- The Bottleneck
- Posts
- ⚙️ Case Study: Slack
⚙️ Case Study: Slack
Network Effects
👋 🌟 Hey there! This is a 🔒 subscriber-only edition 🔒 of our premium newsletter designed to make you a better operator.
Every Sunday, we tell you 1 tactic other companies used to scale their business.
Upgrade to unlock a wealth of extra content, $10,000 in SaaS discounts, and a collection of 10+ Notion templates, all designed to help you scale your business.
Happy Sunday Operators ⚙️
Emails aren’t dead, but they certainly have fierce competitors—real-time messaging.
And guess who’s leading the charge?
That’s right, Slack is absolutely crushing it.
Slack now commands a whopping 34% market share in enterprise communication, with a cool 77% of Fortune 100 companies hopping on the Slack Connect bandwagon.
But let’s not pretend it was all smooth sailing.
Nope, Slack’s journey started with a good old-fashioned flop.
Together With… Me!
Refer a friend… Get a Report
Our team spends 20+ hours a week bringing you the best content on how to scale your business operations. But there’s more we can offer.
We interviewed more than 200 tech operation leaders about their plans for the upcoming quarter. We then compiled their responses into one report for you to review.
To access the report, you only need to refer 1 friend!
Setting the Stage
Slack Connect
Before Slack, there was Glitch—an online multiplayer fantasy game.
Stewart Butterfield, the brain behind Flickr, launched Glitch in 2011 with a $15 million budget and loads of hype. But despite the fanfare, Glitch landed with all the grace of a lead balloon.
By 2012, it was game over. But you know how in movies, the sidekick sometimes steals the show? That’s exactly what happened here.
During the development of Glitch, Stewart’s team needed a better way to communicate. You know it. Email chains were like tangled Christmas lights—frustrating and inefficient. So, they whipped up an internal messaging tool to keep everyone in sync.
They realized this tool was too good to let go when Glitch crashed and burned. In 2013, they made a massive pivot, and voilà, Slack was born. The name stands for “Searchable Log of All Conversation and Knowledge.”
Quite a mouthful, right?
But it perfectly sums up Slack’s magic—organizing all your workplace chatter in one neat space. Instead of chaotic email threads, you got tidy, organized spaces for every project and team. Imagine a filing cabinet that doesn’t make you want to pull your hair out and scream in frustration.
By 2014, Slack had over 120,000 daily users. It quickly became the go-to tool for companies craving better communication.
Then 2020 hit, and the world turned upside down. As remote work became the norm, Slack wasn’t just helpful; it was a lifeline for many companies.
Its user base skyrocketed, proving that real-time messaging was no longer a luxury—it was essential.
But here’s where the uphill battle was…Slack was facing formidable giants like Microsoft Teams and Google Chat. Slack would have risked being seen as a commodity if it had remained just another messaging service.
The problem is that commoditized products often compete primarily on price, leading to lower profit margins. Slack had to provide more value to differentiate itself and stop being just another face in the crowded market.
Enter Slack Connect, the feature that would cement Slack’s market dominance.
Now you could pull outside organizations like clients, vendors, and other stakeholders into your Slack channels. On the surface, Slack Connect seems like a nice add-on feature.
But dig deeper and you'll see the genius…
Each new organization or business joining made Slack exponentially more useful and valuable for every other user.
It created a powerful reinforcing loop:
More companies or people join
Increasing usefulness and value for existing users
Attracting even more people to join
Slack tapped into the powerful business theory called the network effect, which accelerated growth and adoption. So, the next time you’re zipping through your Slack channels, remember this…
You’re part of a story that turned a gaming dud into a communication powerhouse, reshaping how we work and connect.
Not too shabby for a sidekick, huh?
Ops Tactic: To grow your business, leverage the power of network effects to create a reinforcing loop of users where each new addition makes the platform more valuable, attracting even more users and accelerating growth.
Why this Matters
How Network Effects Boost Your Service’s or Product’s Value
Imagine you're throwing a party. At first, only a few friends show up. It's fun, but as more people arrive, the party gets better—more energy, more conversations, more fun.
That's a direct network effect.
Each new guest (user) makes the party (product) more enjoyable.
Now, think about your smartphone. It's useful on its own, but it becomes even more valuable when you start adding apps—games, social media, productivity tools.
This is an indirect network effect.
The more complementary products (apps) there are, the better the primary service (smartphone) gets.
The value keeps climbing as more people join the smartphone.
This creates a snowball effect: more users attract even more users, making the product increasingly valuable.
As a product becomes more valuable and ingrained into daily user habits, switching costs for individuals become extremely high.
Why would you leave the party once everyone's already there?
Essentially, tapping into network effects gives a product defensibility, pricing power, and the ability to expand its territory quite literally. It's the ultimate scalable growth engine on steroids.
Let’s crunch some Slack numbers to see the network effects’ power:
Exponential User Growth: Slack’s network effects have been a major driver of its growth. Slack reported having over 32.3 million daily active users and 54.1 million monthly active users in 2023. The number of daily active users is expected to reach 47.2 million by 2025.
Increased Productivity and Efficiency: Slack usage reduces emails by 32% and meetings by 27%, further enhancing workplace efficiency.
Revenue Growth: Slack's revenue grew significantly, from $221 million in 2017 to nearly $6 billion in 2023.
This article isn't finished...
Start a 7-day free trial to read the rest and get access to all of The Bottleneck.
Join 20,000+ COOs, operators, and founders to access:
This tip and hundreds of other tactics
A reading experience without paywalls
10+ Notion documents to scale your business
Over $10,000 of SaaS discounts on tools like Hubspot, Airtable and Gusto
Start your 7-day free trial today.
Reply