I understand why "VC subsidized taxi rides" runs at a loss, but how on earth does Slack lose money?
Slack S-1
181–190 of 469 posts
Re: Slack S-1
#182I think historical accounting practices and standards are not great at evaluating SaaS businesses. We came up with the concept of depreciation/amortization as a way to better match up expenses with revenues in a given time frame. I think we need a similar mechanism for allocating sales & marketing costs. My company spends about $1,000/year on Slack. We likely will in perpetuity, as long as we/Slack exists. Slack spen…
I don't think that Slack's business model is that different from other companies, from a marketing perspective. Sure, they acquired you as a customer in 2014 and don't need to spend anymore on marketing, but other companies spend huge amounts for marketing in the first few years and then spend less over time (think: you picked a detergent brand and keep using it without further marketing, for example). I actually think it is appropriate to recognize the expense now (or in whatever year it occurred), as there is no way to measure what benefit they are getting now from it. Isn't Slack burning now so it won't have to later? If that is true, does that sound like an unprofitable business?
That being said, specific marketing costs already are amortized over the life of contracts - if you pay commissions to sales staff, those are allocated over the life of the contracts that are signed. If you pay inducements (such as free months of service, or whatever), those are amortized over the life of the contract. However, general marketing expenses like ads are recognized in the period that they occur. There are a number of reasons for this: maybe adtech can decide who saw what ad and made a purchase because of it, but that is generally hard to tell. The other is that how do you know what the life of the contract will be. Your company pays $1000/year for Slack, and you likely will, but what if something changes? Slack can't know what you're planning to do. They'd have to make an estimate, and estimates are open to manipulation by management.
Management's incentive is to decrease expenses in the current year to make themselves look better to investors, so they're going to say that their expenses will be good for 20 years. How can they be certain? There's also the other way they can manipulate it by saying that "oh, this was a bad year already, we might as well recognize marketing expenses now to make a bad year worse, so next year looks better". Since there's no actual measurement basis, there's no corroborating evidence either way.
Source: am an auditor, albeit not familiar with US GAAP.
Re: Slack S-1
#183Re: Slack S-1
#184Earlier quoted context omitted.
Well, these guys do have a good way to make money. Enterprise contracts are worth their weight in gold. As you could see from the quote, their revenue has increased more than their losses - which mean that they are on their way to become profitable. Arguably they could be now, if they didn't invest in growth as much.
> their revenue has increased more than their losses But "net loss" already takes revenue into account! "Loss" is not the same thing as "expenses". The revenue increased substantially, but so did expenses , resulting in a slight decrease in loss over the past 3 years. At the current rate, the company would reach break-even profitability around the year 2070.
That is not how SAAS economics works. You spend a lot money upfront and revenue is earned over years. They can stop investing in sales/marketing tomorrow and be profitable.
Re: Slack S-1
#185Earlier quoted context omitted.
They also don’t have very high barriers to entry for competitors. Replacing SAP is really hard after it has been established in a company. On the other hand replacing Slack is really easy. Same for Uber. Customers and drivers can jump ship anytime.
Uber has a big competitive moat, which is willingness to burn money. They've got a lot of it, and any competitor which can't raise as much money for that purpose as Uber has will lose out. It's simple, in any area that a small competitor of Uber operates they just artificially lower prices and do it until the competitor runs out of money. The company with more money wins. Slack... sure you can just spin up a rocket.c…
Usually those staff are able to setup and manage chat while doing 100 other things for the company, and if they're not then fire them.
Re: Slack S-1
#186Earlier quoted context omitted.
That’s not the point/issue though. The markets are regulated to protect consumers/investors...private companies can’t just have unregistered public offerings to non accredited investors...so it’s not just “up to you to assess the investments” there are rules and nothing is stopping additional rules to not permit registration of a public offering when the company is operating at a $150,000,000.00 annual loss or more t…
The rules are about what information is disclosed. The difference is that with public companies, there are rules about what actually gets disclosed and how often. That's why the general public is allowed to invest. It's about how much information is available, not what that information actually is. Investors need to determine whether or not they invest. In no world is the SEC's role to determine whether or not a comp…
>In no world is the SEC's role to determine whether or not a company's business strategy qualifies them to go public or not.
Profitability is objective...let’s not pretend what I’m suggesting is the SEC subjectively making a decision on a business judgement or business plan. Simply you want to register a security for public offering show a GAAP profit...I understand that’s not “how it works” or I wouldn’t have suggested it “should” be considered, I never said anything about SEC subjectively determining worthiness of an investment.
Re: Slack S-1
#187Earlier quoted context omitted.
I'd be curious if it's remotely sustainable. We started on Slack ~3 years ago. We're now moving (albeit slowly) to Teams. 18 months from now Slack will be gone entirely. I can't believe we're the only ones. And unlike Dropbox vs. Ondrive, Slack isn't markedly better in any area than Teams from my testing.
Oh no, turn back while you still can. My team is in full revolt due to a company-wide migration from Slack to Teams. Teams is worse in almost every way. We're seeing lots of missing functionality, bizarre UI bugs, random crashes, extremely slow sync, you name it. Teams is in no way a viable replacement for Slack unless your use case is one or two plaintext messages per day.
Teams is truly mediocre, other than when it rises to irritating. I have no idea how anyone using it could prefer it to Slack.
It is imposed on people whose organizations have Office 365 subscriptions, it is not chosen.
Re: Slack S-1
#188Lyft, Uber, Zoom, Beyond Meat and now, Slack Is there any benefit of Public at this point of time? or Just a trend to grab as much as Wallet share from the average investor?
I've been seeing a lot of calls about this incoming downturn (especially HN), does anyone have any articles/analysis they can point me to? Would love to read up on the state of it.
The short of it, is that in some cases stocks have gone up 2 to 3 times their value in 5 years, yet revenues have been flat. Also, companies have been doing stock buy backs in some cases using bond debt to do it.
Another kind of interesting thing is the amount of money going into index funds. These index funds buy stocks based on their position in the market. The influx of capital allows companies to stay in the S&P 500 that before may have been removed. This optimizes for whether or not you're in the S&P 500 and not actually company performance. Decoupling your survival from reality is not a healthy ecosystem.
https://www.thestreet.com/story/10115781/1/investors-holding...
Re: Slack S-1
#189Earlier quoted context omitted.
The cost of migrating away from something like slack for an enterprise org is enormous compared to what it costs. Teams might have parity in a vacuum, but everyone already knows what slack is and how to use it, including people you might hire in the future.
Two years ago a company we were at had Slack and it was used vigorously. They hit a user limit and couldn't get the CEO to pony up whatever it cost to extend Slack. (This company was the kind of company that had unlimited budgets for conferences and sales calls, but could hardly ever get a CC# for a dev team need...) They switched to MS Teams, but at least two years ago, it felt unusable. Or, the team's Slackness cou…
Anecdotally did your team's productivity or quality of work suffer to a large extent after moving to Teams?
Re: Slack S-1
#190I think historical accounting practices and standards are not great at evaluating SaaS businesses. We came up with the concept of depreciation/amortization as a way to better match up expenses with revenues in a given time frame. I think we need a similar mechanism for allocating sales & marketing costs. My company spends about $1,000/year on Slack. We likely will in perpetuity, as long as we/Slack exists. Slack spen…
Not really. SaaS isn't immune to gravity, the difference is that investors are willing to dump infinite amounts of cash into unprofitable SaaS businesses hoping that eventually they dominate their market and become a monopoly/oligopoly