Slack's Decline: How Microsoft Teams Overtook the Business Messaging King

Slack was the king. Explosive growth, over a billion in funding, a billion dollar valuation in 8 months. But most of all, users loved it. Slack practically invented messaging for businesses. But now, it's being replaced. Things were going too well, so along came Microsoft to the rescue. Now, Slack is fighting for its life. How did Slack lose, while in most ways, it was better than Microsoft Teams? And… will Slack survive? One of the strangest parts of this story is that Slack was sort of an accident. It was an internal tool at a game studio: Tiny Speck. When their game failed in 2012, co-founder Stewart Butterfield had an idea.

The messaging tool was really good. It was clear to Butterfield that Slack, as it was now called, was solving a problem, and oh boy, was this massive problem. I want you to imagine a world 15 years ago. There's no Teams, Slack, Discord, or any group messaging apps. All businesses were just using email. And the only alternative was meetings. For one-on-one conversations, yeah, not bad, but as soon as you need two, three, or more people, it was a nightmare. Forwarding, CCing, BCCing people, just scrolling up the conversation… Collaborating was… and still is a nightmare inside email.

There was a huge opportunity, which brings us back to Tiny Speck, now Slack Technologies, who made their new platform public in August 2013. There was a certain vibe to Slack. It felt like the new, cool, upstart tech product. Startups, small and medium businesses, loved Slack. Especially in Silicon Valley. A slick UX, custom emojis, great and robust file sharing, searchable chats, quick communication, threaded conversations, channels - it had it all. Slack began exploding, but not in the way you might expect. This software was

really good. Everyone in tech was saying the same thing: "You have to use Slack". Slack didn't have an outbound sales team until 2016. It was growing by word of mouth. "We begged and cajoled our friends at other companies to try it out and give us feedback." On day one, they had 8,000 users, then 15,000 two weeks later. Slack was growing fast. They reached a $1.1 billion valuation in 8 months. It was the "fastest-growing business app ever" - at least, according to Slack. And before they even had a CMO.

Yet, even when they did have sales staff, their technique was, honestly, pretty great. They pitched Slack not to a top executive like a CTO or CIO, but to a regular team manager. "For small organizations, team and company may be one and the same. But if you look at an organization of 15,000 people, you end up with a situation like Adobe, with nine paid Slack teams. Mid-level managers could say, 'This thing sounds cool, let's try it out for our team.' If they liked it, it was affordable enough to just expense it." (Stewart Butterfield, 2015). That's great. Building for the end user first. Yet, unfortunately,

this would come back to bite Slack down the line. Nonetheless, for now, Slack was unstoppable. In February 2014, it had 15,000 daily users. The same time the following year, that was over 500,000, with 135,000 paid users. They crossed 2 million by the end of the year, then 4 million in October 2016, less than a year later. By January 2019, Slack had passed 10 million daily users, with $400 million in revenue. The same goes for funding too. $42 million in 2014, then $110 million later that year. $172 million in 2015,

$208 million in 2016, $412 million in 2017, then another $427 million in 2018! They were gearing up for an IPO too. Everything was going great… at least, on the outside. Behind the scenes, a huge battle was taking place. And as many stories go, it got worse when Microsoft stepped in. One of the biggest problems facing those in software is actually something called "legacy tech debt". You know, those walls of code built years ago by a senior developer, who's gone now. Documentation is hazy, and there are comments that say "don't touch this,

it breaks everything, we don't know why". Now, no one knows how it works. People have tried to modernize it, with ChatGPT or CoPilot, and… nothing's worked. So you just… keep using the build that's held together by duct tape. That's because you need a tool tailor-made for this problem. Luckily, there's a solution: Morph. Morph is the world's leading Generative AI platform built specifically to modernize legacy codebases. Turn that ancient spaghetti code into something modern, efficient, and maintainable. But Morph isn't just another AI tool. It's built from the ground up to fix this particular problem.

