build a business model based on the success of other businesses, especially when some of those businesses are competing with you in your self-same narrow niche.

Rumors and second-hand information on the developer grapevine also inform us that there’s not a decent living to be made out of producing Slack apps & integrations. So relying on the impetus of a fanatical dev base probably also isn’t going to be enough.

And while we at Hybrid (owners of Tech HQ) use Slack, or rather, some of the staff do, it’s certainly not a game-changer in terms of our internal business processes.

There’s no real reason why we couldn’t use a different messaging app and if Slack disappeared (if, say, subsumed into a competitor’s offering) the (virtual) printing presses here would undoubtedly keep running.

Regarding Slack’s future, this author would point in the direction of Yahoo! Mail as but a single example – like Slack, an excellent, well-supported product, but one that has all but died.

It lost out in the face of if not better competition, then to a competitor who does other things really, really well. Gmail may not be glamorous but it won because of Google’s power, presence, and foresight in many different markets.