Why Slack Isn’t Winning the Remote-Work Revolution — Yet
It needs to reach a different type of customer. A timely redesign might help.
This should be Slack’s moment. With millions of office workers confined to their homes by Covid-19, the workplace communication platform has an opportunity to make itself indispensable to companies and organizations that used to think they didn’t need it. And in a twist of impeccable timing, the company on Wednesday launched a redesign that was months in the works, designed largely to make Slack easier for non-techies to use. The company is touting it as “a simpler, more organized Slack.”
The redesign looks promising. But for Slack, seizing this moment won’t be as easy as you might expect. In fact, while the videoconferencing company Zoom is booming despite the bear market, Slack’s stock is slumping: It hit an all-time low on Wednesday of $16 a share, a fraction of the $38.50 opening price when it went public in June 2019.
There are many reasons for that, the simplest of which is that, Zoom aside, it’s hard for any company to do well in the face of what could be a crushing recession. But Slack, in particular, faces a coronavirus conundrum. When new organizations sign up for its product, they tend to start with either the free version or an entry-level paid plan, bringing Slack relatively little additional revenue. Yet they often require customer support to get up and running, which stretches the company’s resources.
In effect, Slack loses money every time it wins a new trial user. It makes money when it wins a large customer, or when one of its existing large customers decides to invest in a bigger plan. Often, it’s competing for those customers with Microsoft Teams, pitting Slack against a company that those organizations already trust for all kinds of software and cloud services. While fewer than 1,000 of Slack’s 110,000 paid customers are spending $100,000 or more per year on the service, those larger customers account for nearly half of Slack’s total revenue, according to the company’s latest earnings report.
Slack has seen a “massive outpouring of interest” in recent weeks, CEO Stewart Butterfield said on the March 12 earnings call — particularly in the countries where coronavirus has spread the most. Many new teams have signed up to the platform, but they aren’t necessarily contributing to the company’s bottom line, at least not yet. Inking big-time deals with larger customers requires a more intensive sales process, which is likely to be hindered by the same work-from-home trend that’s driving the spike in usage.
The conundrum is partly a function of the company’s “freemium” model, which includes a limited free version, plus three levels of paid plans with escalating capabilities and prices per user: standard, plus, and enterprise grid. But Zoom’s model is also freemium, and its stock has soared 50% since the coronavirus outbreak first began. One difference may be that Zoom is relatively simple to use, and its value is obvious to any organization accustomed to holding in-person meetings. Slack is more complex and geared toward certain types of companies, such as tech and media firms — many of which already had plenty of remote workers before the pandemic hit.
The company is notoriously responsive to its users, which has always been a strength. But the early adopters it listened to, which were mostly tech companies themselves, aren’t representative of the companies and workers Slack has to appeal to now.
One obvious difference is that tech startups have especially tech-savvy employees, who are more likely to embrace new features and aren’t put off by tools such as advanced searches or slash commands. That’s a problem that its redesign might help to address.
A big theme of the overhaul, which Slack announced in a blog post on Wednesday, is familiarity. For example, the interface will now include a top navigation bar with a prominent search pane and “back” and “forward” navigation buttons, just like a web browser. Slack already had search and back/forward functions, but they were easy to miss. There’s also a “history” button to see a log of your recently used channels and files, again mimicking a browser.
Similarly, the software will now have a dedicated “compose message” button accessible from anywhere, at the top of an overhauled left sidebar. Previously, you had to first create a group DM before you could message the members of that group. Now you can compose the message, then decide who should receive it — a workflow that will be familiar to anyone who uses email. That can be particularly helpful when you want to type a draft without the risk of accidentally sending it. Just leave the “to” field blank until you’re ready.
“You have people who’ve been using email for years,” said Ilan Frank, Slack’s vice president of enterprise product, in a phone interview. “Now they come into Slack, and we’re asking them to select a channel before they start typing a message. Email, for all its faults, at least has one button you click when you want to send something, and that’s where you start.” The goal, he said, is not to recreate email, which Slack is in many ways trying to supplant. Rather, it’s to “borrow from the familiarity of email” to ease people’s transition to channel-based communication.
The sidebar is the site of more changes. You’ll see categories like “People,” “Mentions and Reactions,” “Files,” and “Drafts” above your channel list, just below the compose button. Those used to be scattered and harder to find.
Power users will have new features to play with, as well. Paid plans will now have the ability to organize channels, messages, and apps into customizable sections in the sidebar — basically, folders, which you can collapse or expand to see their components. So you could make a folder for all the channels that relate to, say, the marketing team, another folder for office-wide or company-wide channels, and another for DMs from your closest friends in the organization. When any channel in the folder has a notification for unread messages, the folder will light up — which could be a drawback, if it means they’re lighting up constantly.
All of those changes are welcome, and some perhaps overdue. They’re part of a multistep refresh of Slack that started in October 2019, with a move to integrate apps into Slack in a more visual way. Previously, many apps had to be summoned by text-based “slash commands,” and functioned more like chatbots than smartphone apps. The motivation was similar: To make Slack feel more intuitive to new users. I wrote about that change as a harbinger of the decline of interactive chatbots.
But tech-savviness isn’t the only difference between Slack’s initial user base and the users it’s now targeting. A bigger obstacle may reside in the very structure of the big, non-tech companies on which Slack’s future growth depends.
Tech startups are famously flat, with employees asked to be jacks of all trades, and junior hires allowed or even encouraged to challenge the ideas of higher-ups. Slack’s own structure reflects that: It inherently puts every member of an organization on equal footing, with the ability to talk to anyone else at any time, including slapping whimsical emoji reactions on their messages. Managers can create private channels from which the rank-and-file are barred, of course. But so can underlings create their own private channels on which to gossip out of view of their bosses. The pitfalls of this approach were driven home when leaked Slacks exposed a poisonous culture at the luggage company Away, whose CEO stepped down in the aftermath only to return weeks later. (Coincidentally, Slack’s Butterfield has personal ties to the company.)
The platform’s chatty, spontaneous nature also lends itself to purely social conversations that tech startups might view as crucial to team bonding, but which more traditional companies might view as productivity-sapping distractions.
For buttoned-down companies to fully adopt Slack, something has to give. Either Slack has to become more fundamentally hierarchical, or the organizations using it will have to become a bit more like tech companies. Presumably, there will be some of both, and surely already has been: Slack has been increasingly landing deals with companies such as KPMG, Nationwide, GlaxoSmithKline, and even branches of the U.S. federal government, which the company highlighted in its earnings. But it’s also possible that, without deeper changes to Slack’s structure, many companies will simply never find it compatible with their cultures.
In that vein, perhaps the most notable change Slack has made recently is not one of those highlighted in its latest redesign. It’s the company’s move in August 2019 to allow administrators at companies using its higher-end premium plans to specify exactly who can post on any channel — and who can’t. That enabled the creation of “announcement channels” in which only certain people can post, and the rest of the channel’s members can only react with emojis (or, in some cases, start a reply thread).
Slack is also learning how to work with companies that have their own IT help desks and procedures for rolling out new software, Frank told me. Those can be at odds with Slack product updates that give everyone the same features at the same time. Frank said Slack developed its latest redesign over a period of months in tandem with 70 different companies, with whom it set up a large shared channel to get feedback on each day’s tweaks.
Though he cautioned investors not to expect huge growth during the coronavirus pandemic, Butterfield said he remains bullish in the long run. “We have no uncertainty that we are in the right market with the right product at the right time.”