Microsoft is not the only thorny issue Slack’s dealing with currently. The workplace messaging app posted underwhelming Q2 results as user growth stalls and competition heats up.Â
 The pressure continues to mount on Slack. The team messaging platform that filed an antitrust lawsuit against Microsoft earlier in July reported a breakeven quarter amid slow user growth. Dubbed a beneficiary of the pandemic bump, Slack posted steady numbers for Q2 fiscal year 2021 but failed to show the growth rate its competitors Zoom and Microsoft TeamsOpens a new window achieved.Â
The channel-based messaging tool added 8000 new paid customers, as opposed to 12,000 in the previous quarter. As one might expect, the company’s quarterly billings also slumped 13 percentage points from 38% in Q1 2021 to 25% in Q2 2021. The company did, however, beat analyst expectations of 6000 new customers.
The slowdown perhaps underscores the uptick in COVID-induced collaboration boom was short-term in nature. Besides, Slack co-founder and CEO Stewart Butterfield revealed revenue nosedivedOpens a new window when companies slashed jobs amid massive market uncertainty. “Paid Customer growth — which is the single most important driver of the business over the long term — accelerated in Q2, up 30% year-over-year,†he said.Â
The CEO’s statement holds true only for paid customers. Meanwhile, companies using Slack as a freemium tool don’t really add to the bottom line. Â
See Also: Is Zoom the Biggest Benefactor of COVID-19?
Slack’s paid customer growth in Q2 2021:
- Added 985 paid customers who spend greater than $100,000; a 37% YoY growth
- Added 87 paid customers who spend greater than $1 million; a 78% YoY growth
- Total 130,000 paid customers; 30% YoY growth
- Added 11,000 Slack Connect customers, posting a 27% growth
Between Microsoft and Slack, two different types of models are at loggerheads – bundled vs. best-in-class. That’s what the antitrust lawsuit was all about. Microsoft won the enterprise software battle by bundling text, video and video-based apps together. While users seem to love standalone apps like Slack and Zoom, Microsoft is surging ahead in the collaboration race. As of April 29, Microsoft’s Teams group-chat platform notched 75 million daily active usersOpens a new window , up from 44 million in mid-MarchOpens a new window .
So, where does that leave Slack?
Well, the company is managing to stay afloat through Slack ConnectOpens a new window . Butterfield added, “One of the drivers of this (paid customer growth) acceleration was Slack Connect, which offers seamless, secure intercompany collaboration that we believe is light years ahead of email.â€
See Also: No, Slack Hasn’t Left the Room. It’s Still Working on Killing EmailOpens a new window
He goes on, “We ended the quarter with more than 380,000 connected endpoints, up more than 200% year-over-year, and now more than 52,000 Paid Customers use Connect, up 160% year-over-year.†Slack Connect was launched towards the end of June and the tool’s functional appeal is also incentivizing freemium customers to move towards a paid model.
Angela Ashenden, Principal Workplace Transformation Analyst for CCS Insight told Verdict UKOpens a new window , “Looking ahead, it seems clear that Slack Connect – which remains a major point of differentiation for Slack against Microsoft Teams and other competitors – is a crucial piece in the company’s growth strategy, with its ability to generate viral adoption between businesses.â€
Moving forward, Slack expects to narrow operating losses from $27 million to $23 million at $0.06 to $0.05 net loss per share.
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