
Slack’s Shares Plunge After It Predicts a Larger Loss - doppp
https://www.nytimes.com/2019/09/04/technology/slack-earnings.html
======
mattmanser
_Stewart Butterfield, Slack’s chief executive, said in an interview that it
would take time for the market to understand his company since it had created
a new category of software, unlike soda or cars_

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.

~~~
anbotero
Thanks! I mean it, THANK YOU!

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.

~~~
phlakaton
My company switched from HipChat to Slack around 2015. I won't say hype didn't
play into the decision, but IIRC there were two other motivations: 1) more
reliable performance, 2) better integrations with Google Docs.

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.

~~~
anbotero
We were kind of heavily invested in Atlassian stack, which means we used
Confluence a lot.

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).

~~~
ismail
I can tell you my experience of having witnessed some companies move to
“slack”, “Jira” etc. There were multiple similar cases.

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.

~~~
chrisweekly
equal parts sad and funny

cargo cult driven marketing

------
SeeDave
I don't know enough about the Slack product or business model to comment
authoritatively, but I'm really confused how they're losing money (and so much
of it) and I sense a bit of "weirdness" around unit economics/user
conversion/pricing.

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"

~~~
chrisseaton
> 100,000 paid users

It can't possibly be just 100,000 paid users. That's clearly nonsense. Oracle
uses it and they have 80,000 employees alone!

~~~
GordonS
Thing is, Slack makes it _far_ too easy for orgs to use it for free.

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?

~~~
unphased
I feel like that is an outlier. For most companies the benefits of having all
the data logged is worth the cost.

~~~
GordonS
Unless a deal is done at the corporate level to get access for all users, at
large orgs, it's not just the cost - it's the internal purchasing process. In
short, if I was to buy software or pay for a SaaS, it's very, very difficult
to do so. I have to raise requests in our service desk, and constantly battle
with them for months (yes, _months_ ) to reopen the tickets they invariably
close without comment, and spend time chasing random VPs to approve something
they have no idea about. In short, I'd rather chop a leg off than waste so
many frustrating hours on it.

------
thorwasdfasdf
I'm sorry but comparing it to Uber is highly misrepresentative. Uber has
serious Cost structure that can not be removed: the cost of the driver is
essential to the operation of it's busienss. Slack on the other hand is just a
SaaS. Why are their costs so high? They said stock based compensation, but
that doesn't begin to tell what it's for. Their user acquisition costs don't
need to be really high, as far I know they started off with a great deal of
virality and without too much paid acquisition. Between then and now, what
happened? Naive question: Couldn't they simply cut most of their
engineering/marketing and be wildly profitable?

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.

~~~
paxys
The stock has also bounced back already, so the headline is no longer
accurate.

------
bluedino
>> Revenue rose to $145 million from $92 million a year earlier. Slack said it
had more than 100,000 paying customers, a 37 percent increase over last year.

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?

~~~
mattmanser
Might say the same about ICQ, Skype, Messenger, etc.

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.

~~~
swarnie_
I use Skype daily and have never had a problem with it, I've never understood
the hate if i'm honest.

~~~
mosselman
The Skype of today is crap compared to the first Skype I used and loved. It is
completely unclear what it tries to be now and the interface is horrible.

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.

~~~
swarnie_
> It is completely unclear what it tries to be now and the interface is
> horrible.

Instant messenger, internet phone and video/presentation conferencing.

Am i missing something here because its literally my primary business
communication tool.

~~~
mosselman
It isn't aimed at being a good business communication tool though. It has a
strange design that obviously tries to be cool and hip, but lacks proper
visual hierarchy and contrast. It is hard to use if you aren't tech-savvy. My
mother ends up calling me on Telegram of all things because in her mind Skype
isn't something you call with anymore. Even though I then call her on Skype
because Telegram doesn't have video. She used to have a Skype-phone (physical
unit), but support for that has died out pretty quickly.

------
chucknelson
I'm surprised investors aren't more scared of the competition, particularly
Microsoft and its Teams product that is part of Office 365.

Maybe it's not a huge deal because the overlap of Slack customers and Office
365 customers isn't that big?

~~~
thejosh
If they can fix teams so everybody who uses it doesn't hate it, I'm sure
they'll absolutely dominate.

~~~
ttul
There is also the possibility of Microsoft buying Slack to fix Teams.

~~~
jupblb
It's very unlikely considering they thought about doing that a few years
ago.[0] I don't think they'll rapidly push forward with adding features
characteristic for Slack as well. Teams is just yet another corporate tool
that is easy to sell to existing customers of Office 365.

[0] [https://www.businessinsider.com/microsoft-
canceled-8-billion...](https://www.businessinsider.com/microsoft-
canceled-8-billion-slack-bid-due-to-bill-gates-and-satya-nadella-
pushback-2016-3)

------
mytailorisrich
Leaving aside the costs of their listing and related compensation (which are
crazy high!) they made a $57m loss on $145m in revenue.

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.

~~~
danenania
A business that’s doing great can have numbers that look like this if they’re
investing heavily in growth. In that case, they’re losing money
deliberately—if they wanted to, they could optimize for profits and be making
money, but at the cost of growing slower and presumably sacrificing greater
profits in the future. If you’re a shareholder, you probably don’t want that.

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.

~~~
scarface74
That’s always the excuse. It’s an outlier when it happens.

~~~
ilikehurdles
Slack's Denver office very recently came online and I know a ton of colleagues
who were hired in their sales department.

