Very true Alex, but slack is being used over Skype by devs because it helps their work flow (Jenkins integration, JIRA integration etc).
Does slack offer benefits for non developers over Office 365 products? Do you think itās likely that a company with no developers would switch off of Skype and onto Slack?
Im very skeptical and I donāt think this is likely based on my experience - there is no reason for them to do so. Taking the past two companies I worked for, both of which has Slack and Skype for business: Devs were on Slack, non devs were on Skype.
Yeah instinctively it feels that Slackās addressable market must be much larger than developers/20m. Also I wonder if the non-engineers outnumber the engineers. However a lot of the concerns above about monetising users seem valid. And it does seem expensive. (I use Slack a lot, am delighted for people I know working there, but am doubtful about buying the stock.)
On defensibility: I believe Microsoft is bundling free Yammer and Teams with Office365, so youād expect to see it take business from Slack because enterprise customers will go āWell, weāre committing to O365 and that comes with something like Slack thatās free, so bye bye Slackā.
Slackās moat/argument might be that their product is better than the competition, it just does more, works better etc. (I believe this is true based on using Yammer a year or so ago: Y works but literally everything is a bit clunkier (and it had a horrible api).) It will be interesting to see if that is enough.
One interesting thing about that question is that maybe Freetrade is in a similar position: the product/service seems better than the HL or II or whoeverās equivalent. Is it easy or hard for the competition to catch up with Freetrade? Is design a sufficient differentiator?
The challenger banks vs the incumbents are perhaps a good reference point for this. The incumbents have started trying to replicate the functionality that the challengers have built but the user experience is still significantly worse & it doesnāt appear to be slowing down the challengerās growth rate
Itās incredibly blinkered to say Slack is primarily a tool for software engineers.
Even without integrations, channels and group chats can be very powerful communication tools, especially in comparison to long email chains.
With integrations, it goes way beyond Jenkins, PagerDuty, Jira, etc. You can put your calendars in there, Stripe has an integration, you can have bots to scrape Twitter, Intercom can be used from Slack, and so many more. Thatās scope for use for far more than just software engineers.
Even if the market is software engineers, most businesses arenāt just software engineer silos. They coexist with PMs, ops, customer support, sales, finance, admin and so on, who can all use Slack too.
Slack is much more than a chat tool for devs. Itās actually much more popular with non-tech people because itās simple to use and offers a lot of integrations. Hence, Slackās TAM (total addressable market) is internal communication. I also think they will eventually expand into gaming like Discord.
Is the current price reflecting the current growth stage of the company? Probably not. Consider this for a second: they raised 400M at a post-money valuation of 7B$. The current share price puts their market cap at almost 20B$, thatās 3x in <6 monthsā¦ But hey, thatās what you get when the SPX is hitting ATHs on a weekly basis.
Kudos to Slack for 1/ doing a direct listing that puts 0 lock-up on employees stocks 2/ nailing the timing of their listing. One to watch once markets cool down.
Very true, but in your example you state how other operations coexist with developers. The developers adopting Slack is what drives the business to migrate to it.
As mentioned before, in my experience in multiple companies, non-devs were not using Slack by default. When I worked for one of the big 4 accounting firms, not a single person used slack - there were no devs and therefore no drive to use it. As a non dev you can do everything you have mentioned (and more) with Skype for Business which works better with your daily tools. Integrations with outlook, integrations with Office apps, Integration with Active Directory. Microsoft teams emphasises this even more for non developers - all via the office licence the company will already have.
I am yet to see a situation where a company with no technical functions is picking slack over Skype for Business because of the reasons you have suggested.
I totally disagree, I have worked in non tech companies and they used Skype for Business for the integrations with Office, Active Directory etc.
I will happily eat my hat at a future freetrade meetup for you if Iām wrong, but at the moment I just cant see it.
We use Skype for Business and itās a bit cack to be honest, In fact in many ways itās worse than the ordinary skype we used to use before the company decided to introduce it
Slack will never replace emails though; it might reduce the number sent by people who moved from Pidgin and similar chat apps and now have team channels but emails will still play a large part & so companies will still use Outlook etc
citation needed. Software engineers arenāt the decision makers for an entire business.
Every modern business has some element of technical function.
But even then itās very easy to give you counter examples from Slackās own website of businesses where the main focus is not on writing code. Away is a suitcase retailer, Liberty Mutual is an insurance provider, Sunday Times is a newspaper, Target is a general retailer.
The company posted a net loss of $0.14 per share in the July quarter, better than Wall Street analysts had expected. But Slack also said it now expects to lose between $0.40 and $0.42 per share for the year, worse than analysts had estimated.
From July 2019 - Microsoft Teamsā users number surpassed that of Slack.
Microsoft is a MOAT.
Maybe thereās always room in this universe for Slack but because everyone uses Slack its stock price/valuation has nothing to do with it.
