In 2013 most work teams communicated through email, mailing lists, text messages and consumer chat; asked what they used for internal communication, most said nothing SL7. Developer teams had chat rooms such as IRC, Campfire and HipChat SL7 SL1. Conversations and files piled up in separate places, so recovering what a team had decided meant searching several tools or asking a colleague. Because most teams did not see workplace communication as a problem worth buying software for, a new tool had to be useful enough to change a whole group's habit.
Slack
Slack arrived four years after HipChat with a product polished on friends' teams, let whole teams in free and charged for history, then tied each workspace to its partner companies and software.
How Slack won
- 1 · 2013–15Ease of use, with integrations built inOnboarding polished on friends' teams through a 2013 preview; integrations in the free product (2014) and an App Directory with an $80M fund (2015).Ease of Use
- 2 · 2014–19Viral team adoption, with a better free tierThe free plan limited history, not users, so whole teams adopted it; team purchases became footholds for a sales force from 2016.Freemium Model
- 3 · 2015–20Collaboration network effectInvitations built into each team's first days, then channels shared across companies from 2017; more than four per paying customer by 2019.Collaboration & exchange network effects
- 4 · 2018–Switching costsHistory, partner channels and 450,000 integrations in weekly use (2019) held each workspace; Enterprise Grid on top.Switching costs
Versus HipChat: HipChat reached teams four years earlier, capped its free plan at five people, then spent its effort on enterprise editions and a rebuild HC8 HC22. Slack let whole teams in free, charged for history, and connected each workspace to its partners and software.
Arena: Market Conditions Before Slack
How each step happened
Step 1 of 4 · 2013–15
Ease of use, with integrations built in
Slack entered a market HipChat had served since 2010, so its bet was to be easier to adopt than the tools teams already had. The founders chose three things to be "extremely, surprisingly good at": search, picking up a conversation where you left it on another device, and simple file sharing SL7. The team had refined the tool for years while making the failed game Glitch, and when the game closed in November 2012 investors let Stewart Butterfield keep the remaining money to build it SL12 SL10 SL11.
From May 2013 Slack shared the product with ever larger groups of friends' companies and fixed what each broke. At Rdio it spread from a few developers to all 120 employees, and new hires could not tell which channels to join, so Slack added channel descriptions and member counts SL7. From the August 2013 preview to the February 2014 launch, teams were admitted in batches and the new-user experience was reworked between them; help tickets and tweets went into channels that product staff read every day SL7.
Integrations were part of the same product. Free teams could connect up to ten tools such as Asana, Dropbox and MailChimp SL1 SL7. In December 2015 Slack opened an App Directory with 150 integrations and an $80 million fund with six venture firms to back developers building on it SL15.
Rivals HipChat launched publicly in January 2010 before its planned mobile and API features were ready HC4. Its app platform, HipChat Connect, arrived in November 2015 and sold apps through the Atlassian Marketplace built for Jira and Confluence add-ons HC12.
Ease of UseApp MarketplaceCustomer DiscoveryQuality & feedback systemsPlatform Strategy
Step 2 of 4 · 2014–19
Viral team adoption, with a better free tier
A free plan for the whole team
Slack had to sell a category as well as a product. In July 2013 Butterfield told his eight-person staff that Slack was defining a new market and selling organizational transformation, not software features SL8 SL12. The free plan at the February 2014 launch had every feature and no limit on people; it limited search to the team's most recent 10,000 messages SL9. A whole team could adopt Slack before anyone paid, and it paid once its archive mattered SL1. Paying teams, at $8 per person a month, were credited for members who stopped using it SL20 SL13 SL2.
Team purchases as footholds
A manager could try Slack for one team and expense it without asking the chief information officer. In 2015 Adobe had nine separately paid Slack teams; "at the beginning, we bypassed all that, and it was a big advantage," Butterfield said SL7. From 2016 a direct sales force widened those footholds into company contracts SL2. At Capital One, which moved about 12,000 employees onto Slack in 2017, many new engineers already knew it SL19. Customers paying more than $100,000 a year rose from 298 in January 2018 to 893 two years later, about 46 percent of revenue SL2 SL6.
Rivals HipChat's free plan stopped at five users from March 2013, and a sixth user meant paying $2 a person HC8. It removed the limit in May 2014, three months after Slack launched HC9.
Step 3 of 4 · 2015–20
Collaboration network effect
The network started inside each team, during the same years the free plan was spreading. Butterfield says every member of a team effectively holds a veto over adopting Slack SL7. More than 90 percent of people who signed up never invited anyone SL7. Merci Grace, who ran the new-user experience from 2015, found three people and 50 messages to be the point at which the product started to work, and put invitations throughout it SL27. Of teams that reached 2,000 messages, 93 percent were still using Slack SL7.
That network stopped at the company's edge: people recommended Slack to friends elsewhere but did not need them in it SL1. Shared channels, in beta from September 2017, crossed it SL21 SL2. Slack built them as one channel whose history both companies hold, not as guest accounts SL21. By January 2019 more than 15 percent of paying customers used them, with an average of more than four shared channels each SL2. Each partner company that joined made the workspace more useful to the people already in it.
Rivals HipChat had offered guest links since 2010, which let an outsider into one room to see only the messages sent while invited HC5. Microsoft's Teams added shared channels in 2022 with lower limits SL21.
Step 4 of 4 · 2018–
Switching costs
History, partners and integrations together made a workspace costly to leave. Messages, application posts and file text all stay searchable, so the archive grows more useful the longer a team works in it SL2. By January 2019 more than 450,000 third-party or custom integrations were used in a typical week, many connected to customers' own internal systems SL2 SL6. Leaving meant moving years of history and rebuilding those connections and workflows elsewhere SL6 SL2, and shared channels added partner companies to what a team would have to move. Enterprise Grid, launched in January 2017, added a layer on top: a whole company's workspaces under central security and administration SL18 SL19. Net dollar retention, the year-over-year change in revenue from existing customers, was 143 percent in January 2019 and 132 percent a year later SL6.
