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Amazon Is Missing Out By Not Competing With Slack

By Natalie Walters – Updated Apr 18, 2018 at 12:11PM

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Amazon could be missing out on a growing market for Slack-like apps.

Editor's note: This article has been updated to include a mention of Amazon Chime. (NASDAQ: AMZN) has been aggressive about breaking into the grocery market, the content market, and the cloud market. But it's been strangely quiet in the area of online messaging systems -- such as Slack -- that companies use to facilitate employee teamwork.

Messaging app Slack is the most well-known workplace messaging application. Founded in 2014, Slack already has 9 million weekly active users.

While Amazon launched Chime in February 2017, the product is focused on videoconferencing, meaning it competes with the likes of Cisco's (NASDAQ: CSCO) WebEx and Microsoft's (NASDAQ: MSFT) Skype for Business. On the other hand, Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), Facebook (NASDAQ: FB), and Microsoft (NASDAQ: MSFT) have all released direct Slack competitors. 

Amazon could be missing out on the growing popularity of workplace chat apps that help facilitate teamwork by allowing employees to communicate and send files. 

A screenshot of the Slack messaging platform.

Slack has taken over the workplace messaging systems. Image source: Slack.

Slack competitors pop up in the large-cap tech world

The near-instant popularity of Slack has caught the attention of a number of large-cap tech companies.

Alphabet's Google announced in February that it was ready for the release of its Slack competitor called Hangouts Chat that will work seamlessly with its range of G Suite apps, including Drive, Sheets, Docs, and Slides.

Last October, Facebook said that its one-year-old Slack competitor called Workplace hit 30,000 business users, up from 14,000 six months earlier. Microsoft is closer to catching up to Slack after announcing in March that its Teams service was used by 200,000 organizations, up from 125,000 in September.

However, Microsoft has a loyal user base that it can continue to market to. That's because Microsoft Office 365, which hosts Workplace, has 120 million business users. Incidentally, Amazon also has a loyal base of users through its Amazon Web Services (AWS) business that it could easily market a messaging service to.

Despite the fierce competition from large companies that have money to throw around, Slack is managing to hold its own. As of September, Slack boasted 6 million daily active users with 2 million of them being paying customers. Slack also said it was up to 50,000 paying teams, including notable start-ups and established companies such as AirBnB and Buzzfeed. 

Where's Amazon's Slack competitor? Does it matter?

Amazon launched Chime last February to give people a way to easily set up online meetings with high-quality video and audio, according to Amazon. But where's Amazon's version of a chat room app that has the feel of a social media site with its colorful and easy-to-use design? 

Microsoft has its video conferencing system Skype but still seized on the opportunity to create a direct Slack competitor with the launch of Microsoft Teams. That move shows the tech giant thinks there's a healthy market for separate workplace chat-focused apps.

Workplace messaging systems must at least be on Amazon's radar considering it showed an interest in actually acquiring Slack last summer, Bloomberg reported. At the time, it would have been a $9 billion sale, sources told Bloomberg.

Despite that interest, the company hasn't done much to promote its Chime product. You'd be hard-pressed to find someone on the street that's heard of Amazon Chime.

Having a Slack competitor is important for any company like Amazon or Microsoft that sells enterprise services because it can help boost the package of offerings that companies sell to clients.

A Slack competitor could further boost business for AWS, which saw sales increase 43% year-over-year last quarter to $5.1 billion. AWS currently claims 34% of the cloud market share, followed by Microsoft with 13% of the market share, according to Synergy Research Group. That means that just as Microsoft has marketed Microsoft Teams to its Office 365 users, Amazon could market a Slack competitor to its AWS users and instantly gain a user base.

Amazon is also missing out on valuable relationships by not offering a much-needed service. Microsoft Teams already boasts big-name clients, such as Accenture and Alaska Air Group. And Facebook Workplace is used by a host of established companies, including Delta, Starbucks, and Walmart. Having a workplace messaging system is an extra selling point these tech companies have to show potential clients when selling a suite of services. And it's helping them develop business relationships with wealthy companies that could spend money on other services that pop up in the future.

Slack is a stand-alone service, but its sharp rise in users and valuation proves that workplace messaging systems are in high demand. Following its Series G funding round in September 2017, Slack boasts a $5.1 billion valuation, up from $3.8 billion at its previous funding round in April 2016.

The fact that Amazon was poking around a Slack acquisition last summer means the company is at least aware of the potential value a workplace messaging system could bring to AWS. While Slack is the top dog in the space at the moment, Amazon has proved time and again that it can swoop into a space and change up the rankings, almost overnight. With 34% of the cloud market under its belt, it's surprising they haven't tried to do that in workplace messaging.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Natalie Walters has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Facebook, and Starbucks. The Motley Fool owns shares of Oracle and has the following options: short June 2018 $52 calls on Oracle and long January 2020 $30 calls on Oracle. The Motley Fool recommends Accenture. The Motley Fool has a disclosure policy.

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