Morph analyzes, maps, plans, executes, tests, and lets you approve every step before anything hits production. Whether it's moving from.NET 4.5 to.NET 10, LAMP stack to Python, Web Forms to React, Morph handles it. It's already used by enterprise and industrial customers, and is SOC 2 and ISO 27001 compliant. It's even used by the world's most trusted defense contractors. Morph customers have reported timelines shrinking from years to just a matter of months, weeks, or even less. Engineers spend a ton of time just refactoring someone else's mess from a decade ago,

instead of actually shipping something new. With Morph, you can do just that. Morph is offering a free trial and a 50% discount on your first year. This is a limited-time offer, which expires on the 30th of April. Go to modelcode.ai/MORPH - that's M-O-R-P-H - and use my code LOGICALLYANSWERED to get 50% off your first year. That's almost $5,000 in savings. This is a limited-time offer exclusive to my channel - link is in the description. Thank you to Morph for sponsoring this video. Let's go back to 2016. Slack was exploding, and Microsoft wanted in. In March 2016, Microsoft considered buying Slack for $8 billion. But they didn't. Why? Bill Gates.

He believed Microsoft didn't need Slack. Rather, he argued Microsoft should just build a competitor… on top of… Skype. A twist, I know. Skype? Really? But here's some important context. Microsoft had just spent $8.5 billion on Skype, and it wasn't going too well. This app wasn't really making any money. They tried to make the platform a business platform, as well as a personal one. It wasn't working. But they had the template right in front of them. Why not make Skype the new Slack? Skype Teams, as it was called, already had different channels, aka chat rooms.

It was just lacking a few special bits from Slack, like threaded conversations. It would soon join the Office 365 suite as part of the monthly subscription for businesses. But things didn't go as planned. Skype was… well… not very good. It was an old app already, its brand was messy, and users were having all kinds of problems. So Microsoft went back to the drawing board. Cut Skype, build from the ground up: Teams. Skype Teams, just without Skype. And this app was a huge blow to Slack. Because Teams was actually a very well-built product. Slack was better in a lot of ways. It had way more app integrations, had a better developer experience, a nicer UX,

but Teams was better in ways that mattered more. It was almost as good as Slack, and it also did something better. Small to medium companies loved it, especially in Silicon Valley, but the big players - aka the ones with deep pockets - not so much. Giants like Uber, even after using Slack, eventually ditched it. Teams was in the perfect spot. It had voice, but also video - aka video conferencing - plus dial-in calling, and PSTN integration. This was definitely a weak spot of Slack's. Many companies using Slack would also use Google Meet or other software. But there was more.

Uber ditched Slack, not due to features, but for another reason: security. Slack had done an SOC 2 audit, but didn't have compliance for PCI-DSS or HIPAA. Microsoft did, and more. (Show on screen in a list side by side: Microsoft: SOC I and 2, ISO 27001, HIPAA, EU Model Clauses. Slack: SOC 2, ISO 27001). Teams was more secure, and for big corporations, this was very important. For some, like a hospital or bank, this is just a hard requirement. But Microsoft wasn't just coming for enterprise. It was coming for everything.

Slack was a better sell to end users and middle management, but Teams was a better sell to heads of IT and heads of companies. Teams didn't need to be a better app. Because Microsoft didn't build it for the end user. The biggest difference, by far, was that Teams was included in 365. That's it. Teams was force-installed for every Office 365 subscriber. Millions of enterprise users, overnight. And very quickly, managers everywhere did the math: We already have Teams in 365… why are we paying for Slack?

But this isn't the end of the story. Slack wasn't about to roll over on this. Like Slack, we're still trying to grow. So if you could subscribe, it'd mean a lot! We're almost at 1 million, and we need your help. Thanks. On November 2nd, 2016, readers saw an entire, full-page ad titled "Dear Microsoft." It was a long, extensive list of "advice" to Microsoft on how to make a good product - aka, why Slack was so good. "One final point: Slack is here to stay. We are where work happens for millions of people around the world. We're glad you're going to be helping us define this new product category. We admire many of your achievements and know you'll be a worthy competitor." Slack also published

the same letter on their website. Slack was ready for a fight. But they were certainly a bit rattled. And for good reason. Teams added 31 million daily users in a single month in 2020. For context, Slack had 12 million total. There was a great exodus. Thousands of companies were leaving the colorful UI for that bleak, corporate, purple knock-off. Unfortunately, their opponent had broken the rules.

