When 75M Isn’t Enough
Last month, Microsoft reported that its Teams product hit 75M daily active users. It’s a significant achievement that suggests Teams is a wildly successful product. While 75M DAU is clearly impressive, I suspect the figure is significantly lower than what Microsoft anticipated when the product launched just over three years ago.
Teams’ success was practically guaranteed. First, it was a high-profile product from one of the largest software companies in the world. It ties together many Microsoft services, and thus has received considerable marketing attention. It received keynote attention for over two years at every major Microsoft event, including testimonials from CEO Satya Nadella. It’s positioned at the core of Microsoft’s fast-growing Office 365 and included for no additional charge in all plans. Actually, it’s free even for users without paid subscriptions. And now there’s even a personal version for consumers. Teams was also provided a large initial market as it was positioned as the successor of Skype for Business, which built a huge base over more than a decade.
Yet, despite these beneficial conditions, Teams had only amassed 32M daily active users by early March, three years after its launch. At the time, Microsoft had about 200M Office 365 subscribers. Thirty-two million is a huge number, but it seems relatively low for a product so central to Microsoft. Microsoft has said, “Teams is to the new Microsoft what Windows was to the old.” (Note that last March, Microsoft reported Windows 10 runs on 1B devices.) There aren’t any easy business comparisons to the growth of Teams, but we did see Instagram and Fornite achieve 100M monthly active users in less than two years and 18 months, respectively.
Then the pandemic hit, and Teams’ numbers started vaulting upward, alongside those of every other video conferencing provider.
What Exactly Are Active Users?
Before getting into the pandemic, let’s examine the concept of active users as a metric. There are two common measures: Daily Active Users (DAU) and Monthly Active Users (MAU). Providers often use the terms to measure the average number of unique users that open and engage with an application in a given day or month.
With premises-based solutions, we measured sales, not usage. There was/is no simple way to measure usage or adoption of most premises-based products. But purchasing a license is not the same as using it, and it’s surprising how often licenses go unused.
With cloud-delivered services, we don’t need to settle for sales information. Instead, we can see metrics such as total usage, who logs in, the devices they use, and which specific features they use and how often they use them. Access to all this data has made daily or monthly active users a preferred and common metric for cloud-delivered services.
Active user statistics are compelling, but of course, they can be gamed. Providers have been known to use tricks to increase DAU—for example, sending notifications to log in for a message, which registers a day’s usage, rather than just including the message in the notification itself, which has no impact on usage metrics.
It’s important to realize that DAU is a measure of usage, maybe adoption, but not necessarily success. Across applications, DAU metrics can be difficult to compare for several reasons. First, because the figures are inherently self-reported, there’s no standard way to measure what makes an active user. For example, applications that log users in automatically can be deceiving if the user doesn’t actually use the software service.
In the case of Teams, Microsoft only measures users that take intentional action such as a chat, call, or meeting. But we still don’t know about some behind-the-curtain details. For example, does an unanswered public incoming call that goes to voicemail count? Does accepting a calendar invite with a Teams link count?
DAU is also hard to compare across vendors. Last year, many attempted to compare Teams with Slack. Microsoft started the comparison in July 2019 when it announced the first Teams usage stats, 13M DAU, and then proclaimed victory over Slack. Slack had reported 10M DAU in January 2019 and reported the same number in October. Slack hasn’t reported DAU since, although they did share that they had 12.5M concurrent users during the pandemic.
In the case of Slack vs. Teams, the comparison itself was flawed from the get-go. Teams offers many more capabilities than Slack, including conferencing and UCaaS. We know that Teams counts meeting participants as daily active users, but Slack doesn’t have a conferencing service. Now we are starting to see comparisons between Teams and Zoom, but again, these are dissimilar applications; Zoom is primarily known for its conferencing service, while Teams is comprehensive.
In May 2020, Microsoft reported 75M DAU on Teams, up 70% from the 44M it had reported about six weeks earlier. The spike in growth is reasonably attributed to the pandemic that forced widespread and rapid adoption of conferencing solutions. Teams includes conferencing, and using Teams is the only way to get conferencing services from Microsoft.
Most conferencing providers saw big jumps in growth during this period, though they all use different metrics. Cisco reported that Webex usage tripled (2.5 times in Americas, four times in Europe, and 3.5 times in Asia Pacific).
A more direct comparison can be seen between Zoom and Teams meetings. In early April, Zoom shared that it hosted 200M meeting participants daily in March. Meeting participants may include paid or free members, as well as those who are neither—just invited guests. By the end of March, Zoom’s pandemic-juiced figure was up to 300M, 30 times higher than the year before. Later in April, Microsoft announced it hosted 200M daily participants. That’s a difference of 50% in favor of Zoom! The gap is particularly remarkable because so many Zoom users likely have access to MS Teams. Around the same time, Google reported it was hosting 100M participants a day (up 300% since January) on its Meet service, and added 3M users per day in May.
