How is Slack killing email?

How is Slack killing email?

Slack is an enterprise productivity software startup that is frequently talked about in tech circles as a potential email killer. In October 2014, just 15 months after its founding, Slack became the fastest “unicorn” ever to reach the coveted $1B valuation. The company recently raised $160M in Series E, at a valuation of $2.8B, from some of the most marquee VC funds in the Valley. At the time of raising Series E capital, Slack reported 1.1M DAUs (Daily Active Users).

At the same time, big tech giants such as Google, Amazon, and Microsoft, still find enterprise email to be an attractive business opportunity. In the last year or so, we have seen multiple investments in enterprise email — GMail for Work, Office 365, and Amazon WorkMail to name a few. Pitted against some of these biggest tech companies in the world, can Slack successfully kill email? What explains Slack’s explosive growth? How does Slack create value? Would it be able to capture this value in the long term to justify its sky-rocketing valuation? These are some of the difficult questions surrounding Slack that I attempt to tackle in this article.

 

What is Slack?

Slack is a real-time messaging app for teams that organizes team conversations in channels such as projects, topics, or teams, and allows for simple drag, drop, or sharing of files in these channels. The attached image shows what a typical Slack home screen looks like.

 

How does Slack create value?

  • Slack helps professionals significantly reduce email clutter, thereby enhancing productivity. The Slack users I spoke to over the last week (n=8) reported that using Slack reduced their daily inbox size by 50 to 80%. Communication in Slack is more real-time and collaborative than email, making companies want to adopt it as at least a partial email replacement. Most Slack customers have moved all within-the-team communication to Slack, while communication external to the team and to the organization is still conducted via email.
  • Slack comes pre-integrated with tools and apps that are frequently used in the office, providing workers a one-stop interface to use almost any work-related application such as Dropbox, Google Hangouts, SoundCloud, GitHub, Jira, or MailChimp. In addition, the company offers APIs that allow developers to integrate custom apps with their company’s or customers’ Slack accounts.
  • Slack syncs seamlessly and real time across devices. In the age of mobile and Bring Your Own Device (BYOD), this enables workers to work across just about every device they use.
  • Slack maintains a searchable archive of all communication and data in the cloud. Slack’s search functionality is often cited to be “GMail-like”. Besides the obvious benefit of spending less time searching for stuff in email, this also enables workers to search for keywords in their colleagues’ non-private inboxes, resulting in better onboarding for new employees and stronger collaboration across the organization.
  • Slack is available for instant download and comes with best-in-class UX and design features (e.g., walk-throughs, animations, screen overlays, speech bubbles, etc.) to onboard new users. This means little incremental time and effort spent by IT teams in setting up and maintaining Slack accounts for employees.

 

How does Slack capture value?

Slack has a freemium subscription model. The company offers a free basic version, and charges businesses a monthly fee of $6.50 per user for premium features. Slack currently has 300K paid seats, with $25M in annual recurring revenue. The company is not yet profitable, but the losses are speculated to be relatively small for a start-up of its size. Slack’s monetization model works well for two reasons: (1) It’s free to premium conversion rate (30% of DAUs are premium users!) is one of the highest that I personally know of in freemium software (2) Slack is extremely sticky. To quote one of the co-founders of Slack, once a team reaches the “magic number” of 2000 messages, they “almost never churn”!

In order to capture greater value, Slack has recently shifted focus to enterprises. Bigger companies obviously have more employees and bigger budgets, making them attractive prospective customers for Slack. Teams in companies such as Adobe, EBay, Comcast, Walmart, and the New York Times are already using Slack.

 

Slack is clearly emerging as a digital winner for now – it’s numbers speak for themselves! Would it completely disrupt email? – Probably not for a long time to go. However, it has successfully managed to shift a large proportion of email traffic to its own platform, and has a sound monetization model in place to capture the value that it creates.

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6 thoughts on “How is Slack killing email?

  1. Thanks for this comprehensive overview, Shashank. I have little experience using SLACK in FIELD 2 and have to say, I initially was not convinced at all. To me, it seemed like yet another messaging service that I had to add to the many others I already have (GroupMe, Text, What’sApp, Gchat, etc.). Using SLACK really requires users to change their behavior and let go of a lifetime habit of using email. Even though the value creation you describe above makes sense to me on paper, I am not confident this model will actually take the world of enterprise email by storm unless SLACK integrates with an existing major player (Gmail, or Outlook) to allow users like me a soft transition. Excited to see where they take it.

