What is the most important metric for Slack and why?

Step 1: Ask some clarifying questions

1) Are we considering the mobile or web app or the entire package?

2) Do you want me to consider any of the company's current objectives (i.e to increase user engagement, increase retention etc) or is it something that you'd want me to assume.

 

Step 2: Talk about the product and explain your understanding of it

Slack is a real-time business communication based messaging platform used by teams(in work-setup). The main goal of slack is to simplify work-based communication

Slack is used by teams for 1:1 and group based communication. Users can send, delete, edit message. Share files, documents, images, videos, links etc. Its a very cross-collaborative tool/platform

Slack has integrations with various third party tools and software like Trello, Google drive, Calendar etc. which makes it very powerful and unique. It helps in organising content and chats in the form of channels.

Groups chats can be done on slack as well by creating groups. One can also check if a particular person is online/available on slack at that particular moment or not.

Slack was founded 5 years back and in such a short period of time it has seen an insane amount of user adoption. However not everyone knows or uses slack, for this reason we can say that the product is in the growth phase.

Step 3: Identify and define the goal of the product

Slack is used for simplifying and organising business/work based communication. It is a huge platform which can have various goals like increasing user engagement, increasing user adoption or even revenue growth.

Step 4: Listing down the user actions

1) Teams (User) can create an account on slack

2) Then they can invite other users on slack

3) Chat on slack, and can share documents, files, images, videos etc amongst participants

4) Can also create channels on slack for organising content.

5) Channels can be made private and public and can add people to different channels.

6) Can have 1:1 and group conversations on slack

7) Can also connect with the different third party integrations tools that are there and use them via an API

 

Step 5: List down the metrics by going through the different phases of user Journey

Activation

# of users who have signed up and created a slack account

# of first-time users who have created atleast 1 channel on slack

# of first-time users who have created/initiated a conversation

 

Engagement

Avg/Total number of message sent and received  on a daily basis

Avg number of chats/interactions per user

Avg time spent per session on slack per 1000 users on a daily/weekly and monthly basis

 

Retention

# of users who use slack on a daily/weekly and monthly basis (DAU, WAU, MAU)

% of users who have been using slack for greater than 30 days

 

Monetization

Number of users who use a premium/enterprise based slack account

% of conversion of users going from free account to premium/paid account

 

Step 6: Evaluate and prioritise the metrics.

As a PM i will evaluate the metrics listed in step 5 in the following way.

By impact to end user, relevance to the goal and mission of the product and effort required to evaluate these metrics.

Most important metric should be one that is aligned to slack's goal of improving, simplifying and organising communication across teams, and that provides value to the end-customer.

Revenue related metrics can't be the most important metric as revenue/business growth for slack will have no benefit for the end customer also it has no relevance to the end goal of the product. User adoption metrics are not very broad to be the most important metric for slack also user adoption.

We will be focusing on engagement  and retention metrics as they are the ones that are most closely aligned towards to the goal of the company and provides maximum value to end users as well and are broad in nature.

Now evaluating all engagement and retention metrics

For engagement- I will prioritise the total number of messages sent and received on a daily basis as the main engagement success metric

For retention- I will prioritise the number of users who use slack on a daily basis. (DAU)

Both can be good north star metrics since however slack is a messaging platform and we are concerned with number of messages and conversations. We will considering the total number of messages sent and received on a daily basis as the main metric to measure success of Slack.

Goals for slack in ranked order 

1. Intra team engagement (Reason: The main marketing of slack is that best teams use slack or most productive teams use slack)

2. Inter team collaboration (This is super important to ensure that slack does not breed creating of siloes, which is the main problem of defacto incumbent aka the email)

3. 1:1 communication (There should be no reason that just by having slack 1:1 communication should suffer)

Some metrics ranked in order:

A. average no. of messages per team per week (MOST important since it measures team engagement)

B. No. of active channels per week (are all teams using slack well - adoption/retention/engagement) 

C. No. of new channels created per week (is slack fostering new conversations between people - engagement)

D. No. of new people added to a channel per week  (this is important to ensure that information is being diffused and there is collaboration)

E. No. of active 1:1 conversations between people who are part of common channels (should be higher than E, meaning people who are part of common channels have broken the ice and are chatting more than people who are not yet part of common channels. Also as a baseline this number should ideally be higher than the pre-slack communication stack e.g. should be more than 1:1 emails)

F No. of fresh 1:1 conversations started between people who are not connected via any existing channels (indicates how slack helps break barriers between two people in an enterprise)

Objectives

Business: Going public soon.

Mission: Continue to be 'where work happens'.

What is Slack?

Workplace messaging app primarily. But also used for larger communities (e.g. Product Manager HQ has tens of thousands of members).

Users can send and view messages grouped by channel in a 'workspace'. They access it through web, desktop and native mobile apps. Third party companies and users can interact with workspaces through the Slack API/Platform.

The unique value users get from Slack is:

• They receive information about their work
• It's relevant to them
• It's presented in a delightful way
• It's all in one place

It achieves these things by:

• Making messaging between people faster than email
• Designing a delightful interface that helps users do what they want and enjoy the process
• Incorporating integrations through the API

Who are Slack's users?

Organisations:

• Not for Profits (charity, local organisation)
• Communities (online community of product managers, designers, campaigners)
• Startups/SMEs
• Large businesses
• Multinationals

We also need to consider Slack's partners:

• Businesses with Slack integrations
• Businesses built on top of Slack

How does Slack make money?

