Slack’s Shares Plunge After It Predicts a Larger Loss
nytimes.com
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We've had public business software companies for decades, they all created a new "category" of software, why does he think his is something new?
Fundamentally speaking, how is Slack any different to the first email program? The first operating system? The first chat system?
We've had this sort of software, and companies that sell it, for a very long time now.
I didn't see the need for a global digitised cab company but it didn't stop two companies burning $30 billion to try and make it happen.
Let's check that timeline of team chat apps...
2006 - Campfire launches (now part of Basecamp)
2010 - Hipchat launches
2013 - Slack launches
At the end of the day Slack is a SV unicorn that went public without turning any profit. I believe they marketed this in their S-1 as a "loss-making" company...who does the market think it is anyway trying to act rational.
In some ways Google Apps for Business is a really good example of a sort of "new category" of communication software. You could plugin apps online, rather than have to host it your self.
A bit of googling shows he's called Slack a "brand new category of software" many times before, but I'm not clear what he thinks it is.
How many corporations use G suite for their email? How many roll their own email systems and use thunderbird?
To the average user, email is a proprietary non-federated system filled with tracking.
i heard they were throwing money at integrations with everything, had a bumpy ride scaling (mysql master-master ffs) and had vague plans for AI that'd help automate your org, not sure where that went. But the VC wants exponential or bust, so there you go.
Even if he says that Slack is "not about tech but about making work happen", there has been countless of other programs that, while being "tech", made work happen. I just can't see this "category innovation" at all.
Perhaps, and also perhaps when they do, it won't be so valuable anymore...
Skype was a P2P phone calling program over TCP/IP.
I.e., a neat trick that might have killed traditional telecoms.
Then Microsoft bought Skype and killed it instead.
Even so, Skype was a household name for video chat for years (despite it's sometime shoddy quality) until FaceTime, Gchat and others implemented video towards 2010.
What's Slack done that's different from other chat platforms available today? Stuff like Jira integration is of interest only to a small portion of its target market, and it's that exact market that will complain about the pricing, that it's non-federated, heavy on resources, intrusive in its tracking, etc.
Btw, although I've seen little difference between HipChat and Slack in my day-to-day, the switch from Skype to HipChat was a profound improvement. Messages sent on Skype could and would frequently vanish into the ether, and/or arrive in the conversation thread way out of order. Imagine troubleshooting production issues under those conditions!...
It's not the market's fault Slack's revenue/sales expectations don't match their goals. That's entirely on Slack to either do a better job or be more realistic with their 'ceiling'.
Everyone shrugged and said "Yeah I need that" and it looked/felt better than Hipchat.
Definitely not a new category, I very near share a date of birth with IRC. Even before that you had BBSs
We were using HipChat at a previous company (2013, I think), and I never understood the switch to Slack. I was like: Wait, but what's the difference? Everybody knew about Slack, and no one about HipChat.
I also don't think they introduced a new category of software, they just spent an absurd amount of additional money in marketing. That's it.
At the time it was claimed that this was really a whole new way to organize data and work. In practicality, not that much changed from HipChat. Pinned items and the ability to rifle back through conversations saved my bacon a few times, but looking back on it, I don't think they outmatch properly-organized documentation and wikis.
We had a good system for creating and looking for documentation in our wiki system, so I hope that was not a selling point for Slack. Unfortunately we (Tech) never really knew why we switched.
EDIT: Also, on the performance side, we were there for the beginning of both systems, and both had their good amount of issues initially. By the time we switched, I don't remember that many HipChat outages. I remember a lot of Slack outages starting up as well, and these days I have issues with Web interface connectivity at least once a week (native works).
It went something like this:
“We are now ‘agile’
Ok what are all the cool agile dev ops companies using?
Aha Jira&Slack. Ok let’s use that”
From there it gets even more crazy. The tools get included as a standard question for evaluating vendors on RFP’s. Vendors that use a similar toolset are rated more highly.
When you question why. The response is along the lines of:
“Oh if they are using Jira/slack/other tool, it must be an agile/dev ops/chat ops shop”
Put another way sometimes these tools end up being used as a “signal” to others rather than intrinsic value. The value is in the signalling, driven by social proof.
If one can pull this of when marketing your product you have a win. Effectively you have associated a movement (I.e agile) with your product (I.e Jira). So the buy decision is driven by the need to show they are doing {x}.