  2. Enterprise “productivity” at the very onset of your post made me chuckle, because based on my only experience using Slack this past summer at a startup of 150 people, it was mostly a way of distraction than anything else! I initially tried to “kill the email” and ask questions to people on business matters via private message, but then I realized those people slowly but surely took themselves off Slack claiming “they could not get any work done” while people thought they were online and available to answer questions. Now that describes a one way use case rather than collaboration, but I haven’t seen a case where people using it for serious stuff either. Most people used it to vent and talk about interest topics that were most of the time unrelated to work. And in most cases, because of the sheer volume of posts in channels you are included in, it’s easy to feel as if your friends posted all night when you were sleeping in a group message setting and you wake up to 1,254 unread messages! And if there was any important things you had to follow up on, good luck! By the end of summer a bunch of our employees gave up on it. But hey, this was one company in one specific time frame, I bet the usage pattern very much depends on the culture of the company. I guess we used Slack mostly to slack off 🙂

  3. Nice writeup. I do wonder about Nazli’s point of over communication though. I’ve experienced this with many apps (whatsapp, band (section J, what?), and groupme, etc). Eventually you just want to shut it off. My partner uses Slack and I see hundreds of notifications fly by, which makes me believe that it could eventually spell it’s own doom.

    That said, I haven’t used it. And I’ve long been looking for a better alternative to email, since it seems ripe for innovation. I’d be worried about Google easily replicating what Slack has created (even though they’ve tried their own alternatives before), and taking over in the corporate spaces they are already in.

    Another thought would be re: external communcations, as you mentioned. Do we really want two separate services? I often CC both internal and external parties on emails. I once had an email address of internal comms, and one for external. It was both annoying and a disaster. Perhaps Slack can fix this problem.

  4. I wonder what the creators of IRC think about their 1988 tech being used to “disrupt” in 2015. Agree with above-dubious about Slack from an efficiency standpoint, but if valuations are the capital-T-truth, I might be missing something.

    I wonder how replicable this tech is, or at least this idea of bringing back basic old tech to replace over-complicated current solutions? Maybe next ICQ or AIM will disrupt SMS 🙂

  5. This is very interesting. I had heard vague whisperings about a company like this a few years ago and thought it was a great idea then but hadn’t heard about it since. The product itself seems phenomenally well-designed and clearly valuable to businesses no matter the industry. It reminds me a lot of the value prop of Dropbox, “no more file transfers between machines using USB’s”. Coming from a company that used Outlook (“a curse upon its home”) to send everything via emails, I definitely see the value in real-time chat and drag-and-drop file sharing. Hitting refresh repeatedly while waiting for the 11th version of a giant PPT file to arrive in my inbox is something I never want to experience again.

    Your point on stickiness is also key. Once a company commits to this software and their employees grow attached to it, the company can forget about canceling its Slack subscription. While I doubt they’ll be the coup de grâce to email, I don’t doubt that inboxes will be significantly smaller as a result.

  6. Shashank, thanks for the interesting post about Slack.

    I generally agree with most of the doubts mentioned above, but my biggest worry is the subscription fee of $6.50 per user, which is higher than Gmail App’s for Work’s $5.0. This worries me. It is also significantly higher than Asana’s (a web and mobile application designed to enable teamwork without email that I used this past summer, which seems to offer similar features to Slack) of $4.2 per user ($21 for 5 users). I do not understand the rationale behind their price point and what justifies the premium over Asana and other similar services. The company I worked for used both Gmail Apps and Asana. Gmail for email communications, and Asana for storing files and leaving comments for transitioning from one person to another (the company mostly had interns that were staying for up to 6 months, which highlighted the need for smooth handover of files). However, we never completely relied on working on Asana (which would be similar to leaving comments on Slack) as it is more convenient to exchange ideas with relevant team members directly through email. Using both for communication could cause a lot of redundancies and inefficiencies, especially when data is shared with everyone on the platform.

    Another point is related to Carina’s comment about user behavior. It is a significant challenge to instill a new program that replaces a service that people have been using since the introduction of the internet. There are also other features embedded within Gmail (Chat) that enable instantaneous interaction with team members (and a lot of distractions sometimes…)

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