Slack is quickly becoming one of the biggest names in tech right now, but just how far can they go?
Sept. 25, 2019
Slack Technologies is considered one of the fastest growing tech companies of all time. What began as a failed venture to build a multiplayer online game gave birth to the success of their internal messaging system, known today as Slack Technologies.
Businesses have traditionally used email messages to communicate internally, which is long overdue for an upgrade. But it wasn’t until Slack’s unique platform introduced a modern communication process with built in hashtags, the use of GIFs, emojis, document sharing and even a friendly reminder system, that they soon became a verb of their own with employees saying things like “I’ll ‘Slack’ it to you…”, meaning “I’ll message it over to you.”
Microsoft Teams VS. Slack – A Comparison
Before we introduce the fundamentals of the two companies as an investment, here’s a brief introduction of the two products along with my personal opinion, having used both technologies in fast-paced workplaces.
Microsoft Teams is yet another app among the Microsoft suite of apps available that enables team collaboration and internal communication. If you’re familiar with the old fashioned MSN messenger, consider Microsoft the modern version of MSN’s messenger platform from years ago.
With Microsoft Teams, you have the ability to send instant messages to anyone within your organization, communicate via group chats, video web conferences and group calls.
I used Microsoft Teams years ago as an insurance agent. My employees and I were able to communicate in an effective way without having to shout across the office, and I was able to collaborate with other agents and mentors within the organization. This saved us a lot of time and effort, as the contrary option would be to get up and walk over to someone else’s desk to communicate or pick up the phone and call them. With Microsoft Teams, it was as quick and easy as sending an instant message, allowing you to effectively get work done without interruption.
If Microsoft Teams is the modern version of instant messaging, consider Slack the future of internal communication already happening today. To avoid redundancy, Slack does everything that Microsoft Teams does in terms of communication, but with more very useful features such as:
– The ability to create separate “channels” on different topics that anyone can comment and contribute to
– The use of hashtags, emojis, and GIF images
– The ability to upload and send files of almost any format
– Integrate with company updates such as having a “#Sales” channel that automatically posts updates of new sales and basic details, allowing a sales organization to stay motivated and up to date on their goals (for example)
– A personal assistant known as “Slackbot” that allows you to type in reminder requests such as “call John at 3:30pm today” which triggers Slackbot to send you a reminder notification to complete the task
Slack is an all around communication hub that allows organizations to communicate faster and more efficiently, while keeping the emotional sentiment often lost in text based communications. Slack even keeps an entire history of everything you’ve ever said within each Slack channel, hence the name Slack, an acronym for “Searchable Log of All Conversation and Knowledge.”
As it turns out, once I decided to transition jobs from my insurance agency, the next organization I worked with was a user of Slack. We would always have at least two windows open, one for our CRM system and another for Slack. Slack was the central place to get alerts, updates and reminders of anything and everything within the organization. It allowed all 400+ of us employees to all communicate at once, while all still having our voice heard and not being muffled out from the loud chatter.
One thing was for sure, we were all up to speed on the latest within the company, and that allowed us to move at a very fast pace. In fact, this company where I worked when first introduced to Slack, is one of the fastest growing tech companies in the US, no surprise.
Fundamental Analysis of Slack & Microsoft As An Investment
It’s a bit hard to compare Slack and Microsoft as investments from a broad standpoint. Microsoft has a trillion dollar market cap with a large suite of products (both related and unrelated to Slack’s product) wile Slack is a $14 billion dollar company with one niche focused product. Both companies are potentially excellent investments for a vast number of risk tolerances, and Microsoft clearly has the track record, financial strength and brand awareness to argue one over the other.
So, in order to conclude whether Slack will be a great investment, we must be able to answer the question as to whether Slack has the ability to win market share for it’s internal communication platform over the market competition (Microsoft Teams being the biggest competitor). To do so, I’ve outlined a few facts that support the strength of the internal communications products.
In comparing the daily active users and number of organizations between both products, both have strong sustaining numbers.
13 million daily active users
10 million daily active users
The fact that Microsoft Teams has less total organizations and more daily active users may indicate they have a larger share of bigger sized companies using their product. This would make sense seeing they have over 180 million users of their other Microsoft apps such as Microsoft 365, Microsoft’s subscription service to all their main business applications, including Teams. There is, however, something to say about Slack not having any added leverage to acquire customers (such as 180 million customers already using your other products).
Price can be looked at from multiple angles. On the one hand, a company with a cheap price has pricing power advantage over the competition with higher prices. But on the other hand, companies that can charge higher prices often have higher margins, and that’s good for investment, especially if customers are willing to pay higher prices for a better product.
Microsoft Teams: Free, $12.50/user per month for Office 365 Premium, $20.00/user per month for Office 365 Enterprise
Slack: Free, $6.67/user per month for Standard plan, $12.50/user per month for Plus
With Slack being in growth stage of a newly listed public company, their focus is on acquiring users at a fast rate, which they are doing very well and their prices certainly help. As Slack expands its user base, it wouldn’t be surprising if they increased their prices slightly, just enough to launch their earnings and perhaps “price-out” (or, push away due to increased price) certain unprofitable customer segments.
To get a general idea of how customers feel about the two products, I researched two popular software websites whose focus is solely that of rating and reviewing software platforms.
(User reviews taken from GetApp and G2 customer ratings)
GetApp users rate Microsoft Teams 4.55 / 5.0 with a total of 8,123 reviews.
G2 users rate Microsoft Teams 4.2 / 5.0 with a total of 1,078 reviews.
GetApp users rate Slack 4.63 / 5.0 with a total of 15,586 reviews.
G2 users rate Slack 4.5 / 5.0 with a total of 17,992 reviews.
Either Slack has a much more engaged customer base (also a great sign of an exceptional product), or their product is just that much better.
Competitive Advantages / Moats
Perhaps one of the biggest determining factors of a successful product and company is their competitive advantage, or Moat, as may may refer to it as.
Microsoft Teams: Microsoft Office has a user base of nearly 180 million users, giving it a large market of current customers to market their Teams product to.
Slack: Convenience goes a long way and a large convenience that allows Slack to compete with companies like Microsoft is their apps and integrations. Slack has over 1,500+ apps within their app directory, over 4,000+ apps that have been built to use with Slack, and over 900,000 integrations.
There Is Power In Niche Focused Companies
Coming from personal experience having used both products, Slack takes the win hands down. Their fundamental growth and ever increasing revenues only makes it even more appealing for the investor who is looking for the next “tenbagger” stock purchase (as Peter Lynch calls it).
To further illustrate how Slack Technologies is becoming more and more of a powerhouse company for internal communications, consider these growth stats for the modern communication platform:
Revenue was $134.8 million for Q1 fiscal year 2020, an increase of 67% year-over-year
645 paid customers with $100,000+ in annual recurring revenue, up 84% year-over-year
98% paid-user retention rate
There is a lot to say when it comes to niche focused companies having a stronger position than generalized companies. The same principle applies to a 150 watt light bulb that powers a room as compared to a 150 watt laser that cuts through metal. When taking a niche approach to internal business communication, Slack is able to dominate a trillion dollar powerhouse like Microsoft Teams, creating a great investment opportunity for those who recognize it.
Cameron Williams is a freelance writer on finance and investment related topics. Read more of Cameron Williams work here.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Microsoft and Slack. Read our full disclosure policy here.