What the Rise of Slack and HipChat Mean for Small Business

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If you’ve been following recent valuations of companies like Slack, you’d be forgiven for wondering how a simple messaging application could fetch such a lofty sum. After all, AOL instant messenger (AIM) never reached a $2.8 billion price tag like Slack just did. So why all the noise about business chat? Because instant, integrated communication is the future of teamwork. And it’s coming to a small business near you.

On the surface Slack seems to offer businesses better internal communication. In reality its value is rooted in real-time, contextual streams of business data within an environment that invites collaboration. That’s a fancy way of saying Slack is a chat app with loads of integrations. A similar application we use here at CallRail, HipChat, boasts 80 connected services on its integrations page that all feed data into its platform. For us, email is secondary to HipChat for communicating internally with the team.

Most small business owners today, however, haven’t heard of Slack or HipChat. For many, another SaaS subscription with a “hip” name likely means more complexity and more work. They are, however, familiar with Facebook Messenger and Google Chat. Most have Facebook Business Pages and Google Business Pages. Many already advertise with Facebook and Google. Naturally, if there’s value for small businesses in a Slack-like communication platform, Facebook & Google are going after it.

Solving Fragmented Workflows
You can barely read anything these days on workflow tech without seeing HipChat or Slack mentioned. There’s a good reason for this. They’re solving big problems with both back and front office workflows like customer relationship management.

One of the biggest problems facing businesses today is the fragmentation of business data and workflows. Data is spread across multiple platforms, each with its own user interface, its own data, and siloed in proprietary, cozy, cloud databases. Many of these platforms are best suited for a single workflow. Project management work happens in one service, customer sales & support happen in others, and advertising management in yet another. All this fragmentation of workflows hampers teamwork. This is where Slack and HipChat succeed. They integrate with everything.

Here’s a real world example: Many businesses receive customer complaints through Twitter. With HipChat’s Twitter integration, customer service employees within HipChat can see what customers are saying on Twitter. Along with a Zendesk integration, these same employees can also see support tickets relating to the complaints on Twitter — all within HipChat, giving workers instant, integrated messages relevant to their workflow.

(For more detail on this, see VentureBeat’s Jon Cifuentes’s illuminating breakdown of how integrations are powering Slack’s value proposition.)

Because of these integrations, HipChat becomes a powerhouse of real-time, contextual information for employees. Wide-ranging integrations make these messaging applications so much more than just chat.

Small Business Messaging for the Masses
Taking note, tech giants Facebook and Google are making big bets on communication platforms for small businesses. Millions of small businesses are already using existing business services from both companies. Each has an enormous user base, and they’re moving quickly to develop business messaging solutions.

Facebook recently announced at its F8 Developer Conference that it will soon allow businesses on the platform to receive messages from Facebook users via Messenger. The company also touted the number of active Facebook Business Pages to be 40 million in April 2015. While these 40 million don’t always reflect real companies (see self-proclaimed biotechnology & landscaping outfit Texas Goat Rentals for reference,) the business case for Facebook adding messaging services is very real.

Google has also been making its own investments in the recently rebranded Google Apps for Work. Businesses large and small continue to sign up for Google’s business suite, paying $5 per user per month. Among the apps is Google’s own messaging platform, Hangouts, which appears to be gaining more and more phone-like functionality (at the expense of Google Voice.) Add to this Google’s new foray into the world of wireless carriers with Project Fi and it’s clear that the largest software companies today are betting big on instant, integrated communication platforms.

The 7.2 Billion Dollar Small Business Messaging Market
120 million Americans work for small businesses. Assuming each worker would benefit from the same instant, integrated communication offered by platforms like Slack, and assuming a $5 per month per seat business model, the small business messaging market clocks in at an annual 7.2 billion dollars. With the stakes this high, many tech companies will being aiming to become the small business communication platform of choice.

Judging by history, however, Google and Facebook will forgo the fee-for-service business messaging model in favor of the advertising attribution model. This means that the existing business platforms offered by Google & Facebook will probably roll in messaging with their existing advertising products. Why? In order to tie advertising conversions (e.g. in-app messages, calls, & bookings) back to ad spend. Google recently announced a move in that direction, adding functionality to make local business orders & appointments directly from a search page.

This makes sense. Google and Facebook are more interested in selling advertisements than new platforms-as-a-service. We can expect they’ll design business messaging offerings around proprietary advertising attribution instead of fully integrated, instant communication.

If that’s the case, then there’s a lot more noise to be made by companies like HipChat and Slack, especially when they turn their attention to the huge small business market. After all, if Slack’s recent round of funding is any indication — instant, integrated communication is the future of teamwork.

mark sullivanMark Sullivan is Director of Analytics for CallRail, a call analytics company currently integrated with Slack and HipChat for a complete SMB Dashboard. He is passionate about arming small business owners and agencies with the right tools to create exceptional sales success in an extremely tough and often treacherous online environment. He can be reached via Twitter at @mpsulli