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How Slack Became so Popular

Slack has quickly become a very popular group communication app as it used by various organizations from businesses to universities. For example, on Cornell’s campus alone there are Slack groups for fraternities, advisor groups, research teams, and many other organizations. Previously known as Tiny Speck, Slack’s main goal was producing an online game called Glitch. They scrapped that idea and now Slack is one of the fastest growing team collaboration tools ever made. At launch in February 2014, they had 15,000 daily users. By February 2015, the app had an incredible 500,000 daily users. Besides the tremendous growth in only one year, the daily users were spending about two hours a day engaged with the app. Slack had not only broken into network, but it had also become actively used. We will analyze this phenomenon in the context of network effects.

Before Slack came about, businesses and organizations did not have a go to app for communication. In fact 70-80% of companies said that they were not using another app before starting to use Slack. However, many of them were using an assortment of tools that were not very effective to combine. For example, some companies used a combination of Facebook Messenger, Google Pages, and Skype. This means that Slack did not enter a market that was already controlled by one dominant technology. It was sort of the consolidating agent that combined features from various technologies into one that filled a niche. Therefore, the challenge for Slack was not convincing people to use Slack instead of another app, it was convincing people of the utility of Slack. Because a centralized messaging product did not exist, Slack had to spend money to educate consumers about its benefits and create a market where there really wasn’t one.

Another thing Slack did properly was price the app effectively. They introduced the product with both a free version and a paid premium version. In the context of network effects, Slack was trying to overcome the tipping point z’ by getting a large enough group of initial users to adopt the product. Although this caused early losses, once there were enough users, people started paying for the premium. Additionally, in the current tech market, many investors like Andreesseen Horowitz and Google Ventures provided Slack with investments to grow. As of early 2015, Slack had over a billion-dollar valuation all because it was able to get passed the tipping point.


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