Tiered pricing:

• Free: limited storage history but unlimited users (and channels, I believe) - used by Communities and Not for Profits
• Paid teams: extended/unlimited storage and other features like external channels - used by Startups/SMEs and teams within Large Businesses
• Enterprise: connections between Slack teams - used by teams within Large businesses and Multinationals

Deciding the metric

For Slack, we could consider the following metrics:

Product metrics:

• Usage (messages sent, time on Slack, messages viewed, channels joined, integrations added)
• Feedback (NPS etc.)
• Growth (either by workspace or users net growth, retention, churn)

Business metrics:

• Market share
• Number of paid customers

Assessing the metrics:

Criteria for assessing metrics

• Easy to calculate and act on
• Good for the product by incentivising behaviour that enhances its value
• Good for investors by increasing and explaining the value of the business

Usage (messages sent, time on Slack, messages viewed, channels joined, integrations added)

• Messages sent is an obvious starting point. Perhaps that can be refined to something like number of batches of messages sent per day to reflect conversations. This is the core Slack functionality.
• Perhaps it's too narrow and doesn't reflect the unique value of Slack, differentiating it from a pure messaging app like WhatsApp. So maybe a combination with messages, channels and integrations will help. But then the metric becomes harder to interpret.

Feedback (NPS etc.)

• This is a strong candidate since it reflects how much people enjoy the product. This is important to Slack since it's enterprise software that people enjoy, differentiating it from the legacy providers that they hate to use.
• But again this is generic. It doesn't reflect what its users are trying to achieve. Slack isn't like Reddit or Twitter, which are just for enjoyment.

Growth (either by workspace or users net growth, retention, churn)

• The benefit of setting growth as the target is that it is simple. Another is that it's historically been the result of good product, since people tell other people about products they enjoy, and continue to use them.
• A limitation is that it doesn't express how people are using the service. Increased acquisition can just be a result of greater brand awareness. Good retention is not exclusive to good products - sometimes it's just lock-in. Now that Slack is a more mature company, growth might not be as good a guide as it was.

Market share (by customer segment)

• Slack's market share is arguably more important the larger it grows. If it's becoming a public company then it will be important to look for global rather than local maximums. In the context of Microsoft and Facebook's competitor products then this will be important in the long term.
• This can be harder to calculate than other metrics. Whether an online community counts as part of the market is a difficult question.

Revenue (per workspace, per user, absolute)

• An advantage of this will be that it helps the company prove profitability to investors when it floats.
• It has the disadvantage of incentivising local maximums which harm the business long term. In particular, increasing prices or limiting more features to paid tiers (worse still, micro transactions) might hurt brand image in the long term.

Decision

Since Slack is going public soon it will be important to focus at least for now on attractiveness to investors. Therefore product-level metrics might need to take a back seat to business level metrics. Of these, market share is less easy to calculate but less likely to lead to harmful product practices.

Therefore market share seems like the best metric to use. It's likely that it will be made simpler to calculate and act on if it's limited to established startups, office-based SMEs and all larger businesses.

Summary

• Slack's core value to users is delightfully providing one place where they can see and send information about work. It's going public soon so that's important to business leadership.
• When deciding between metrics it will be important to consider how easy to calculate the metric is, how easy it is to act on and what the effect will be on the product and investors.
• Share of the total addressable market was chosen because it was less likely to harm core product value, and reacts to the IPO and competitor context.

Slack is primarily a Saas company. Slack makes money by annual recurring revenue. Just to clarify, Slack is more than just a chat app. There are tons of applications you can integrate it with, for example, project management software with Trello. This could also be something to consider.

The goal of Slack is to empower teams and companies with productivity. As a user of Slack, you would be able to do all work-related things like chat, project management, analytics, etc with Slack.

The most important metric, in my opinion, is Churn. Retaining customers is extremely important for Slack, especially with all the upcoming competitions like HipChat and other companies like Google, Facebook trying to get into the business suite (B2B SaaS) industry. Churn allows the product team to learn from its customers the best (to understand why they left) – as opposed to asking satisfied current customers

You can create a funnel to see where the Churn occurred (for example, many users in a specific company could sign up for a Slack account, but not create any channels, and such, low usage due to issues leading to cancellations).

Digging deeper, you can look at a number of topics and threads being created, how engaged or active users were at certain points to pinpoint specific problems.

The problem with Slack as a user is a usage – if no one uses it, companies will not see the point of purchasing the subscription plan. Companies have to see the value from their employees and this means active chatrooms, threads, and some sort of result. Slack could definitely measure this individually and potentially quantify it by segmenting based on Slack-Successful companies VS non-Slack-successful companies.

And just to emphasize, monitoring customer satisfaction as a metric should be the next step. Go visit and speak to the customers to understand what issues they might be having.

Anyway, looking at churn rates on a monthly basis, and trying to reduce it with a set goal % should be an important aspect as a PM at Slack. This will lead to creating something sustainable – and afterward, we can focus on other things like CPA, ARPR, LTV, MRR, ARR.

I would end the note by saying enterprise Saas is tougher to analyze – a single metric should never be considered the most “important” because it all depends on context. For example, Slack could be focusing on retaining big enterprises as a business and could care less about churn from smaller companies. Churn rate % could help evaluate the current product and that should be important for a PM.