There must be some basis Of this and reading on how this is done? The broad topic would be marketing but what specifically?
Notes:
* This is merely an observation. I am not judging the accuracy of the statement that using a specific product = demonstrating some property.
These associations may not be applicable in all markets and I have seen them change over time.
cargo cult driven marketing
Slack's "good enough" for most communication and has better integration with most products, so it stuck. Others always failed in some way.
It's not that Slack is irreplaceable, if anything it's more vulnerable than ever, but that it has momentum. Other platforms like Campfire or HipChat always fell short of expectations.
You could argue that we had cellphones for ages, why would someone need an iPhone? You could also argue that an android has the same functionality as an iPhone, again why would someone need an iPhone?
The new "category" of software is about how people relate to software, not the software itself. IKEA created a new category of furniture, or it did not?
I think Uber created a new category of service, but we always had taxis and gps; Slack didn't necessarily create new software, but in my opinion it put chat apps on the general public's mind and it kinda became the go-to name, same as AWS or IBM. That's worth something.
his argument is that it’s so new that people don’t grok it yet. (which of course is wrong)
Having used both I think it is a legitimate question. iPhone vs android is just arbitrary preference at this point.
I think the same thing with Slack. Whether you use Slack, Teams, Hangouts Meet, or something else is becoming entirely a preference. For a company that is losing money this is not a good thing.
Just look at the insane secondhand value of any iPhone. Even my perfectly working old iPhone 6S I use as a backup would still sell for €240 today - which is absolutely nuts...
However, I agree with the general sentiment that Slack must be profitable by now and if their messaging isn't reaching the target audience it's their fault and their fault only. Not to mention the ridiculously high valuation.
Only host things if you really need to, and only if you have the resources to support them. Unless you want to add “manage chat servers” to your list of core competencies, just buy something and move on. Our business isn’t managing chat servers. All we need is an IM service so we can communicate and get our stuff done. Slack, for all its faults, works for us, and frees up our time to focus on the problems we actually want to solve.
https://mastersofscale.com/ev-williams-never-underestimate-y...
Artifice. Just like WeWork trademarking the word We and coming up with a bunch of frothy "created with the power of We" bullshit
What matters to the market now is that they are a subscription-based software business model not unlike thousands of other SaaS companies. It’s a very well understood space watched by investors who can compare what they are seeing to many other examples.
Slack needs to adjust to life as a public company - how to set expectations, how to manage to those goals. In fairness they also were saddled with hugely inflated expectations before the media and some investors likely realized that they are just like a lot of other SaaS businesses.
I've long thought that they've essentially built beautiful native/mobile/web clients for IRC-type chats and provide hosting/IRCOp services. Charging per-seat to enterprise seems like a very, very lucrative proposition for this type of product/service.
There are a couple of eyebrow-raising financials:
1.) 100,000 paid users @ $6.67-$15/mo = $667k-1.5m MRR = $2m-$4.5m QRR
2.) 13m DAUs @ $0/mo (free tier)
3.) They lost $30m Q3 '18
4.) They lost $300m Q4 '19 due to 'stock based compensation' (which from my perspective should have been accrued Q4 '15 onwards)
And for all the above... a $5billion unicorn valuation considering chat is a solved problem?
Three major questions:
1. Has any other SaaS or company in human history ever had a 1:130 ratio of paid:free users with a hard cap of $15 on MRR?
2. Does quarterly losses between $30-$300m on $4.5m in revenue make sense considering the unit economics of cloud-based chats?
3. Does 100k paid subscribers seem a bit low for a 6 year old company?
Really weird situation from my "knows enough to be dangerous" perspective and I'm all ears because from my perspective:
1.) There's really not enough innovation or a big enough TAM (considering competitors) to drive a unicorn valuation
2.) Which shouldn't matter because this is still a potentially lucrative market
3.) And yet... they're losing money hand-over fist
Weird, weird weird. Feel free to share your thoughts, I just ask that you consider this message comes from a perspective of "confused guy trying to make sense of these crazy times"
Upgrading Slack from 'WTF' to "Let's see how this plays out and if it's priced accurately' because $30m in losses on $145m in revenue for cloud enterprise chat with a long-tail of free-tier users seems pretty promising!
Thanks again!
Slack on the other hand has communities with thousands of members in them that have zero monetization. No one is going to shell out 60k for their open source project's slack to be monetized.
