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The origin story for Slack, the San Francisco-based enterprise communications platform, involves one of Silicon Valley’s wilder pivots.
In 2013, Stewart Butterfield, already famed for confecting Flickr from the ashes of a failed video game venture and selling it to Yahoo for $20 million, announced the launch of a workplace messaging app built for a second gaming startup (which also failed). By the summer of 2018, Slack—as the spun-off app was dubbed—counted more than 8 million users, had raised $1.7 billion, and commanded a $7 billion valuation. By the time Slack debuted on the New York Stock Exchange in June of last year, its market value had more than doubled to $15.7 billion. On its first day of trading Slack’s market cap more than doubled again to close at over $38 billion.
Early this year, as the coronavirus swept across the U.S. and Europe, the value of Butterfield’s ersatz messaging app looked poised to ascend even higher into the stratosphere. Slack offers a product that seemed a sure bet for the “work-from-home” era: an innovative digital platform, beloved by tech startups, that enables employees to communicate with each other quickly and intuitively without having to occupy the same space or resort to e-mail.
In June, Slack rolled out Slack Connect a bundle of additional functions and features designed to make it easier for large companies to collaborate externally with partners, vendors, and clients.
(Full disclosure: here at Fortune, we practically live on Slack; I’m a huge fan.)
And yet, as the pandemic drags on, Slack shares remain stubbornly earthbound. Consider Wall Street’s response in September when the company reported that revenues in the second quarter ending July 31 jumped 49% to $216 million. Losses were negligible. But billings were $218 million, shy of the $232 million projected by analysts. Slack’s stock price tanked 19% in a single day.
Slack shares have since rallied and now trade around $29, up from $23 at the beginning of the year. Not bad, but it’s a far cry from the performance of Zoom, the video conferencing app, whose shares began the year at $68 and now trade above $480. Slack’s market capitalization of $16 billion compared to $138 billion for Zoom.
I have argued often in this space that Wall Street routinely underestimates the value of great design. But Slack, unlike Zoom, has struggled to grow its user base during the pandemic. The company claims more than 12 million total daily average users—but hasn’t updated that estimate since last year.
A more pressing challenge for Slack is that many of its 130,000 paying customers are small and medium-sized businesses that have been hit hard by the pandemic and quicker to cut back on software fees to contain costs.
And it doesn’t help that Microsoft, Google, and Zoom are adding Slack-like features to their products. Slack’s biggest headache is Microsoft, which introduced its own enterprise communications and collaboration app, Teams, in November 2016.
The Wall Street Journal reports that Microsoft made a bid to acquire Slack in 2015. Butterfield declined. Microsoft CEO Satya Nadella now hails Teams as critical to his company’s future.
Like Slack, Microsoft offers a free version of its platform with limited features and a more robust subscription-based version that can be purchased separately from other Microsoft products. But the Seattle-based software giant has worked hard to integrate Teams into its broader product suite and includes the platform free of charge for companies that pay for Office 365, which includes Word, Excel, and PowerPoint.
Butterfield has accused Microsoft of trying to “kill off” Slack because it perceives the smaller company as an existential threat. (Microsoft scoffs at that and says it welcomes competition.)
Slack has filed a complaint against Microsoft in the European Union alleging illegal and anti-competitive practices that breach EU competition law. In a statement, Jonathan Prince, vice president of communications and policy at Slack, alleged Microsoft is trying to stymie Slack because it “offers an open, flexible approach…that competes with the rest of Microsoft’s stack and gives customers the freedom to build solutions that meet their needs. We want to be the 2% of your software budget that makes the other 98% more valuable; they want 100% of your budget every time.”
Online reviews (like this one on blogging site, kinsta.com) of the two platforms tend to rate Slack the superior product for design, flexibility, and compatibility with outside applications. But there’s no denying that Teams is a solid alternative—or that Microsoft’s approach seems to be gaining traction, especially with big companies, government agencies, and schools.
In July of 2019 Microsoft issued a statement claiming Teams’ daily average users exceeded 13 million, topping the 10 million users then claimed by Slack. In April 2020, Microsoft said Teams’ user base had swelled to 75 million—prompting analysts at Goldman Sachs to declare victory for Teams.
My view, for what it’s worth, is that the battle is far from over. And in any case, it’s not clear to me that this is a zero-sum contest. Slack says the “majority” of its $1 million and above customers also use Microsoft’s Office 365. That’s certainly true at Fortune, where we use Slack, Outlook, and Zoom throughout the day.
