Premium

If Slack can free us from the tyranny of email, it is worth at least $17bn

You've Got Mail
You've Got Mail was a high point for our love affair with email; it's been downhill since then Credit: Warner Bros

The first email, like so many technological firsts, revealed little about the invention’s real potential. It was sent in 1971 between two computers sat directly next to each other, and its contents have been long forgotten, suggesting they contained no useful information.

It would need cheap and available personal computers, and the internet, for its use as a worldwide communication system to become apparent: electronic versions of letters, which could be sent for free and cross continents immediately.

Now approaching its 50th birthday, email has been a remarkably resilient technology. Sending one might have been the first thing many people did on a computer; in 2019 it takes up almost a third of the working day, according to various studies.

Unlike so many other services, it has thrived through the shift from bulky PCs and dial-up connections to laptops, tablets and smartphones with superfast broadband.

There are clear reasons for that: email is a completely open system, meaning anyone with an email address can contact somebody else, whatever email app or website you happen to use.

A technology’s ability to survive is not something we should always welcome, however. We can admire a stubborn cockroach’s hardiness, but we do not support it. Because there is much to dislike about email, too.

Most professionals (apart from the most irritatingly productive) find their overflowing inboxes stress-inducing. The format of subject lines, addresses and signatures feels antiquated and overly formal, especially for conversations between colleagues. And group emails feel like a minefield in which a typo can ruin one’s professional prospects.

By now, the PR boost that email received from Tom Hanks and Meg Ryan’s heartwarming missives in 1998's You’ve Got Mail has been firmly extinguished. Email is now something that triggers dread, a feeling that has been amplified by smartphones tethering us to the office on evenings and weekends.

Slack chief executive Stewart Butterfield Credit: AFP

Any alternative, then, can expect to be treated with great enthusiasm, which perhaps goes some way to explaining the $17bn (£14bn) valuation that the office messaging app Slack is set to receive when it goes public on Friday.

Slack is a mere six years old (although the real-time messaging technology it is inspired by, Internet Relay Chat, dates back to the 1980s), but is credited with transforming how many companies work.

It operates more like WhatsApp or Facebook Messenger than email - chats, rather than electronic post - and is best used in groups, which its advocates say helps to avoid meetings. What’s more, office workers actually seem to enjoy using it: the company’s listing prospectus claims that it works more like a piece of shiny consumer software than a clunky enterprise tool.

At first glance, Slack’s financials do not appear to justify such a valuation. It lost $138m in its last fiscal year on $401m of sales. Slack is being valued at 42 times its revenue, well above the 10 times that is a common shorthand for valuing loss-making tech start-ups.

What makes this more impressive is that it comes without the investor roadshow that typically precedes an initial public offering: Slack is pursuing a rare “direct listing” in which it does not sell any new shares, so has not had to employ bankers to pump up its value.

The company is however, growing rapidly: last week it said sales would grow by up to 50pc in its current year.

It is also shaking off its reputation as a service for small teams and start-ups: the number of companies spending more than $100,000 a year on Slack is growing faster than the overall business.

Losses have been stable for three years, a generally encouraging sign when revenue is growing strongly because it suggests the company’s business model is not inherently lossmaking, and will eventually lead to profits.

But Slack does not have the market to itself. Two years ago Microsoft launched a rival service called Teams that has the advantage of integrating with other Microsoft programs that businesses already use. The software giant also has existing relationships with its millions of customers, meaning Microsoft could find it easier to sell its Slack rival into IT departments.

That should not worry it too much: its product is better, and several start-ups have proven capable of outmanoeuvring Microsoft by focusing on one area: video conferencing system Zoom and file storage service Dropbox among them.

The bigger challenge for the company will be convincing lethargic companies, and their staff, to break up with email at all. The business it has generated so far has been skewed towards tech and media companies, where employees tend to be more digital-savvy.

Broad trends sweeping the workplace, such as the rise of remote working and staff that increasingly handle business on their mobile phones, should give companies more reasons to use chat apps, which do a better job than email of digitally replicating the conversations and meetings we have in real life.

Slack has little chance of killing off email completely: it is too embedded in the fabric of the internet and office culture for that. But if the company can chip away at it just a little, it will easily justify that $17bn price tag.