Instead of competing for customers by having the best product - aka, the free market - Microsoft just bundled Teams with something hundreds of millions were already paying for. Microsoft didn't "win people over" from Slack. They were trying to kill Slack. So, Slack went to war. [Slack Complaint, 2020]: "Microsoft is reverting to past behavior. They created a weak, copycat product and tied it to their dominant Office product, force installing it and blocking its removal - a carbon copy of their

illegal behavior during the 'browser wars.'" "Slack simply wants fair competition and a level playing field. Healthy competition drives innovation and creates the best products and the most choice for customers. We're asking the EU to be a neutral referee, examine the facts, and enforce the law." Butterfield also said "Microsoft is perhaps unhealthily preoccupied with killing us, and Teams is the vehicle to do that." But the EU, being a government body, was very slow. It would be years before they got to Slack's complaint. And Slack was running out of time. Every day, more businesses left Slack for Teams, and Slack's revenue fell. Then came an unexpected rescue. Butterfield had met with Bret Taylor, Co-CEO

of Salesforce, about potentially buying Quip from them. Though the discussion soon flipped. In late 2020, Salesforce would buy Slack for over $27 billion - their largest acquisition ever. Slack would be integrated into Customer 360 - aka Salesforce's own 365 suite. This could save Slack, but then came an unexpected hurdle. Exactly two years later, Bret Taylor resigned. Just days later, Butterfield also resigned. Slack's own chief product officer and SVP of marketing followed.

Why? First, Butterfield. He had a number of obligations after the acquisition. And it seems like those lasted for exactly two years. So, when his contractual obligations from the acquisition were up, he stepped away. And it's hard to blame him: "Butterfield's exit also has to do with Salesforce asserting itself more with Slack, and as that happens, other longtime executives are taking the opportunity to leave." [Jason Wong, Analyst]: "It's clear that Salesforce is taking Slack in a direction that is more aligned to extending and enabling their Customer 360 Platform." Bret Taylor, though, was a bit more worrying.

He was the architect of the acquisition. His vision was for Salesforce to become a "digital HQ", with Slack at the center. But Taylor leaving at the same time signaled that the bet might not be working. Microsoft 365 was just too strong. Salesforce stock fell 8.3% the day after Taylor's resignation, then another 7.4% the day Butterfield resigned. The whole year, it had lost 47% of its value. And, ironically, replacing Taylor was Lidiane Jones, who had spent twelve years at Microsoft. Speaking of Microsoft, there was some good news for Slack at last. In 2023, the EU had finally gotten around to their investigation, and it wasn't in Microsoft's favor. But something unexpected happened.

Microsoft knew they were in the wrong. So they quietly separated Teams from 365 in Europe. Then globally in 2024. Then in 2025, the European Commission made their verdict. Teams had to stay unbundled for 7 years. But it could be offered at a discount to 365 customers. The penalties were up to 10% of Microsoft's worldwide revenue. But, there was no fine. Microsoft just had to separate it, years after the damage was done. [Marc Benioff, Salesforce CEO]: "You can see the horrible things that Microsoft did to Slack before we bought it. That was pretty bad and they were running their playbook and did a lot of dark stuff."

Despite all this, Slack isn't dying. But its situation still isn't great. Revenue in 2023 was $1.7 billion, up 17%. They currently have 47 million daily active users. Slack still has a strong hold on niche markets, like small businesses and startups, and even some giants in the Fortune 100. But the clear winner is Microsoft Teams. They have 37% market share, while Slack has just 13%. Though, I don't know many people who actually love Teams. It makes me a bit sad, what happened. There are a lot of what ifs but in

the end, Microsoft won by changing the rules. Then quietly abiding by them when they got caught. While Teams is killing Slack, Microsoft is also killing one of their own beloved apps in 365. Microsoft, weirdly, has two different mailing apps. Now it's trying to combine them into one, much worse app: New Outlook. And users aren't happy. Click here to learn the rest of the story.