What is Slack’s true total addressable market, also known as TAM?
TAM Estimates
Slack: Slack estimates the market opportunity for providers of workplace business technology software platforms for communication and collaboration to be $28 billion. This was calculated by estimating the total number of companies in its addressable market across large enterprises (> 5,000 employees), medium-sized organizations (250–5,000 employees), and emerging and small businesses (10–250 employees), as well as by applying annual recurring revenue (ARR) to each organization based on its size and location.
Gartner: Gartner estimates that Slack’s direct market for collaboration services will increase to $6.6 billion by 2023 from $4.3 billion in 2019 and the entire collaboration services segment will reach $37.9 billion by 2023 from $28.4 billion in 2019 — growing at 20% CAGR.
IDC: IDC estimates that Slack’s direct market for team collaboration applications will increase to $5.8 billion by 2022 from $3.5 billion in 2019 and the entire collaborative applications segment will reach $31.2 billion by 2022 from $22.2 billion in 2019 — growing at 12% CAGR.
Disruption Research: We gave these estimates a sanity check. We identified Slack's customer as any user of Office 365 or Gsuite. Knowing Office 365 has 180 million active users, estimating Gsuite has ~100 million users and assuming a 28% overlap in users, we estimate that Slack's TAM is ~$25billion — in-line with Slack, Gartner and IDC's estimates.
What this means for investors?
Slack estimates its fiscal 2010 revenue to be $603 million, less than 3% of TAM. If the market becomes bifurcated between Slack and Microsoft Teams, Slack has ~15x's more room to grow. If the industry becomes winner takes all in nature, Slack could take up to 80% of market share with~30x's more room to grow.
What makes Slack so incredibly interesting is that it has the ability to change the way its customers behave and change the way is industry is shaped. The current TAM estimates are defined by "collaborative" software as we currently know it. If Slack becomes THE platform for all business software then that definition may be less relevant and we will be underestimating the true size of its business opportunity.
"If we can be 2% of the software budget that's a multiplier on the value of the other 98%, then that's a fantastic position to be in." — Stewart Butterfield, CEO of Slack