~~~
scarface74
If they need to hire aggressively for sells that means their customer
acquisition costs are about to increase and there are still doubts about how
deeply they can get into large enterprises where the lifetime value of a
customer will be worth it.

Also, selling into the enterprise is a long slow process.

------
pcarolan
Slack's long-term value prop isn't chat, it's the platform. If you've used any
of the great bot apps it hosts (PTO Ninja for example), it's easy to imagine a
future where these kinds of apps replace whole swaths of bloated Saas-ware.
I'm excited to see more of these and a competitive eco-system emerge within
Slack the way Apple built the app store. Slack should invest heavily in
building a platform for developers if it wants to grow, if it can pull this
off it's going to look a lot more like Salesforce.com in 5 years where whole
industries are built on its back. This is also the moat they have against MS
Teams. Microsoft hasn't been as successful in building wildly productive
developer ecosystems since the Windows 9X days.

~~~
brown9-2
I think some people are wildly overestimating how much of management or
timekeeping style apps people want to use inside a chat interface.

------
ilikehurdles
Slack is back up at or above where it was at end of trading hours yesterday.
It plunged after-market, opened at $26, and is back near $31 again now. NYT
should just start using AI to write negative articles about tech companies
when their stock swings more than 5% and put their journalists to better use.

------
skywhopper
I get that they are the most obvious comparisons for recent IPOs, but it's
disappointing to see Slack being conflated with Uber, Lyft, and We, none of
which have a remote chance of ever making more than a razor-thin profit in
their respective industries. Whereas Slack is a SaaS company, with the real
potential (whether it's likely or not) to become highly profitable down the
road.

~~~
s_Hogg
If they can figure out how to get cash out of the gigantic amount of people
who use slack without anyone paying for anything, it'll be phenomenal.

Really hope the answer isn't ads!

~~~
kaushikt
Slack doesn't seem to be the sort of company who will go with an Ad strategy
for monetisation.

A number of free users upgrade over time by upgrading their free account or by
highly recommending Slack at their workplace.

~~~
dorian-graph
> Slack doesn't seem to be the sort of company who will go with an Ad strategy
> for monetisation.

I feel like I've definitely heard that said a few times before.

------
Mindstormy
I just wish they had not acquired Screen Hero. That was a beautiful standalone
product that I wish I could still use.

~~~
jsherwani
Screenhero cofounder here. I’m working on a successor to Screenhero. It’s
currently in private beta: [https://screen.so](https://screen.so)

~~~
nodesocket
Interesting, so the acquisition agreement did not have a non-compete clause or
golden handcuffs to Slack? If you don't mind me asking, how come you left
Slack?

~~~
runako
(I'm not affiliated with either Slack or ScreenHero. But I loved ScreenHero.)

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.

------
tictoc
Slack feels like employee surveillance beyond the chatting capabilities

~~~
merpnderp
Are the alternatives any better? For instance is discord protecting your
chats?

~~~
gamegod
Mattermost, IRC, etc.

~~~
merpnderp
IRC is great, but I've never thought of it as protecting my privacy. It's
definitely public and almost always logged by a myriad of bots if not the
server.

~~~
icedchai
You can run your own server.

------
collyw
Slack is overrated and over priced. Its not like messenger platforms are
difficult. We have had msn messneger, yahoo messenger, whatsapp, rocketchat,
facebook messneger, messenger, gchat, skype. Slack doesn't do anything
particularly special.

~~~
kaushikt
I disagree. Slack is not just about chat, they are about communication. We
moved from Skype to Slack and it was incredibly different for us.

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.

~~~
slothtrop
I've heard it described as having IRC channels with skype capabilities

~~~
smileysteve
> with skype capabilities

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.

------
frequentnapper
I don't understand. They are already back up. Is this even relevant anymore?

------
wetpaws
Slack is essentially an IRC. IRC is pretty much dead nowadays, Slack is just
the same concept but with a cloud integration and a modern client. It is
neither new nor a particularly good implementation, discord is faster and
better as a communication tool and possibly more clones are coming. The only
lucky thing for Slack is that it was in the right time in the right place and
introduced 30 year old concept to the corporate folks - but this advantage can
go away anytime.

------
rainyMammoth
One of the most useless product of our generation. The fact that they believe
themselves that they make "work happen" is a level of self-koolaid-drinking
that I rarely saw even in Silicon Valley. I'm happy that the stock is
plummeting.

------
geerlingguy
Well if they’d just implement dark mode or a dark theme on desktop...

~~~
magashna
You can hack it in

~~~
GhettoMaestro
Been waiting years for official desktop app dark mode support. The lack of it
is sheer stupidity, considering they have dark mode in the iOS Slack app.

------
shay_ker
It'd be really interesting for Slack to go the Atlassian or Microsoft route -
acquire companies that solve adjacent problems, and then bundle the products
to enterprise customers. The sales get harder to ignore, and it'd make Slack
as a company even stickier.

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.

~~~
davnicwil
I think this is their strategy, and I think what's more they will want to
solve these things vertically 'on top of' slack as plugins and apps. They
started filling the pipeline for this a while ago by literally funding
startups building such things. Acquiring some of the more popular ones is
surely one of the goals, should this work out.

------
kerng
New category of software? Such a statement shows how disconnected leaders can
be from reality.

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.

------
elhudy
Earnings run-up aside, it's only down 7% or $2 from this past Friday. That's a
lot, but not in comparison to it's drop since IPO.

------
t34543
Good! Slack product managers are arrogant and the product is garbage. Lots of
dark patterns.

------
freediver
Seems even nytimes reporter is embarrassed by what slack actually is (chat
app) calling it “business software”.

