Why Salesforce’s acquisition of Slack makes perfect sense

Hrishikesh Pardeshi

Hrishikesh Pardeshi

WSJ reports that Salesforce is currently in advanced talks to buy Slack- a deal that would value Slack at more than $17 billion and go down as Salesforce’s largest acquisition ever. If you are quite surprised by the news, Slack's CEO Stewart Butterfield almost gave it away a month back 🧐. Here are some of my thoughts on why this is a great deal for Slack.

Slack is yet to turn a profit

Amid the rampant shift to work from home, investors expected a better-than-before earnings report but were instead disappointed to see a mediocre performance. 

Slack has blamed the slowdown on some of its small business customers being hurt by COVID-19. Despite having an impressive growth in paid customers, Slack still expects to post a net loss this year. It still remains unclear when the popular messaging tool will turn a profit or will it ever? 🤐

Competition with Microsoft

Microsoft Teams boasts more than 115 million daily active users while Slack only has a fraction of that (12 million dau), despite being launched years ago. Having a large existing customer base, Microsoft has been able to quickly scale Teams, as Slack slowly tries to catch up with the tech behemoth.

On the other hand, Salesforce is one of the world’s biggest seller of software and has strong relations with enterprise customers through its CRM software. Slack joining forces with Salesforce could easily help them scale up to more high-paying corporate customers that could make them a sustainably profitable business. 📊

Ultimately Salesforce would do the same thing to Slack, what Microsoft did to Teams-bringing in a huge existing customer base to drive growth & profitability. What do you think about this acquisition? Would like to know your thoughts!

Here's what our users had to say:

  • Boris Borisov said "It is good for Slack as a company, and its founders. I agree completely that those enterprise customers that Salesforce can bring will accelerate Slack in growth, and especially profitability. Although I'm not keen on Slack turning into a bloated enterprise software abomination (like Microsoft Teams?). Hubspot is a great example of enterprise software. In theory, it has so many nice features. But in reality, they have built them just so that their enterprise sales team can say "Yes, we have that", not with the user in mind, not with depth and quality of the features."

  • Karthik Sridharan said "Yaa, that would be an interesting one isn't it? We have seen companies like Microsoft turn seemingly decent products like Skype into something that does nothing for anyone. Will be interesting to see what Salesforce does with Slack though. Does Slack have what enterprises need? I don't know - frankly, I don't know much about what enterprises need, but my bet would be that there will be some product changes. But in reality, they have built them just so that their enterprise sales team can say "Yes, we have that", not with the user in mind, not with depth and quality of the features. Are you suggesting that Hubspot isn't a good product?"

  • Boris Borisov said "Some people like Hubspot. As a whole, it is not a bad product given how many people use it and pay for it a significant price. I have used Hubspot for 1-2 years and I don't like it. It may be that others need different features than us. But for us, when we switched to Close.com, it was amazing. It is one of the top 10 best decisions of 2020 we have made."

  • Karthik Sridharan said "> It is one of the top 10 best decisions of 2020 we have made. Wow, that's a big statement :). @suvansh also likes Close quite a bit though we haven't taken it up yet. I have only used Hubspot's free product very specific things I was testing on the marketing front and found it to be a decent product with also good support. But never too deep to be able to judge the product as a whole. Thanks for the heads up :)"

  • Boris Borisov said "You are welcome!We also used Hubspot the free version - for the basic CRM things it was good. But then when we wanted to systematize more the sales function, so we needed analytics things, better sending of automated emails etc. - Hubspot was not so good, and the annual subscription is quite steep. You also pay per number of contacts which quickly adds up in our industry. Probably the best feature we got from switching from Hubspot to Close.com is that we can at any time click a button and get our pipeline of customers by stage etc."

  • Karthik Sridharan said "I can totally imagine that. Totally different use case, but we still feel the steep costs of Mailchimp and its per contact costs. For now, we are using Airtable and Freshsales to manage our CRM work. But as our outbound scales and we want more organisation there, we might have to do better. I am just quite reluctant to use multiple tools. So, with Airtable, there are a lot of powerful things that can be done. Over the past 6 months, I have been trying to automate almost everything within our startup and get it all within airtable."

  • Boris Borisov said "That's pretty cool!I also want to look into Airtable, it sounds very promising."

  • Karthik Sridharan said "Oh, it absolutely is!"

  • Jeanette Soderland said "This is likely when more people will start to seek out newer and smaller options for managing the functions of the giants. (Hint: keep an eye on Desktop.com as we inch closer to the new year, as a big collaborative feature set is about to be rolled out).. ;)"

  • Hrishikesh Pardeshi said "Unbundling of Slack - interesting point. Although I think the entire play here is for enterprises. Does Desktop.com also cater specifically to enterprise customers? I am keeping a close eye on the new features you launch! 👀"

  • Jeanette Soderland said "Coming soon ;)"

  • MarkE said "I don't really see the value add here for Salesforce . . . when they lost out on LinkedIn, I feel like they've been reaching ever since. Slack is pretty great and far better than Salesforce's chatter product, but I don't see how this is going to dramatically improve Salesforce's core offerings and bring new audiences.  I also feel like the bloom is off the rose for Slack. A few years ago, it was this darling that everyone wanted to buy. And yeah it's still pretty great but I don't feel like it's responded strongly to competition . . . again, not that I think any of the competitors are better per se, but they are all there and they've established enough of a foot hold. I also don't think Salesforce has a great track record of taking acquisitions and making the most of them. To be fair, pretty much no one seems to be able to pull that off these days, but all the more reason not to make such a gigantic acquisition."

  • Karthik Sridharan said "Really great points. I think it is more about being able to use the existing distribution channels (around enterprise) and to do a better job for Slack's adoption in that category. Teams is largely "winning" due to the way Microsoft bundles it along with other Office products. If Salesforce can do something similar for Slack, that could be quite transformational. As you said, these large acquisitions have been really tough for all companies (though got to say Facebook does a better job than others), it does make sense for both Salesforce and Slack. The former needs new categories to grow in, the latter needs to go before it loses its shine entirely."

  • Kevin Simons said "Previously SalesForce bought another piece of "friendly" enterprise software, namely Quip. It's a pretty good tool, and it had quite a buzz about it when SalesForce bought it. But it's since stagnated and Notion has come rushing past it to be the darling of "Google docs killers". I'm just hoping that post acquisition Slack is run as an independent subsidiary else I fear the same thing will happen. Depsite the fact that it annoys me at times, Slack is still one of my favorite SaaS tools I use everyday. It showed us that SaaS tools don't need to be boring enterprise things. They can appeal to our fun side as well and still help us get things done."

  • Shahul Rashik said "Well said, I agree with your points on why Slack should be an independent entity. According to the deal, Slack will become an operating unit of Salesforce and be led by CEO Stewart Butterfield."

  • Emeka Promise said "Salesforce may find it difficult to compete with Microsoft Teams but for sure the acquisition will boost Slack profitability. 90% of enterprise/corporate organization already use 1 or 2 Microsoft product so is a big edge Microsoft has in the market. Organizations find it easier to migrate to Teams more than any other product."

  • Shahul Rashik said "Good point, Emeka. Salesforce also is also known for its strong enterprise partnerships as almost 90% of Fortune 500 companies use Salesforce. If Salesforce is able to convert them to paid subscribers, it would surely drive profitability for Slack."