Is the Covid Boost in Cloud and SaaS Already Over?

We’ve talked a lot on SaaStr recently on Covid Beneficiaries, the ones given a boost by the crazy times of this year.  And I’ve seen it across my little investment portfolio too, from startups like Gorgias tripling on the back of the acceleration of eCommerce, to Talkdesk booming as call centers have to move to running distributed in weeks, to RevenueCat and others benefitting from an explosion in app development.

But can this go on forever?  Doesn’t the Covid Boost eventually have to slow down, as the acceleration into the future becomes … the present?

I thought a lot about a comment from Loren Padelford, GM and SVP of Shopify/Shopify Plus at the recent SaaStr: Enterprise event.  He said the future in e-commerce (where Shopify is #1) had been brought forward 5 years.  You can catch the A+ session here:

Reflecting on it, that does seem just about right in e-commerce.  E-commerce is now where we expected it to be in 2025 or so.  And videoconference?  Well Zoom, Zoom, Zoom.

And yet … can this go on forever?  It can’t.  And we’re seeing lots of signs that the Covid Boost is slowing, and that the New Normal is here.  It might be where we expected to be in 2022, or 2025, but we may have gotten there — and see more “traditional” growth going forward.

Some data is already suggesting ecommerce’s boost has been huge and real, but now has reach a “new normal” that will grow at a rate more similar to 2019:

We may be seeing this in mobile apps too.  As discussed above, mobile business apps saw a huge boost after Covid.  And that level of activity appears to be sustaining … but, at a New Normal level:

Slack perhaps is the most tangible case study here.  You love Slack, I love Slack.  Our little team’s usage has gone up substantially since Covid hit. But that’s it.  We’ve adjusted.  We use Slack 2x-3x more than before, but now that we do, there’s no more Covid growth to wring out of it.

And the market seems to have said the same thing.

Slack is growing 30% at $900m ARR — incredibly impressive — but doesn’t seem to be accelerating faster any longer because of Covid.  Even though it’s a core tool in our distributed team toolkit.  Importantly, Slack’s bookings have slowed an earlier spike during the pandemic.  Still very impressive, but no longer a Covid Beneficiary.  Bookings are your window in the near future in SaaS.

The new normal may simply be here for many apps, with a return to previous impressive — but not anomalous — growth.

And what about start-ups?  I got 5 investor updates this month that were really strong.  Pre-unicorn strong.  But the CEOs all said “growth seems to be returning a bit to normal.”

It had to come at some point.

It’s probably here now.

Published on September 10, 2020

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