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How’s enterprise at Stack Overflow?

How’s enterprise at Stack Overflow?

2023-05-17 12:31:49

I’m writing immediately to share that I’ve made the very troublesome
determination to scale back our workforce by about 10%, or 58
staff.—Prashanth Chandrasekar, CEO Stack
Overflow

Nicely, that makes the query within the title simple. Enterprise is not nice
if you’re chopping 10% of your workforce simply 2 years after being
acquired for $1.8
billion

(with a “B”). Layoffs are what occurs when a enterprise unit is spending
cash prefer it’s going out of favor and must reign it in a bit.

Cash flying out of the Tower of Pisa in the style of Renaissance painting

A month or so earlier than the Stack Overflow sale was introduced, I
predicted investors were looking for the
exit
. I
concluded they’d a suggestion from Microsoft that wasn’t giant sufficient
for his or her ambitions and that their solely remaining choice was to go
public. My estimate was that buyers had been on the lookout for a valuation in
the vary of half a billion {dollars}.

I did not anticipate a South African firm flush with money from an
funding in a Chinese language inventory spinning off a Dutch subsidiary wanting to
add Stack Overflow to their edtech
business
. I
described this sophisticated flip of occasions in a Twitter
thread
.
Proper round that time I additionally realized I overlooked a significant piece of
the analysis puzzle: I hadn’t counted the portion of the corporate
that was tied up in choices and unissued shares. After making a
few changes to my mannequin, I concluded that $1.8 billion was too
costly, however not outrageously costly, for Stack Overflow.

I additionally had a little bit of inside information to go on. I knew, as an example,
that Stack Overflow had three traces of enterprise:

  1. An promoting enterprise.
  2. A job board enterprise labeled “Expertise”.
  3. A Groups service that grew out of Stack Overflow
    Enterprise
    .

Promoting income rises and falls with visitors (roughly) and I
estimate from anonymous
feedback

that visitors has held regular whilst participation has fallen off
since
2016-7
. The
good factor about promoting is that it is fairly excessive margin if you happen to
are getting content material totally free. In the event you arrange programmatic adverts, akin to
Google AdSense, you
do not even must have a gross sales crew. Not loads of progress potential
maybe, however predictably worthwhile.

Stack Overflow’s job board enterprise was discontinued last
year
. There’s nonetheless a Talent
landing page
, nevertheless it appears to be
centered on branding and promoting for corporations which are
hiring. From what I can inform, the job board was a viable enterprise, however
it did not have hyper-growth potential and it required a specialised
gross sales crew. It additionally does not match neatly into the schooling know-how
story the brand new homeowners had been telling their buyers.

Expertise was a big portion of the corporate’s income just some years
earlier than the sale. For some time it was over half and maybe as a lot as ⅔
of Stack Overflow’s income. A few of that income was
subscription-based and, if I perceive accurately, might have been
collected perpetually if the service hadn’t been scrapped. Huge
know-how corporations subscribed to Expertise with a purpose to increase different
recruiting sources. Expertise additionally supported a unusual timeline function
that I discovered relatively helpful for tracking my
career
,
which is a small loss within the large image.

I initially questioned if discontinuing Expertise was
eyewash
for potential buyers. Startups are imagined to be high-growth,
high-margin or each. Job listings have a number of competitors and
fluctuate because the hiring market fluctuates. However because it was lastly
canceled effectively after the acquisition, I believe it was not
rising and, maybe, unprofitable. I do not get the sensation that the
new CEO was on this line of enterprise and it could possibly be that
Expertise was starved of assets till it was simple to get rid of.

Lastly, there’s Groups, which is simply the form of excessive progress, excessive
margin and excessive lock-in enterprise startup corporations like to stumble
into. And boy howdy did Stack Overflow do its greatest to keep away from constructing
this product. For years there was an Enterprise model of Stack
Overflow that giant corporations might host internally. We instructed
smaller corporations to not hassle and to make use of an alternative
Q&A
. However
due to a few inner advocates, the thought was explored
and eventually turned the centerpiece of the Stack Overflow enterprise.

This is was Prosus says about Stack Overflow of their most recent
financial
statement
:

Stack Overflow, a number one knowledge-sharing platform, now serves
round 100 million folks worldwide each month. The group web site
continues so as to add a mean 200 000 new registrations each
month. Stack Overflow grew whole bookings by 53% within the interval. The
enterprise grew income in native forex, excluding M&A, by 33% to
US$45m, pushed by progress in Stack Overflow for Groups, which permits
organisations to construct their very own inner communities on high of the
open platform. Stack Overflow for Groups contributed 49% of whole
revenues. By September 2022, Stack Overflow had 1 262 paying groups
producing annual recurring income of US$50m, a progress of 66% over
the prior interval. Elevated funding in engineering and
product-development initiatives, gross sales headcount and advertising and marketing
programme bills, primarily in Stack Overflow for Groups, contributed to
the buying and selling lack of US$42m, a margin enlargement of 18 proportion factors
to 93%.

