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…