The field of professional messaging apps shifted on Tuesday when Microsoft (NASDAQ: MSFT) announced it now has over 20 million users on its Teams platform, outpacing both Slack (NYSE: WORK) and investor expectations. Microsoft shares saw modest growth, 0.3%, in comparison to Slack's share plummet of 10%. Shares of Slack are now down 45% from their all-time high, and investors are wondering how Slack will fair as Teams continue to grow. Both Teams and Slack are cloud based collaboration software commonly used by business and professionals to manage projects, schedule meetings, etc.
Despite being two years younger than Slack, Teams has several advantages when it comes to user growth. Currently, Teams is bundled with Microsoft's suite of tools, meaning Office users have little incentive to also pay for Slack. Many companies are transitioning to Microsoft's Outlook, effectively making Teams use required. Teams also currently has 500,000 customers, while Slack is higher with 600,000, but Teams reported 8 million more users than Slack's 12 million. The disparity between the difference in users versus customers is an indicator that Microsoft is indeed picking up larger companies than Slack. Both companies benefit from network benefits-the more users on a network, the more value there is in that network to each user. It is unclear now which company will benefit more from these effects, but they will undoubtedly play a role in the shift of control of the market between the two companies.
The news earlier this week was not necessarily the end for Slack, but it will be a . The software firm will need to find a way to either differentiate itself via branding or usage. Concerning the latter, Slack has been attempting to position itself as complementary to Office rather than as simply an alternative. Slack could also focus on its marketing in order to increase brand loyalty and highlight the "cool factor" that they have over Teams. If enough employees prefer Slack, companies could be persuaded. Slack could also be bundled with a suite of business solutions similar to Office, something perhaps foreshadowed by Slack's partnerships with other technology companies like Atlassian whose products are used to help manage projects.
Although, there are other reasons to have a little faith in Slack. Their stock is predicted to continue to fall for a few months. Currently, only 20% of Slack users utilize the apps capability to communicate with those outside of the company, a number with a lot of potential for growth. Slack also consistently hires talented people, many of whom previously worked for top technology companies. This shows Slack's commitment to hiring qualified employees. Slack also has a strong lead on integrations with other applications: Slack has 1,800 integrations in comparison to Teams's 220. However, both apps are similarly rated on the marketplaces.
Microsoft's outlook on the other hand is looking very promising. The technology company's CEO Satya Nadella has expressed an interest in embracing cloud computing with Azure, the company's public cloud, which has already reached a $17 billion annualized revenue run rate. Amazon (NASDAQ: AMZN) still leads the pack in the cloud market, but Microsoft wants to change that. Analysts agree that cloud computing is the way of the future, so Microsoft's future is looking particularly positive, and Teams will probably be a part of that. It's not clear whether or not Slack will be.