I am not 100% positive what that final sentence means, however I feel Stack
Overflow bought $45 million in income and (after subtracting bills) misplaced
$42 million. Since 42/45 = .933…, I suppose that is what they imply by “a
margin enlargement of 18 proportion factors to 93%.” That is an odd solution to
put it although. Margin usually tells you ways a lot every greenback in gross sales
is retained as earnings. However on this case, Stack Overflow spent virtually
twice as a lot because it introduced in. I could possibly be studying this fallacious, however
mathematically it in all probability must be -93%.

I assume the larger level is that Groups has almost equaled Promoting
as a income supply. (“Stack Overflow for Groups contributed 49% of
whole revenues.”) Bear in mind Promoting in all probability hasn’t grown very a lot
and Expertise is not a factor anymore. So Groups has definitely grown quite a bit
because it began, however in all probability not sufficient to justify $1.8
billion. Once more, I am fairly positive Prosus overpaid.

They may not have understood, precisely, what they had been shopping for. Final
fall, Stack Overflow for Groups moved off of Stack Overflow. That is
what I see because the proprietor of a Workforce:

"Looking for your Teams?"

Stack Overflow has good reasons for making this
change
:

  1. For the reason that starting customers had been frightened about by chance posting
    on the general public web site after they thought they had been within the consolation of
    their very own crew. By making a Groups separate from public Stack
    Overflow, it is simpler to promote new clients on the concept that Groups
    is not a safety danger.

    See Also

  2. Having a separate area means engineers can work on Groups with out
    worrying about breaking the general public web site and vice versa.

I can think about members of the SRE and gross sales groups casually chatting
about their frustrations with Groups and discovering they each wanted
the identical resolution to their issues. It makes loads of sense! It is
additionally a great way to kill Stack Overflow for Groups.

A number of years in the past Elon Musk advised that cities ought to construct tunnels
to unravel the visitors issues in large cities. So folks on Twitter
made fun of him for discovering
subways
. Of
course the thought wasn’t precisely the identical as a subway since folks
would keep of their automobiles relatively than stroll to the practice. Nonetheless,
underground tunnels for automobiles face lots of the similar challenges as
underground tunnels for trains plus a couple of additional potential
issues. Nicely Stack Overflow for Groups found Stack Overflow
Enterprise. Transferring off of stackoverflow.com eliminated the one
compelling function Groups has.

This would possibly sound like hyperbole, however I’ve used loads of inner
information methods. None of them apart from Stack Overflow for Groups
work. Groups is not a slam dunk both, however for programmers it had the
big, huge, incalculable benefit of dwelling proper on the web page
that they in all probability have open in a single (or doubtless extra) of their tabs. It
removes one supply of friction between utilizing the device and forgetting
it exists.

The tools of remote work are
chat, video calls and shared paperwork. Groups must be simpler to
use than shared paperwork
. If you’re utilizing Google or Microsoft,
there’s already a big ecosystem supporting sharing paperwork of all
types. You have already got an account and so do your entire
co-workers. When somebody shares a doc in chat, it exhibits up with a
preview. All of the paperwork you’ve got entry to are
searchable. Everyone is aware of easy methods to use shared paperwork.

Groups lacks any benefit except one or two individuals are already utilizing
Stack Overflow
. Stack Overflow has been optimized for sharing
technical information. Take one seemingly trivial factor: code
blocks. Sharing code is prime to technical documentation, however
Phrase and Google Docs haven’t got a simple solution to mark code as separate
from prose. I usually use a mix of indenting the Courier New
font to set code. It really works, however I at all times want we might use Markdown
for that. Except you’ve got folks devoted to utilizing Stack
Overflow, your crew will fall again to the best path: shared
paperwork.

Look. I is likely to be exaggerating the impression of transferring Groups off of Stack
Overflow. I haven’t got the information that Stack Overflow has and perhaps
Slack, GitHub, Jira, and (Microsoft) Groups integrations do the
trick. What I do know is that if I had been choosing a information
sharing system for builders, I would not decide Stack Overflow for
Groups. I would just use
GitHub
. It is
laborious to discover a system that is nearer at hand to coders than supply
management. For non-technical groups, I follow Google docs as the trail
of least resistance.


It is odd to me that the layoffs had been 10% throughout the board. It comes
proper out of the Jack Welch
playbook
. He was the
CEO of GE and asserted that 20% of a workforce is especially
productive, 70% are simply nice and 10% aren’t producing and must be
fired. Except issues have radically modified, Stack Overflow doesn’t
use stack
ranking
. However
across-the-board layoffs pressure managers to chop individuals who in all probability
should be retained. Again in 2017 a 20%
layoff

resulted in important losses of expertise that wanted to get replaced a
few years later when the enterprise rotated.

There’s additionally the difficulty of Stack Overflow’s CEO chasing the newest
shiny
object
. I
gotta say I am not significantly optimistic in regards to the enterprise, however I am
open to being fallacious.


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