Slack will be introducing a host of new features at its Frontiers 2020 conference which will be held virtually October 7-8. (You can register to participate here.) Ahead of that event, I caught up earlier this week (via Zoom) with Slack’s chief product officer Tamar Yehoshua and design vice president Ethan Eismann.
I couldn’t persuade them to spill the beans on Slack’s new product launch, but they offered a spirited defense of Slack’s open design philosophy and a detailed explanation of how the company collaborates with customers to continuously improve the platform. You’ll find highlights of that conversation in the video at the top of the web version of this week’s newsletter.
More design news below!
Clay Chandler
– clay.chandler@fortune.com
NEWS BY DESIGN
Japanese fashion designer Kenzo Takada died from COVID-19 complications at age 81. Takada emigrated to Paris in 1965, where he began his career, growing his self-titled brand into an international icon. The Kenzo brand—originally known for its colorful, Japanese-inspired designs, and now most famous for its vibrant tiger logo—was acquired by LVMH in 1993. Takada retired from the label nine years later.
Norwegian (but, international) architecture firm Snøhetta won the Cooper Hewitt National Design Award for Architecture. The accolade is awarded by New York’s Smithsonian Design Museum and recognizes not only the aesthetic splendor of Snøhetta's work but also its focus on the environment and sustainability. The award is the latest distinction to befall the architectural firm. Last month, Snøhetta won the bid to design the Theodore Roosevelt Presidential Library in North Dakota’s badlands.
California-based Cypris Materials has created a new paint inspired by the wings of a butterfly that uses reflection to create the illusion of color. Unlike conventional paints, which rely on dyes to provide color, Cypris Materials’s clear lacquer contains “nanostructures” that reflect certain wavelengths of light, making the paint appear colorful. But it’s not just color—the paint can be constructed to reflect UV or heat, too.
The Mellon Foundation—the largest foundation in support of humanities and arts in the U.S.—has pledged $250 million over the next five years to reimagine America's relationship with monuments. The so-called Monuments Project will pay to relocate some monuments, build new ones and reinvent others.
Venmo is launching a credit card designed for mobile apps. The card comes with a personalized QR code printed on its surface, which can be scanned with handheld point-of-sale devices. It can also be used at regular credit card terminals, expanding Venmo’s reach beyond mobile payments.
The e-commerce giant is trialling a new payment system at two of its physical Go stores that allow customers to pay by hovering their palm above a scanner. The initiative is called Amazon One and it uses a biometric sensor to detect the identifying pattern of blood vessels within the user's palm. Amazon argues it is more “private” than facial recognition tech. But privacy advocates say biometric payments are unnecessary anyway.
EVENTS BY DESIGN
October
Dubai had, perhaps, the misfortune of hosting the World Expo this year. Originally scheduled to open in October and run until April next year, the Dubai Expo 2020 has been delayed until October next year instead. World Expos come but once every five years, so perhaps waiting one more year is okay.
Italy’s materia independent design festival will return to showcasing young Italian designers October 2, taking the exhibition online via Instagram and Facebook.
Dutch Design Week is cancelling the real-world elements of this year's event in Eindhoven as coronavirus case numbers rise in the city. The online portions of the event will continue, October 17-25.
Swiss furniture designer Vitra is hosting its inaugural Vitra Summit October 22-23, bringing together architects, curators and designers to discuss the future of spaces. The event will be online.
November
Dubai’s inaugural architecture festival, d3 Architecture Festival, will run November 11-13 on the sidelines of Dubai Design Week. The event will focus on sustainability—an existential issue for the desert city.
Canada’s annual graphic design fest, DesignThinkers, is running online this year, November 10-21—the first time in the event’s 20-year history that it hasn’t been held in person.
QUOTED BY DESIGN
“Designers need to take a good hard look at themselves and stop making pointless stuff that looks nice and fuels relentless consumption.”
A new eco-focused creative collective, Urge, is hoping to reimagine how designers interact with the issue of climate change. The group is “not a think tank,” members Alexie Sommer and Ella Doran assert, because it aims to create practical solutions—rather than just conduct research and file reports. Urge wants all designers to be more actively engaged in the climate crisis, calling on them to “re-think the brief and make people and planet the clients.”
This week’s edition of BxD was curated by Eamon Barrett. Email him tips and ideas at eamon.barrett@fortune.com
