SLACK: Stewart Butterfield on his tech empire, and what's next for the company

Stewart Butterfield, co-founder and CEO of Slack. Photo: supplied.

Slack, one of the fastest-growing apps in the history of the internet, has launched in Australia, officially opening its APAC HQ in Melbourne last week.

The business messaging app, valued at $US3.8 billion as of the weekend after raising $US200 million, has gone from strength to strength in the US, and now wants to build upon organic growth it has experienced in local markets.

But for those living outside the tech bubble, not privy to the hype around up-and-coming tech companies, Slack aims to be “the Microsoft people want to use”. And its co-founder and CEO, Stewart Butterfield, wants to kill email-based work culture in the process.

In the last two years the company has attracted more than 2.7 million daily active users, of which more than 800,000 are paying users. Last year alone it experience a tenfold growth in its user base.

Even more phenomenally, this insane upward trajectory has been supported completely through word-of-mouth. Until now, the company hasn’t put a single dollar into its marketing strategy.

Now that it’s going big in a global sense, Slack faces a few challenges.

First, how to stay competitive in a market saturated with messages apps — most of which are free — and how to convince people unfamiliar with the brand to use its premium service, which comes with a premium price tag.

“When we ask our customers ‘what did you use before Slack?’, almost all of them will say ‘nothing’ because they don’t think about it as a software product category,” said Butterfield.

They were communicating through a raft of different systems from email to Facebook to Whatsapp. But people see don’t see Slack as being in the same category of these services because it brings everything together in a way that an entire company can have visibility of what’s going on.

Slack’s director of customer experience, Ali Rayl added to this: “We’ve also practically opened the platform to say ‘build what you need because we don’t know everything that every business needs and here are the tools to do’.

“It’s a fundamental shift in the way that businesses can work.”

Because of this, Butterfield sees Slack’s standard package — $US7 per person per month — as a relatively cheap alternative for businesses.

“Because Slack is new and is something people haven’t paid for before, you just look at the total price and it may seem high but the standard plan is 22 cents US per day per person — less than you pay for soda pop,” he said.

“If you’re a big business customer, or a business customer of any kind you end up paying a lot of different vendors for a lot of different software, and prices are all over the place from $5 per user per months to $100 per user per month.”

On average, Slack’s daily active users spend two hours and 20 minutes a day using Slack. So in Butterfield’s mind, even if the product only makes you 1% more productive “versus the cost, it would be a 10x return on your money”.

According to a survey released by the company in October last year, Slack users (1,620 paid users, to be exact) say they see an average of 48.6% reduction in email, with nearly 80% saying it improved transparency and office culture. It’s also dropped the number of meetings by 24%, while increasing overall productivity by 32.4%.

Until now, Slack’s growth has predominately relied on organic growth. Other than some podcasts, they haven’t sunk a single dollar into marketing.

The company plans to change this when it launches it’s first national marketing campaign this week in the US.

“We’ve only been around for two years and we have a long way to go still,” Butterfield said about familiarising people with the brand.

“In the US, college educated 23-54 year-olds –- of which there are 35 million people -– we have 12.5% aided brand recognition.

“If you ask them, ‘have you heard of Slack?’ 12.5% will say yes. That is compared to about 80%, maybe 85%, for things like Outlook and Gmail, so we have a really long way to go,” he admitted.

While this may seem like a negative, Butterfield said it held massive potential.

“It might seem like a discouraging sign, but it’s actually really encouraging,” he said.

“First of all because it’s growing really quickly. We’re adding 1-1.5% per month. But it also means if we have this many customers paying for the service with that much recognition, when we double that or quadruple that (figure) we should get all of those customers as well.”

Butterfield showed Business Insider the ads he, and his team, have created to drive this brand recognition.

Here’s one of them.

“We’re going to try advertising, so it’s unusual for that to be a means of growth for most software companies,” he said.

“We were doing testing in some local markets over the last couple of weeks.

“Whether this prompts new people to try Slack directly or gives them an impression of what Slack is, when three months later, six months later a colleague of theirs says, ‘hey, let’s try Slack,’ they already have some familiarity, and ideally some positive sentiment towards it because it’s cool and or legit because it’s been on TV.”

Butterfield believes a lot of the ads will translate worldwide. So get ready to see the quirky little Slack animals Down Under.

Slack has the ambition to become an all-in-one business hub where all your business communications come together under one app. This has been supported through its App Directory where users can download third party apps that integrate with Slack.

Since the launch of the app store in December, Slack has already has brought on 300 apps, integrating with dozens of popular services such as Twitter, Dropbox, Google Docs, JIRA, MailChimp, and Zendesk.

Another part of this goal is redefining the way email is used by organisations.

“Email was very important and will remain very important because it crosses organisation boundaries really well,” said Butterfield, “it’s just not the best tool for internal communication.

“The version of Slack that we have today is much better, but we still have a long way to go as well.

“We intend to be around for several decades, and Slack in 2027 will probably be significantly different than to what it is today.”

And when it comes to taking the company public, Butterfield said his “IPO readiness program” has been slightly misinterpreted.

“I didn’t mean that we were planning to IPO,” he confirmed.

“It means we want to run the company with a kind of discipline and structure that we would have to have in order to be public, so that should we ever decide to go public it’s not going to be a big ‘oh s..t’ moment.

“We’re running Slack as if we were planning to, or as if we already were public just enforces a nice discipline, which is valuable in its own right.”

While plans for an IPO aren’t off the table completely, Butterfield said it had a while to go before it was ready for one.

“One of the things that is required to be a public company is a high degree of predictability with the growth of the business,” he said.

“We’re growing way too fast for that. In 2015 we grew like 6x in terms of revenue. It’s very rare for a public company to double in a year, that would be an extreme case.

“We’d have to slow growth.”

Butterfield closely watched the results of Atlassian’s recent IPO, as the company is comparative in terms of growth and revenue.

“Yeah, they’ve been doing really well. They’re a great example,” he said.

“They’ve been in business for 13 or 14 years now so they know what they’re doing next year already.

“It’s a very well run business, they’re growing at a predictable rate and their customers are expanding at a predictable rate, so it’s very encouraging for us.”

The writer traveled to Melbourne as a guest of Slack.

NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.