Slack’s sentimental growth slow, as competition zooms ahead, says GlobalData

Intense competition, user interface (UI) complexities, and net income slumps affected Slack’s sentiments, says GlobalData, a leading data and analytics company.

Slack has seen slow sentimental growth, as tracked by Globaldata’s Filing Analytics platform. According to the database, Slack’s sentiments grew by only 2% in the first quarter (Q1) of 2020 (ended April 30 2020) as compared to the fourth quarter (Q4) of 2019.

Rinaldo Pereira, Senior Analyst at GlobalData, says: “Despite lockdowns driving the usage of work-from-home tools and services, Slack has not been able to capitalize on pandemic-driven quarantines due to intense competition from Zoom and Microsoft Teams. The software-as-a-service (SaaS) conferencing and chat tool posted revenue growth of around 50% in Q1 2020, compared to the same quarter a year ago. Sentiment growth was low due to a net income slump in Q1 2020 compared to Q1 2019.

“Furthermore, Slack’s UI is complicated, while Zoom and Teams’ are easy to adopt. Such complications, coupled with renewal issues, caused Slack’s deferred revenue to take a hit compared to Q1 2019.”

Slack’s business runs on a seat-based model. As customers reduce staffing due to economic constraints, the inflow of payments is less. However, the company had a positive aspect with a net retention rate of 132% during the quarter. Slack has also improved its cash flow in Q1 2020 versus its prior-year period. During the quarter, Slack only added 12,000 net new paid customers, while Zoom added ‘millions’ of licenses according to respective earnings transcripts.

Pereira continues: “The surging interest in Zoom and Microsoft Teams is causing problems for Slack as it caters to a smaller audience and is enterprise software. Slack’s monthly growth is monumental yet is failing to keep up with Zoom’s meteoric growth (customers with more than ten employees grew 354% in Q1 2020). Zoom had over 300 million daily users by April 2020.While Microsoft Teams which had 32 million daily users in March 2020, grew to 75 million daily users by April 2020.”

Security issues prompted Zoom to aggressively spend on research and development during the quarter, being up 66% in Q1 2020 compared to the same period a year ago.

Pereira concludes: “Zoom’s security concerns are boon for Slack to prove its capabilities. Slack’s management has commented on possible investments to improve the company’s competitive landscape. However, it needs to do so quickly as its counterparts may soon leave it behind.”

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