Workplace – the app originally designed as a version of Facebook for employees to communicate with each other – now has more than 7 million users, carving out a niche as an app to help businesses communicate online. internally using essentially the same tools that have proven sticky in their lives with friends and family. Turns out this pull caught Workplace’s attention of a different kind.
We have learned that Facebook (before it was rebranded as Meta) was approached by corporate investors offering the social network a proposal: spin off the organization, they said, and let us support it by as a startup. A deal would have valued a newly independent Workplace as a “unicorn” (at least at $1 billion) according to the source.
A source tells us the conversations didn’t progress, mostly because Facebook (and now Meta) viewed Workplace as a “strategic asset” – not because Workplace generates sales close to the billions that Meta makes through advertising on platforms like Facebook and Instagram, but more important to present a more diverse face to the market. For regulators, this shows that Facebook/Meta is more than just an overpowered social network; and for organizations, that Facebook can do more for them than just sell ads.
“It helps make Facebook [and Meta] look like an adult,” the source said.
Spokespersons for Meta and Workplace said they had nothing to share and declined to comment for this article.
It’s unclear which investors were involved, but a source says they were among those focusing on late-stage growth investments with a view to injecting capital specifically into corporate opportunities.
Their approach to funding a spin-off workplace last year reportedly came at a time when late-stage investors and private capital were stepping up (and still stepping up) to take over big, mature tech companies. Last year, Thoma Bravo reportedly raised $35 billion to pursue more acquisition opportunities in the space (and he’s made a slew of investments and acquisitions to that end). Bloomberg estimates that private equity acquisitions totaled some $80 billion in 2021, up more than 140% from 2020.
That pace doesn’t appear to be slowing this year, and it includes private equity firms approaching big tech giants to expand their operations as they seek to streamline and realize more capital from less core assets. , or perhaps unprofitable, or more generally lagging behind. Earlier today, Francisco Partners announced a deal to take over IBM’s Watson Health business for around $1 billion.
Building a SaaS Beachhead
For Meta, a Workplace spin-out approach highlights developments on two fronts.
On the corporate side, there have been calls for the company to be dissolved – the latest development on this front since the start of the month is that the courts have ruled that the United States Federal Trade Commission can bring an action in court demanding the sale of WhatsApp and Instagram, alongside apparently a separate investigation by its VR division for antitrust violations. A situation that some investors and shareholders will see as an opportunity, a tension that Meta may have to weigh more and more because it justifies keeping its various assets.
For Workplace, the division has been at a key crossroads in recent months.
On the one hand, Workplace has seen a number of key departures, including no less than its two main executives, Karandeep Anand (who this month was named head of product at Brex) and Julien Codorniou, who left to become partner at London VC Felix Capitale. A number of others have also left the building to move on to other opportunities elsewhere.
The logic behind some of this movement was described to me, in a charitable way, not as a response to the poor public relations that Meta faced, but as natural attrition: here is a group of people coming together to create and build Workplace starting from scratch, and now that it’s a more mature product with a clearer direction, it’s a good time for new people to come in and work on the next step. (My personal opinion: Workplace’s new chief, Ujjwal Singh, seems like a solid choice to run it right now.)
But even though there have been reports contradicting that workers might feel burnt out by Meta being constantly criticized in the court of public opinion, Workplace hasn’t been immune either. We understand that Workplace signed a huge deal with a major restaurant chain, one of the biggest, but the client asked not to announce the win last fall due to the cycle of bad news and ” reputation “.
“This shit doesn’t happen to other SaaS companies,” one person said.
This, it seems, would have been an argument for more distance between Workplace and its parent, perhaps through a spinoff, but it seems Meta has the opposite idea.
Workplace has actually changed a lot over the years since it was first rolled out as a product.
Originally founded as a “work” version of Facebook – expanding the way Facebook employees already used Facebook to communicate with each other in private groups – Workplace was launched in response to the rise of Slack and others chat apps for the workplace. Workplace’s logic was that it had a natural advantage since billions were already using Facebook. And, the introduction of a new service targeting a different type of user, with a different business model – paid, non-ad-supported – opened the door to new business opportunities for the company.
This has largely remained the company’s strategy even though the focus has shifted to Workplace. It originally introduced a number of integrations with other workplace productivity tools aimed at knowledge workers, as part of a larger effort to compete more directly with Slack and Teams. But over time, almost by accident, Workplace found an audience of deskless workers who communicated with their employers primarily through mobile. So, what has become the sweet spot for Workplace is a communication app for both categories of workers simultaneously.
“We realized that instead of asking our customers to choose between Teams or Slack and Workplace, you could have both,” a source said. “Others might handle real-time email communications for knowledge workers, while Workplace is best asynchronous for everyone else.”
And that seems to be the driving force behind Workplace’s strategy now, which saw it recently integrating more Microsoft Teams features into its platform to complement Workplace, and yesterday announcing a new integration with WhatsApp, which is already very popular with frontline teams, and will now become a more formal interface for Workplace communications. From what we understand, closer integrations and services involving Meta’s VR business and the portal are also underway.
Although the company is not expected to update the user count until the end of the year, a source told us that there are now nearly 10 million users on Workplace, with key customers including some of the biggest employers in the world, like Walmart, Astra Zeneca and others. .
While Workplace has in the past been sold to customers as a standalone product, “I don’t think it will ever be sold as a standalone app again,” a source said.
Instead, it will be part of a suite, for example selling business email plus Workplace, or with Facebook login functionality, opening up the outlook for how Meta can engage with these businesses. (The broader enterprise sales pitch is also likely behind its motivation to acquire Kustomer, the CRM startup, though that deal has yet to close.)
Far from ready to part ways with Workplace, it looks like Meta is now positioning it as part of a beachhead that includes a larger SaaS business. Can it mobilize as an independent company could have done to make this opportunity a reality? The VCs could still be waiting in the wings if that’s not the case.