I would bet that the free plan for slack is basically free advertising for them to on board people to their paid plans
TAM includes competitors.
It can't possibly be just 100,000 paid users. That's clearly nonsense. Oracle uses it and they have 80,000 employees alone!
I work at a megacorp, and we use Slack without paying a single penny.
We have a Slack account setup per project, which typically have 5-50 members. We don't care too much about search or history, we just want a simple chat and audio call solution that isn't horrible to use. Slack fits that bill.
To be clear, this doesn't sit well with me; we should be paying for a service we make good use of - but Slack makes it so damn easy for us to get away with it!
Maybe this is part of some long-term strategy, to basically give it away until it becomes ubiquitous, and then scale back the free tier?
Most users don't know nor care about the paid tier, especially if CHQ isn't footing the bill and the cost for each user license is passed to a business unit or department (which can be how megacorps are setup).
The change over was funded by corporate and it's becoming the standard form of comms in the enterprise.
I haven't looked at this, but if this is a large part of their loss, then you can possible find the answer to why it was declared in one chunk by looking at the timing of option grants. The schedule should be available. Normally when I see "Our company is losing money" and the money it is losing is a one time loss that would normally be spread out over a long period of time, it's because they timed the announcement to coincide with the granting of options. It causes the price to drop precipitously, they grant the options -- "No funny business here! We scheduled the option grant 6 months ago!". Then the price rebounds. It has happened in every large company I've ever worked for. I always wonder how they get away with it...
If I were to take a wild guess, I'd say it was they tried to grow too quickly and overspent on marketing, getting a barely decent ROI on ad spend.
They should be fine. $307m of the loss was stock-related compensation.
How could you screw up a business who has a product as popular as Slack?
edit: Just look at what's happening to Patreon
I was referring to Carl Benjamin being removed. Jordan Peterson and Sam Harris, who were two of Paterson biggest earners removed themselves as a result and encouraged others to do the same.
https://dailycaller.com/2018/12/17/jordan-peterson-sam-harri...
All communications platforms so far have come and gone in vogue.
I remember in 2005 when everyone in our office communicated over MS Messenger.
Maybe Slack is to instant messaging as Facebook was to social networking and will get some longevity. But it's too early to tell yet.
- no message history past a few months
- the redesign made it look like a phone messaging app
- poor group chat functionality that didn't have anything beyond basic permissions
- calls were peer-to-peer for the longest time, making it mostly trivial to get someone's residential IP and DDOS their network.
It might have improved since then (I know calls are no longer P2P) but that's why a large portion of the gamers moved to Discord.
I have an unlimited-Europe plan with it and a phone number attached to it, but I'd rather use something else some day. I haven't found any cheaper alternatives though. Maybe someone here can point one out to me.
But as an aside, “the cheapest one you can find is horrible” is probably appropriate for what “cheapest” usually translates to in products, and expecting to find one cheaper and better when you can’t find one cheaper at all, seems optimistic.
Instant messenger, internet phone and video/presentation conferencing.
Am i missing something here because its literally my primary business communication tool.
IMO the bigger issue here is there expectations to lose 9c / share next quarter, which isn't explained by that $307 M last quarter.
Just because a product is popular doesn’t mean it’s a good business.
It also amazes me that people hand wave compensation as a “real” expense....
Maybe it's not a huge deal because the overlap of Slack customers and Office 365 customers isn't that big?
[0] https://www.businessinsider.com/microsoft-canceled-8-billion...
Those sound more like great features than "workplace bureaucracy".
To everybody who isn't a software developer and will likely never need Jira integrations and Slackbots, Slack is just another chat app.
For a paid software, Slack needs to win those people over too.
...Which serves as a demonstration that nobody needs chat.
Isn't it great how that works?
As many times as I’ve hated on Slack on HN, my anger is at their bloat and sluggishness and low density UI to do basic text chat. At least I can do basic text chat in an IRC style channel in it.
Desktop Teams is a nightmare of mystery magic UI, I never have any clue where I am in it, where anything else is, how to get to or from stuff or what the chat is doing, it’s super unpleasant.
It’s basically a web browser to SharePoint but with no browser chrome or address bar or navigation hints or breadcrumbs, then the same into a Skype replacement, then a pile of chat channels which aren’t channels and have rolled up chat threads in a list in them, but all of this in one window so you can only do one thing in the UI at any time (I.e. NOT chat to someone and look up some documentation in another window because it only has one window) and Teams honking at you wherever you are with red blobs of attention grabbers and “people are trying to contact you in Teams” dark pattern Facebook bullshit where the mobile teams and desktop teams notify and then emails you.
