Slack CEO Explains Why Current Usage Spike Will Have Staying Power

The company has added 9,000 new paying customers just in the last two months, but the positive effects for Slack will outlast the pandemic according to CEO Stewart Butterfield.
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Slack, among many other virtual work tools, is seeing a massive surge in usage tied to coronavirus. But the boost to Slack won't fade away after the pandemic subsides, according to CEO Stewart Butterfield. 

Butterfield took to Twitter on Thursday to describe what it's been like at the helm of Slack, as well as to announce a few updated metrics. Shares of Slack  (WORK) - Get Report closed 10% higher on Thursday to $28.48.

Slack added 9,000 new paid customers between February 1 and March 25, Butterfield said, representing an 80% increase compared to the full quarterly total of preceding quarters. At the same time, simultaneously connected users grew to 12.5 million as of Wednesday, from 10 million two weeks ago. And the creation rate of creation rate of new Slack workspaces (which the company believed to be created by businesses) increased by hundreds of percent from March 12, 2020 to March 25, 2020

The question for investors is: How much of this growth is sustainable? And between Slack, Microsoft  (MSFT) - Get Report Teams, Zoom  (ZM) - Get Report and other enterprise apps seeing a major surge in usage right now, who will win longer term?

At an investor conference hosted by RBC Capital Markets on Thursday, Butterfield cautioned that "there absolutely will be a partial revision to the mean" in Slack's growth rates once the crisis subsides. 

It's also impossible to properly model expectations given the unknown trajectory of the virus, how long widespread work-from-home scenarios might last, and how many businesses could cut back or fold entirely over the next few months, he said. Nonetheless, behavioral changes by customers will outlast the pandemic.

"We're seeing a deep introduction [to Slack] that's difficult to achieve," Butterfield said, reiterating that the company's goal isn't necessarily encouraging more remote work, but to make employees more responsive and agile. 

"That's the fundamental competitive advantage that cuts across any organization," he added. 

Slack is far from the only beneficiary of the sudden baptism-by-fire facing remote workers.

Zoom and Cisco's WebEx, among other apps, have experienced dramatic increases in usage in countries hard hit by the coronavirus epidemic. And Microsoft Teams, one of Slack's main rivals, recently added 12 million users in one week, according to Microsoft. 

Critics of Slack have questioned its ability to effectively compete against Microsoft, given the latter's formidable competitive advantages and existing ecosystem of ubiquitous enterprise products. But Butterfield isn't overly concerned, saying that the remote work surge has highlighted differences between them -- as well as the most relevant metrics for each -- which have been difficult to communicate up until now.

"When we look back on this time...that more people used Teams is not going to be relevant to us as a company," he said. 

He urged investors to pay attention to Slack's growth in paying customers as the metric to zero in on in the near term, and said that the stickiness of its product, particularly within larger organizations, bodes well for Slack in the longer term.  

"Go find a customer in the world that paid us a lot of money...that no longer pays us that much money. Good luck," he said.