The barrier held against a rival chat product; a bundle was a harder test. In July 2018 Atlassian discontinued HipChat and Stride, sold their intellectual property to Slack and worked with Slack on a migration path for their customers SL3. Microsoft's Teams, included in Office 365 from 2016, reached the same buyers at no separate price; Slack named Microsoft its primary competitor and complained to the European Commission in July 2020 SL18 SL6 SL23. Slack then sold itself to Salesforce for about $27.7 billion, a purchase completed in July 2021 SL24 SL4. What kept teams in Slack was the history and connections that the free team plan in step 2 had let them build.
Rivals HipChat's owner rebuilt the product from scratch as Stride in September 2017, restarting adoption in a market Slack already led HC16 HC17. In July 2018 it sold both products' intellectual property to Slack for what Butterfield called a nominal sum HC19.
Key dates
- 2010-01HipChat launches to the public HC4
- 2012-11Glitch closes; investors back the chat tool
- 2013-08Preview by invitation; teams admitted in batches
- 2014-02Launch with a free plan limited by history, not users
- 2014-05HipChat drops its five-user limit on free use HC9
- 2015-12App Directory and an $80M developer fund
- 2016A direct sales force
- 2016-11Microsoft announces Teams; Slack's open letter
- 2017$105.2M revenue Fiscal year to January 2017 SL2
- 2017-01Enterprise Grid
- 2018$220.5M revenue Fiscal year to January 2018, +110% year over year SL2
- 2018-07Atlassian leaves chat and sells HipChat and Stride IP to Slack
- 2019$400.6M revenue Fiscal year to January 2019, +82% year over year; more than 88,000 paying customers SL2
- 2019-06Direct listing on the NYSE SL2
- 2020$630.4M revenue Fiscal year to January 2020, +57% year over year; more than 110,000 paying customers SL6
- 2020-06Slack Connect for up to 20 organizations
- 2021-07Salesforce completes its purchase
Sources
Oldest first.
- HC4 HipChat Takes On Campfire And Yammer As It Launches To The Public. Contemporaneous report quoting a founder
- HC5 HipChat's Enterprise Communication Platform Adds Video Chat And Guest Access. Contemporaneous report
- HC8 HipChat Introduces New Free Tier For Teams Of Five Or Fewer To Capitalize On Bottom-Up Growth. Contemporaneous report quoting a founder
- SL9 Slack, Flickr Co-Founder Butterfield's Business Collaboration App, Exits Beta & Goes Freemium. News report
- SL8 We Don't Sell Saddles Here. Founder memo
- HC9 Atlassian's HipChat Removes User Limits On Free Plans. Contemporaneous report quoting a founder
- SL7 From 0 to $1B: Slack's Founder Shares Their Epic Launch Strategy. Founder interview; VC publisher
- SL11 Andrew Braccia's Big Bet on Slack. Investor interview
- HC12 Atlassian Opens Its HipChat Messaging Platform To Developers. Contemporaneous report quoting an executive
- SL15 Slack Launches App Directory And Joins Top VCs For $80M Fund Backing Developers. News report and analysis
- SL17 Dear Microsoft. Company letter
- SL18 Slack launches 'Enterprise Grid' for larger businesses as Microsoft touts Teams traction. News report
- SL19 Slack Grows Up, Debuts New Suite For Large Businesses Called 'Enterprise Grid'. News report
- HC16 Atlassian launches Stride, its Slack competitor. Contemporaneous report
- HC17 Atlassian Launches Messaging Platform Called Stride In Latest Bid To Slow Down Slack. Contemporaneous report quoting the co-CEO
- HC19 Atlassian exits business communications space, surrenders to Slack. Contemporaneous report quoting both chief executives
- SL3 Announcing our new partnership with Slack. Rival exit announcement
- SL10 The Slack origin story. News feature
- SL2 Slack 2019 direct-listing prospectus. Listing prospectus
- SL1 Acquired: The Slack DPO (transcript). Podcast transcript
- SL6 Slack FY2020 Form 10-K. Annual filing
- SL22 Slack will let up to 20 organizations collaborate, extending reach and escalating Microsoft rivalry. News report
- SL16 The Product Thinking That Built Slack & Twitter, with April Underwood. Executive podcast transcript
- SL23 Slack Files EU Competition Complaint Against Microsoft. Company announcement
- R1 Acquired — Slack + Salesforce Emergency Pod with Packy McCormick of Not Boring. Podcast transcript
- SL24 Why Slack and Salesforce execs think they're better together. News interview
- SL4 Salesforce Completes Acquisition of Slack. Acquisition close
- HC22 20 years of Atlassian, 20 lessons learned. Company retrospective
- SL27 Merci Grace (ex-Head of Growth at Slack). Executive podcast transcript
- SL20 Day 1. Early-employee history
- SL13 Behind Slack's Success: The Fair Billing Policy. Executive essay
- SL21 Turning Slack into a Network. Early-employee history
- SL5 La Commission accepte les engagements offerts par Microsoft pour résoudre les problèmes de concurrence liés à Teams. Competition commitments
- SL26 An Interview with Cal Henderson. Co-founder interview
- SL12 Mental models for building products people love ft. Stewart Butterfield. Founder podcast transcript
- R2 Slack to Teams in Two Weeks, 95% Adoption. Implementation-partner named customer account
- SL25 Salesforce, Part One. Early-employee history
- SL14 Slack's Fair Billing Policy. Policy page
- SL28 Social Capital's Mamoon Hamid on raising capital. Investor podcast