Microsoftās Teams collaboration app is now used by 13 million individuals on a daily basis, according to data released by the company Thursday, surpassing rival Slack for the first time.
Microsoft introduced Teams in 2017 as a competitor to Slackā¦
Highly recommended to visit listed companiesā investor relations (IR) sites. They are easy to find if you google them e.g. Slack Investor, Slack Investors, Slack Investor Relations
Click on Financials (SEC Filings), then check 10-Q (quarterly earnings) or 10-K (annual) because typically a press release or a presentation does not get reviewed by anyone external. Also take a look around, maybe thereās a transcipt here, a video there, a presentation from some Wall St Bank Event hidden somewhere.
Slack had 100,000 paid customers as of 31 Julyā¦
Paid Customers
ā¦
As of July 31, 2019 and 2018, we had approximately 100,000 and 73,000 Paid Customers, respectively.
Paid Customers >$100,000
ā¦
As of July 31, 2019 and 2018, we had 720 and 412 Paid Customers >$100,000, respectively.
I personally feel like Slackās pricing model is done really well. They allow businesses to use the entire product for free, however you canāt see past messages over 30 days, a must have feature for a lot of businesses which gets them to sign up and subscribed. Once youāve started using the software youāre basically tied in, and all Slack need to do is slightly ramp up with subcription fees like Netlfix have done. Iām not expecting any decent returns till at least the next 2-3 years!
However there is the likes of Microsoft Teams with so many businesses embeded with M$ products itās definitely a strong competitor.
Slack and Teams are team āMSN-as-a-serviceā businesses with add-ons like and calls + integrations with Trello, Asana, Google Drive, etc.
There is a ālock-inā because of the archives but SCRUM/TODO list apps like Trello (owned by Atlassian) and Asana (a Bay Area startup that hasnāt grown in value much recently) are more organised when it comes to getting stuff done (productivity) in my experience.
Microsoftās advantage in my view is that Teams is part of Office 365. And if youāre a software developer, well they already own Github. Not to mention LinkedIn.
Google should launch a proper Slack competitor and combine it with Google Drive (free) and G Suite (Office 365-like). What would happen to Slack if they do?
Slack also faces other non-traditional competition such as Discord.
Iām not against Slack but in the long runā¦
ā¦is Slack a startup or a feature?
and
Did Slack do its IPO so that the early backers could cash out while the markets were in the rally mode? (āPump and dumpā) Itās market cap is just under USD 14 billion. Can they justify it vs, say, USD 5 billion or USD 1 billion?
Beware of a large competitor which turned your product into a feature.
According to Professor Galloway:
Slackās pros:
High growth, recurring revenue, strong retention revenue
Slack captured a loyal following including half of Top 100 US companies
DAU - daily active users - up 33% year on year
Revenue growth over 50% year on year.
Nice renewal rates - key metrics for valuing high growth companies
Slack has > 100% net dollar renewal rates
Network effects - the more users, the higher the valuation
Especially on shared channels: 20% of users use them to talk to people outside the company
Top tier talent
~40% of Slackās employees used to work at Top 80 tech company
~20% studied at a Top 30 university
Slackās cons:
Slack could be overvalued
49x revenue (not even EBITDA) at IPO - while Uber was 7x, fb at 28x, amazon at 28x, beyond meat at 17x.
Market cap as of 20 Sep at 34x revenue - still greater than IPO valuations of amazon, fb etc
but many companies are overvalued?
Microsoft Office 365 has Teams - with network effects and recurring revenue bundles (365 monthly fees)
In late 2016 Teams was launched
In early 2017 Teams was buncled with Office 365
Slack: 10 mln DAUs in 6 years
Teams: 13 DAUs in < 3 years
Slack: 500k customers
Teams: 600k customers
ā¦ Microsoft, therefore, has more paying customers with less DAUs
Slack is $6.67/user/month
Teams is $5/user/month for the entire Office 365 package - āitās more expensive not to use Teamsā
Potential options for Slack to fight off MSFT:
Choose love: Slack could succeed if employees demand Slack and Slack has a better product. Software devs may like Slack more: 1800+ integrations vs 220 @ Teams. But Teams has 4.8 stars on iOS App Store and 4.6 on Google Play. Both higher than Slackās app.
Choose a partner: Slack and Atlassian (Trello, Bitbucket, Jira, Confluence). Atlassian shut down hipchat and stride (competitors of Slack) and migrated users to Slack. Atlassian is $31 bn + at market cap, up 600% since the IPO in December 2015. More than 150k customers use Atlassian (a lot of coders).
Slack is a great product and is vulnerable to Teams.
and 
calls + integrations with Trello, Asana, Google Drive, etc.
Bay Area startup that hasnāt grown in value much recently) are more organised when it comes to getting stuff done (productivity) in my experience.
