Slack: The Secret’s Out!
Reposting my comments on Slack (Ticker: WORK) as a stand-alone article below.
I believe Slack is a Contender, and it is one of my companies in Coffee Can 4, which I created for our Stock Market Contest. Although my cost basis is slightly lower than this, the Scorecard will track performance based on a purchase price of $26.55 on May 4 (because that’s the date the contest started).
With that said, I wanted to share a few thoughts on Slack.
To start: Stratechery’s excellent recent article “The Slack Social Network” let Slack’s secret right out of the bag:
“Slack has made chat itself into a moat,
not just by being better at it,
but by expanding who it is you can chat with.”
— Ben Thompson
Chat is the killer app that Slack believes can help it build an enterprise social network. And Shared Channels are its secret weapon: These allow you to chat with others not only within your organization, but also outside of it. As a result, not only can you have multiple companies in one channel, you can also manage the flow of data between different organizations. This is becoming more and more important as team workflows become increasingly complex and distributed, and require collaboration with several job functions, both inside and outside a company.
If Slack’s Shared Channels succeed, they could play a very important role in how distributed cross-company collaboration takes place. Stratechery serves as a good example of this:
“It is hard to imagine how the Stratechery podcast service would have been built without shared channels”
“Stratechery LLC is already tied into 4 other companies, and that number will only go up.”
— Ben Thompson
On Competition
As I wrote above, I believe Stage 2 is the most dangerous of the 3 stages. One big reason: Fierce Competition.
Microsoft is seen as Slack’s primary competitor. And they’re a formidable one.
That said, Ben Thompson said something really interesting in his article:
I pay for both Microsoft 365 and Slack, and happily so.
Moreover, I can’t imagine ever not paying.
This may not seem like much, but it is actually quite an important comment. It demonstrates that Stratechery receives different value from Slack than it does from Microsoft 365. As a result, there may in fact be room for both Teams and Slack to co-exist.
According to Ben, Microsoft is a “vertical company” building an enterprise operating system that tries to provide a unified experience across contacts, files, conversations, etc, while Slack’s attempt at an enterprise social network is a “horizontal approach”. This should be a light bulb moment: recall that Mavericks approach their end markets in completely new ways! And Slack is doing just that.
Of course, this does not guarantee Slack’s success. Yesterday, Slack filed a complaint against Microsoft with the European Commission, accusing Microsoft of unfair competitive tactics. Specifically, Slack believes that Teams prevents Microsoft customers from even trying Slack.
This is a big deal. This is hindering Slack’s growth.
But, on the positive side, it is actually good news to see Slack finally going on the offensive here. Plus Slack continues to innovate, has built a great product, one that is resonating well with knowledge workers, and despite that competition, has grown its enterprise business 12X over the past 3+ years.
If interested, I’d encourage you to read more about it directly from Slack’s CEO.
Lastly, Microsoft is not Slack’s only competition. For example, Discord may become a real threat in the coming years, not to mention earlier stage companies continue to get funded.
But… if Slack is able to successfully leverage shared channels to create and improve their cross-company network effects, they may just become a very important global company for many years to come.
It will be interesting to see how things play out.