'Winter is coming' for Slack in 2020 as its faces more competition from Microsoft's rival Teams app, an analyst says

• Slack has been under pressure this year from Microsoft and its rival Teams chat app. That's expected to continue into 2020, writes Dan Ives, an analyst at Wedbush.
• Ives writes in a note that "winter is coming" for Slack, and that new customer growth will be the area where Slack continues to struggle.
• Microsoft has touted the rapid growth of its Teams app this year through daily active user numbers, which were at 20 million as of November. Slack has 12 million daily active users, but has fought back by highlighting engagement numbers to show how much people like using its app.
• "Slack is a great product but competitive headwinds are on the horizon in our opinion and new customer growth is going to be challenging," Ives said.
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Slack has been under pressure this year from the rival Microsoft Teams chat app.

That's expected to continue into 2020, and it will be more difficult for $12 billion Slack to compete with Teams going forward, said Dan Ives, an analyst at Wedbush. In a note to clients, he even invoked a "Game of Thrones" reference: For Slack, he says, "winter is coming."

In the last year, Microsoft Teams has experienced tremendous growth: The company said Teams reached 20 million daily active users in November. Slack, meanwhile, said in October that it had 12 million daily active users. It was also careful to highlight figures that suggest that those users are highly-engaged with the app.

With Microsoft Teams so successful in midsize and larger businesses - in no small part because it's bundled with some versions of the very popular Office 365 productivity suite - it'll be harder than ever for Slack to pick up new users, in Ives' estimation.

"For Slack the focus on [small businesses] will be core, and trying to balance the market opportunity in Redmond's turf will be tricky," Ives told Business Insider in an email.

Ives has argued this before, saying that given Microsoft's stronghold in the workplace, Slack's growth potential may not be as large as it may have seemed in the days when it was one of the hottest privately-held startups around.

While Slack's freemium model, where users start on a free plan and then have the option to pay for business-grade features and functionality, has earned it the devotion of many smaller businesses and teams - but it's apparently been slower going in cracking the lucrative market for larger customers, where Microsoft has a particular specialty.

Indeed, Microsoft Office, and the Office 365 cloud-based variant, are the standard way of getting work done at many companies around the world. That, in turn, means that Slack is going to have to make a compelling case why customers should ditch Teams, which they may already get included in Office 365, and go through the cost and effort of moving to Slack.

To that end, Ives previously wrote that "Only 10% to 15% of the core Microsoft enterprise customer base is potentially 'in play' for Slack."

Slack CEO Stewart Butterfield, meanwhile, has been vocal about Microsoft's competitive stance. On his company's last earnings call, Butterfield said Teams user growth isn't organic and users are being forced into using it after older Microsoft products, such as Skype for Business, are deprecated. He also previously suggested that Microsoft uses unsportsmanlike tactics to compete in the workplace productivity space.

Regardless of the reasoning, Ives says that Microsoft Teams is only going to grow from here, and it'll get that much harder for Slack to compete.

"Slack is a great product but competitive headwinds are on the horizon in our opinion and new customer growth is going to be challenging," Ives said.

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