How Slack Became Boring
In the war for the remote office, why isn’t the hyped messaging app pulling a Zoom?
It’s no secret that the arrival of the coronavirus earlier this year smashed the fast-forward button on the acceptability of remote work. For a certain class of white-collar job, working from home has become the default, and it’s not clear when offices will fully reopen. That’s been a major boost for some businesses — maybe most notably video conferencing tool Zoom, which transformed in a matter of months into a wildly popular, and wildly profitable, fixture of everyday life. It not only became a core part of the virtual office, it transcended it.
Another obvious winner, it would seem, should be Slack, the widely known workplace collaboration and messaging startup launched in 2013. While Slack has reported increased usage in the pandemic era, that has come with caveats and disappointments — for Wall Street, at least. Zoom’s stock has more than quintupled from $67 to more than $400 this year, for example. Slack shares, on the other hand, nose-dived after its most recent earnings report, and now stand at around $26, down from a bit over $34 in early September, and roughly flat for the year.
The weird thing is, Slack’s numbers weren’t really bad. The company reported $215.9 million in revenue, up 49% over last year, and above Wall Street estimates. It has 130,000 paying customers—including Amazon, Verizon, and IBM, among others — a 30% annual increase. And its latest product, Slack Connect, which lets companies use the platform to communicate securely with vendors and clients, is a smart idea that’s bringing in new customers. The company even raised its guidance for its third quarter.
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The catch is that there was no eye-popping spike, which underscores a deeper issue: Slack is no longer a thrilling and potentially disruptive newcomer storming the marketplace. It’s a (very) familiar fixture of the marketplace. In fact, one challenge can be found in the fact that in addition to courting new clients, Slack relies on an existing client base it has built up over the years — and the pandemic’s toll on the economy has cut into that: Slack charges companies on a per-user basis, so layoffs and slowed hiring among its clients undercut Slack’s billings. “That impact is direct,” CEO and co-founder Stewart Butterfield conceded in the company’s most recent earnings call. Plus, the precarious economy means more budget scrutiny from potential new customers who, for now, have to focus on more “immediate problems,” as Butterfield put it.
Slack arrived on the scene in a blaze of press hype, touted as a quintessential tech game-changer so radical that it would “save your workplace sanity” with its new approach to networked communication.
All of which is actually reasonable, and would hardly seem like cause for such market skepticism for most companies. But what Slack is experiencing, and demonstrating, right now is the peril of disruptor expectations.
Slack arrived on the scene in a blaze of press hype, touted as a quintessential tech game-changer so radical that it would “save your workplace sanity” with its new approach to networked communication. Time (among others) declared in 2014 that the young startup was an “email killer” bound to “change the future of work. An admiring New York Times column in 2015 agreed, marveling that Slack was “one of the fastest-growing business applications in history,” shaped by its founders’ “grand vision for the future of the office.” This vision entailed digital collaboration, and “radical transparency,” The Times enthused, adding that Slack offered a “feeling of intimacy” with far-flung co-workers.
As you know, Slack did not kill email. Still, the sense that it brought something new and useful to the workplace communication dynamic remained strong enough that its June 2019 direct listing (an alternative to an IPO) was a smash, valuing the company at about $23 billion — quite a leap over the $7 billion valuation from its most recent private investment round at the time.
Excitable predictions of a Slack-transformed workplace have given way to workaday grousing that it can be yet another distraction — a way that “workers end up checking messages about work, rather than doing any,” as one recent critique put it.
When the pandemic moment arrived less than a year later, Slack was in that category of companies that seemed poised to live up to its destiny in the dispersed workforce world. And indeed, in late March, Slack said its usage had spiked by 30%. Its CEO tweeted about gaining 9,000 new paying customers — nearly double recently quarterly gains, in half the time — and its shares surged 15%.
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Yet this momentum did not last. Zoom is again a useful contrast: For many, Zoom was an unfamiliar tool that suddenly served an obvious and newly important function, and the company leaned into courting a wider audience. Slack was still Slack — something white-collar workers had been hearing about for years. Many already used it, or the similar Microsoft Teams, which arrived a few years after Slack and has turned into a real competitor. (Slack has filed a complaint against Microsoft, alleging anti-competitive behavior, with the European Commission.) Excitable predictions of a Slack-transformed workplace have given way to workaday grousing that it can be yet another distraction — a way that “workers end up checking messages about work, rather than doing any,” as one recent critique put it.
Sometimes you’re better off being the humdrum company that quietly works its way toward surprising success, rather than the splashy startup that’s stuck with living up to its own hype
That’s not completely fair, and Slack, now valued by the market at around $14.5 billion, still has great promise. But living up to it now looks like more of a lengthy grind than the lightning bolt revolutionary force that once seemed inevitable. “We’ve always said Slack is something that people don’t know that they want, but once they have it, they can’t live without it,” Butterfield said in that earnings call. But, he also conceded, IT departments have been focused on crises and short-term operational challenges that going remote brings, and “Slack is viewed more as an elective.”
This is quite a comedown from the seemingly transformative vibe the company once projected, particularly given that Zoom is not the lone remote-work winner. Productivity platform Asana is reportedly preparing a public offering, and “spreadsheet startup” Airtable recently raised $185 million at a $2.5 billion valuation.
Sometimes you’re better off being the humdrum company that quietly works its way toward surprising success, rather than the splashy startup that’s stuck with living up to its own hype — long after the reality of the long haul has settled in. Slack still has a future. It’s just not as a sexy disruptor anymore. It’s nothing but work.