The Slack Bubble and the Professional Instant Messaging Market
The IM pro segment is up for grabs with an addressable market of at least 600 million people. Last week, I talked with Gilles Raymond, CEO of Done which is working on a messaging suite for business.
Gilles Raymond, 50, is a French serial entrepreneur who splits his time between Maui, Hawaii, and Bordeaux, one of the hottest tech spots in France. Three years ago, he made a nice exit for News Republic, whose flagship product was a news aggregator app, sold to Cheetah Mobile who then resold it to the Chinese giant Bytedance, as part of the Musica.ly deal. After launching The Signals Network to provide assistance to whistleblowers, he is back to startup with Done (www.do.ne), an instant messaging suite for business, currently in stealth mode. (In case you wonder, “.ne” is the top-level domain for Niger).
— “Why focus on the B2B market while the B2C seems so huge? As far as we can tell, IM is far from having overtaken email and its 3 billion users…”
“First of all, it is no longer relevant to consider separately the consumer and the business market. Inevitably, the two will merge. In your question, you mentioned email. Last year, a user had on average 1.7 email accounts; this year, the ratio will be 1.9, simply due to the increasing combination of professional and private use. Another example is the video call segment: look at your list of recent conversations on Skype, Zoom, or Hangout. They mix personal and professional activity. The line between private and personal use of these tools is more blurred than ever.
In this context, the IM market has room to grow, to say the least. Right now, in the United States, only 38 percent use instant messaging systems for both private and business use. This is way below the global average of 67 percent.
Now, if we focus on the enterprise segment, the potential is huge. At Done, we estimate the addressable market between 600 million and one billion users.
When you think about it, IM is a perfect fit for the workplace. In a company, interactions need to be quick, tasks are organized by groups — which often involve different places, cities, time zones, etc. Plus with IM, you maximize the relevancy of the content: the group is smaller, or more focused. Plus there is no spam, no distraction… and no viruses. And as the platform operator, you can attach to it a cool and recurring subscription model…”
— “But whether it is the B2C or B2B side, the market seems pretty crowded…”
“It is, indeed. Recently I found this tweet from the Motherboard writer Lorenzo Franchesci-Bicchiera:
I think it perfectly summarizes the sector: a flurry of players, some of them supported by tech giants, but none has emerged as a dominant tool, let alone a standard.
It is actually strange when you consider the position of Microsoft for instance. They were unable to upsell their 1.2 billion Office customers in order to boost Microsoft Teams; they owe their market share to the acquisition of Skype… in 2011.
As for Facebook, it failed miserably to enter the enterprise market with its Workplace product. The main reasons are its terrible features and the fact that most companies freaked out when Facebook suggested that their A.I. tools will be great to measure employees’ mood and their feelings on key internal issues. That’s just another example of Facebook peculiar DNA when it comes to data mining users.”
— “There is the counterexample of Slack, which started from scratch and achieved a staggering growth…”
“Right, but here you have the optics and the reality.
The optics are: every person you and I know in Silicon Valley has the Slack app in their smartphone. To put some figures on it, you can take The Information’s subscriber survey. While it is essentially the tech world looking onto itself; the poll states that 43 percent of the respondents use Slack; the next group is a vague “other systems” which account for 23 percent, and the next identified platform being Google Chat/Hangout with 16.5 percent.
Now, the reality: this analysis by Spiceworks offers a more accurate view:
It gives 15 percent for Slack across a wide spectrum of sectors and companies. It is obvious that, despite a huge marketing push, Slack has not, by a long shot, replaced email or taken the top spot in the business. In the worker’s daily arsenal, it is just yet another tool.”
— “OK, but the 1500 external apps claimed by Slack are a reality. Aren’t they a serious barrier to entry?”
“I don’t think so. First, the ecosystem you refer to is largely subsidized, thanks to the $80 million fund created in 2015 by Slack, or rather by its VCs (Accel, Andreessen Horowitz, Index Ventures, Kleiner Perkins and others). It was meant precisely to secure Slack’s position. I’m still waiting for compelling figures, especially the retention rates of the apps [how many people still use the service after a certain period, vs. the ones who downloaded it].
Now, let’s take the user’s perspective. If we have the choice between 10 apps, for, say, organizing group meeting. For the system to work, you, me, and the people we want to invite to our meeting will have to use the same apps. That’s easy among the staff, more uncertain for outsiders. Plus, in terms of integration, ease of use, reliability, compatibility between updates for the apps and the platform, which one will works better in your view? The native app proposed by the platform or the cluster of third-party extension?”
— “Is Slack a typical Silicon Valley bubble?”
“I’m just looking at the numbers: Slack claims 10 million users. Fine. But the most important metric is the paid-for customers. Here we are down to 3 to 4 million at most. Of course, there is a nice ARPU of $67 per year attached to it. But if we consider Slack’s market cap ($7.1 billion), it gives a valuation between $2400 and $1800 for each paid-for user. As a comparison, Netflix, which has 120 million paid-for customers and produces about a thousand original shows per year has a valuation of $1300 per customer. Speaking of barriers to entry, those of Netflix are quite high.
Plus honestly, I have my doubts about a platform that requires a command-line like:
/remind [@someone or #channel] to [What] [When]**…simply to set a reminder to a coworker, an instruction that is not even guaranteed to work across all the team as warned by Slack:
‘The functionality of some slash commands (e.g. /remind) may vary depending on your language preference.’
We can definitely do better than that.
— Interview by frederic.filloux@mondaynote.com