It’s both completely overwhelming and underwhelming at the same time.
I have seen first-hand how much of the business can run on Slack. Yet, if it's gone one day, companies would survive.
(I do most of the sales calls for Latacora, which feels like a decent representative sample of startups, and I think all but one, maybe two, of the companies we have ever spoken with used Slack. Order of magnitude a percent.)
In my company Teams was actually a big improvement because we had nothing before.
* Formatting is done with Markdown syntax instead of "word processor" style formatting.
In a word processor if you type Hello, Ctrl+b World Ctrl+b!
it would produce Hello, <b>World</b>!
In Slack it produces Hello <b>World </b>!* * .
* /commands are not discoverable or intuitive to anyone who never used IRC or CLI programs. Non-programmers have no idea what arguments are or that [brackets] means optional.
* Bots and their syntax have the same problem except that their DSLs are far more varied and arcane.
* Very few people know or understand the difference between a channel and a group.
* Threads are super weird compared to email. It's like an inbox but not really. Threads interleaved into actual message timelines are not very discoverable and difficult to follow.
* Attachments and files don't really work like most people expect.
* There are at least 5 different settings panels all with different things and scopes.
* Reminders and a bunch of stuff being implemented as a magic "account" in Slack is super confusing to people.
* Very few people really "get" apps as well in this respect. They're in your message timeline, they look like accounts, and are in some ways but aren't in others.
* The difference between a "bot" and "app" isn't super well defined. Some respond to messages in a channel, some need commands.
It's one of the few products that's forced Google to create a desktop app (even if it still is CEF based).
The explanation is here
For Slack has no moat
Considering that they are a pure software company this is quite shocking and, to me, a sign not to touch them with a barge pole.
If they were just putting it all back in sales and marketing they wouldn't have losses this high.
I don’t know whether Slack is in this position, but simply looking at revenue and losses doesn’t give you enough information to judge how well they’re doing on its own. You need to look at things like CAC and growth rate.
Also, selling into the enterprise is a long slow process.
Enterprise sales is expensive, but the contracts are very large and long-term.
For its second fiscal quarter, Slack posted a loss of $364 million
364-307=57
Really hope the answer isn't ads!
A number of free users upgrade over time by upgrading their free account or by highly recommending Slack at their workplace.
I feel like I've definitely heard that said a few times before.
>Office 365, Salesforce, Adobe Creative Suite, ADP
I'm not a coder but these applications seems vastly more complex than slack - and thus I would be willing to pay more for them.
>DocuSign
This seems closer to being along the same lines as slack, but I feel like docusign doesnt sell it's "software" per say but rather implementations and operational change consultation.
>Shopify, HubSpot, Zoom. Not sure what these are
Sorry for the late response
It would be common for an acquisition agreement to shackle the founders with non-competes. It would also be common for those non-compete clauses to have limited durations. (I have seen 2-3 years in documents.)
Slack bought ScreenHero over 4 years ago. The non-competes have likely expired.
Open channels meant - more transparency and anyone can join and contribute. All those hella bots are extremely handy.
Overall, i would say we became more transparent, focussed and it made communication across a single company SIMPLE.
I'd be interested to know the stats on people using the video feature. My experience is that companies on slack primarily trust Hangouts and Zoom more than Slack for video conference.
> platform
Slack isn’t a messenger app. It’s a platform. People like to “work” in slack for some reason. not that slack is so well suited, but because it reduces the number of context switches you need to do. it’s good to have something as a central hub.
If you produce some kind of app, you’ll want to integrate into a messenger platform and your choice (if only one) will be slack. this gives slack gravity and that is what makes it special.
salesforce the core product is nothing special. it’s salesforce the platform which matters.
https://twitter.com/slackhq/status/531941157283315712?lang=e...
A couple things come to mind, like file sharing, calendar & room management, project management (around tasks, mainly), VoIP integration for sales calls, and maybe even gasp email.
Collaboration and communication software has existed basically since computer networks exist. More specifically icq, MSN, even Skype falls into the same category of software...
They created a succesful startup - a lot of kudos for that. The company, as so many others this year, fails to proof itself in the public market.