Teams is included in every Office 365 subscription (including government and education). It is also available for free for non-subscribers. A new version, intended for personal use, was just released in preview. It is intended to help consumers coordinate projects and events such as a family activity.
Large Teams Pose Challenges
Despite Microsoft’s larger base, Zoom, Meet, and Webex appear to have grown more than Teams during the pandemic. During this period, Microsoft reported it increased its Office 365 subscriptions to 258M, all of which get Teams. Also, Microsoft reported it had 183,000 educational institutions using Teams, and we know that many students finished spring semester with virtual classes. At the same time that the pandemic increased online learning, some schools banned Zoom due to security concerns.
Microsoft has made significant strides in conferencing over the past year. It has consistently reported conferencing-related improvements and new features for close to a year now. However, Teams is a daunting and complex application that often requires training. When the pandemic caused a rush on conferencing, Zoom and Webex fit the bill with intuitive, purpose-built software applications.
I contend that, at this point, Teams is holding back adoption of Microsoft conferencing. That is, more users would be using Microsoft conferencing if they could access it without Teams. Google likely came to that conclusion and unbundled Meet from G Suite. There will be a profound impact to the video industry if Microsoft follows Google, and both companies use meetings as a loss leader. Imagine just booking and hosting meetings in Outlook without Teams. Such a standalone product could still be tightly integrated with Teams—as Webex Meetings/Webex Teams and Slack/Zoom are.
The concept that Teams is holding back meetings is substantiated by Slack’s Q1-2020 results, reported earlier this month. Slack had a very strong Q1 with 12,000 new paid subscribers. However, its growth was much smaller than conferencing providers such as Zoom. Slack’s CEO said that the more complex nature of Slack made it a “harder lift” for customers to adopt compared to conferencing apps.
There’s also an organizational challenge with implementing and supporting Teams because Teams blurs several of the boundaries found in most IT organizations. Enterprise IT usually have different groups responsible for communications, meetings, rooms, collaboration, networks, and security. , Plus Teams acts as both a platform and an application, making it even more difficult to use and understand by casual users.
A standalone, yet integrated, solution for UCaaS probably also makes sense for the same reasons. Teams is a very complex application for hosting meetings or making calls, as those are not the application’s primary intended features.
Teams will continue to grow and may become wildly successful. Though it does have some significant challenges to overcome.
On the conferencing side, the industry is rapidly shifting to end-to-end encryption. Microsoft currently does not support this trend; Cisco Webex does, Lifesize does, and Zoom and 8x8 will. This is a nontrivial upgrade for Microsoft that will break many of Teams’ advanced features, such as captions and its smooth integration with Stream for sharing recorded content.
On the messaging side, Teams has some limitations involving collaboration across multiple organizations. This is a common limitation with workstream collaboration applications. Collaboration often involves external participants (contractors, customers, partners, etc.). Applications such as Zoom Chat, Webex Teams, and Workplace by Facebook natively support and facilitate intercompany collaboration.
The lack of E2E encryption is also a problem for Teams messaging. Both Cisco Webex and Slack support E2E encryption with the use of enterprise key management services. Microsoft does not offer any E2E encrypted services for Teams and in fact relies on access to customer content for advanced services such as ediscovery and search. Zoom got a lot of pushback when it indicated that it would not offer its planned E2E encryption on free plans. The company reconsidered and now intends to include it for all users. That is Zoom got pushback for intending to give its free users the same security as Teams’ paid users.
In addition to UCaaS and conferencing services, Teams also competes with enterprise social solutions. Teams has significant overlap with Yammer, one of Microsoft’s own products, and both of these Microsoft applications compete with Workplace by Facebook. Both Workplace and Yammer scale much larger than Teams, which is still limited to teams of 10,000 users. That cap prevents Teams from offering enterprise-wide communications in larger organizations.
Teams is also limited by its own client. The best experience on Teams is delivered through the app, a fairly large client that has to be installed and maintained on each device. Workplace, Google Chat (and Circles), and many other alternatives are web-first deployment models. By comparison, Teams deployments are relatively complex, and often require the assistance of outside consultants.
But the biggest challenge for Microsoft remains engagement. Slack has highlighted the difference between a daily active user and one that actively uses an app all day. The Teams leadership group recently changed, and I expect user engagement is the new crew’s top priority.
The pandemic is not over, and conferencing apps will continue to grow. We could see significantly more usage in the fall if schools again embrace remote learning. Workstream collaboration applications are inherently complex and require broad buy-in and significant training to be useful.