Why Amazon may be on the hunt to buy Slack

Dive Brief:

Amazon.com is among the companies reportedly in the hunt to acquire Slack Technologies Inc., according to a Bloomberg report. Representatives for Amazon.com and Slack declined to comment.
If Amazon were to acquire Slack, it would be the company’s second-largest purchase to date, with Slack worth at least $9 billion in a sale, according to the report. Prior to buying Whole Foods Market for $13.7 billion on Friday, Amazon's largest purchase had been the acquisition of Twitch Interactive for $970 million in 2014.
But Slack also has a $500 million funding round in the works, according to Bloomberg, which would lead to a company valuation of $5 billion. At this point, sources told Bloomberg a funding round or a sale are equally likely.

Dive Insight:

Amazon may be the enterprise cloud leader, but its penetration into the enterprise essentially ends there. The company’s primary cloud competitors, Microsoft and Google, both have a more robust suite of business offering, designed to for every aspect of work.

But like other companies, Amazon is likely looking to the enterprise to help ensure long-term growth. Toward that end, Amazon has recently been taking small steps to build its enterprise offerings over the last several months. In February, Amazon introduced Amazon Chime, a video and audio conferencing service for the enterprise that competes with Microsoft’s Skype and Cisco Systems Inc.’s WebEx service.

Amazon may see a purchase of Slack as a way to dive further into the enterprise market without having to build its own tool, which could ultimately cost it even more in time and resources. It's not the first giant to consider a Slack acquisition. Prior to building Microsoft Teams, Microsoft had considered acquiring Slack.

Slack has a large and impassioned following. As of last October, it had 4 million daily active users, 5.8 million weekly active users, over 1.25 million paid users, and 33,000 paid teams, according to a company blog post. Slack is also looking to expand in the enterprise. Earlier this year, Slack introduced Enterprise Grid, its large enterprise product.

But the company also has its doubters, including some who believe Slack’s lack of ability to scale will prevent it from ever truly taking off as an enterprise tool. Incidentally, that’s also often the reason many startups are acquired by larger vendors.