In late March, Microsoft (NASDAQ:MSFT) announced that COVID-19 lockdown measures in Italy sparked a 775% jump in Teams' calling and monthly meeting users within a single month. It also noticed a "very significant spike" in Teams usage worldwide, as over 44 million daily users spent more than 900 million meeting and calling minutes on the platform within a single week.
That growth spurt seemed like bad news for Slack Technologies (NYSE:WORK), which competes against Microsoft Teams with its messaging and collaboration platform. To make matters worse, research firm SimilarWeb recently revealed some head-to-head comparisons between Microsoft Teams and Slack throughout the crisis, and claimed the former left the latter "in the dust."
Ed Lavery, Director of Investor Solutions at SimilarWeb, noted that the COVID-19 pandemic "gave Teams a huge opportunity to onboard millions of users," and Microsoft Teams "couldn't have dreamed of a better March than the one it just had."
Let's discuss the two main ways Microsoft beat Slack in March.
1. More downloads
SimilarWeb noted users downloaded the Microsoft Teams app on Android 1.22 million times in March and 2 million times within the first quarter -- which marks 500% year-over-year growth and 140% quarter-over-quarter growth. Slack's Android app was downloaded just 1.02 million times in the first quarter.
That surging in interest in Teams is troubling for Slack since it serves a smaller audience. Last October, Slack revealed that it had 12 million daily active users. In late March, it noted its total concurrent users topped 10 million on March 10, rose to 10.5 million on March 16, and hit 12.5 million March 25.
But those figures still paled in comparison to Microsoft Teams' 44 million daily active users and indicated Microsoft's marketing blitz -- which included pricey TV ads aimed at Slack -- was paying off.
2. More traffic
SimilarWeb claims Microsoft's Teams website racked up 187 million visits in March, compared to just 134 million visits to Slack.com. This marked a major jump for Microsoft Teams, which averaged just 39.2 million monthly visits in January and February while Slack served an average of 95 million monthly visitors.
Slack's month-over-month growth is impressive, but it's clearly failing to keep pace with Teams' explosive growth. That raises another red flag, since Slack has repeatedly touted its gains against Microsoft in recent conference calls.
During last quarter's conference call, CEO Stewart Butterfield stated that Slack continued "to win not just against the status quo, but head-to-head against Microsoft Teams," and that four of its top five biggest deals in the fourth quarter were against Teams.
Butterfield declared that customers chose Slack over Teams for its scale and security and that one of its Fortune 100 customers that temporarily switched to Teams struggled with "challenges from a near-complete lack of engagement to architectural deficiencies."
Unfortunately, SimilarWeb's download and traffic numbers suggest that Slack merely woke a sleeping tiger, which can leverage its dominance of the OS, productivity software, and cloud services market to pull customers away from Slack.
Should Slack worry about Microsoft's advance?
Slack is still growing at a robust clip: Its revenue rose 57% last year as its paid customer base expanded 25%. However, Slack's net loss still widened on a GAAP basis, and it has no clear path toward profitability. The stock is also richly valued at 17 times this year's revenue forecast.
Microsoft is firmly profitable, has a lot more cash than Slack, and can afford to rack up losses on Team's plans to drive Slack out of the market. Slack isn't in serious trouble yet, but it probably can't survive a prolonged war with Microsoft.
The pandemic presented Slack with an opportunity to shine, but Microsoft arguably stole the spotlight. In retrospect, the COVID-19 crisis could be the defining moment that tilts the scales back in Microsoft's favor and throttles Slack's growth.