Startups are still paying extra for tools that duplicate ones bundled in G Suite
Google gives away a lot of enterprise products in a relatively large bundle. When you get Gmail, you’ll get Google’s video conferencing and communications tools Hangouts along with it, as well as other services including cloud storage and productivity software all in a bundle called G Suite.
But even though these services are baked into G Suite, a lot of startups are still opting to pay extra for many competing offerings. Those services also mean additional costs while running a startup. For companies that are trying to be as capital-efficient as possible, this represents a pretty substantial statement that they are willing to pay more for tools that are different (or potentially superior) than an otherwise free add-on to G Suite.
To take a closer look at this, we dove into Brex spending data to see how startups are deciding with their wallets. We analyzed the overlap of Brex customers that are paying for Google G Suite, and also paying for Slack, Dropbox, or Zoom. As a result, we found that a non-trivial chunk of Brex users are willing to pay extra for a service that more or less duplicates what you get out of the box with Hangouts or Google Drive (G Suite’s Dropbox competitor).
Zoom, Dropbox, and soon Slack have all proven that these individual sets of services can exist as standalone companies. Dropbox is hovering around the $10 billion in market cap, while Zoom is now worth more than $20 billion after going public. Slack is pursuing a direct listing and we will soon find out the valuation it will set for itself, though its last private market valuation was reportedly roughly $17 billion.
So a possible explanation, in that sense, is that many startups simply think Zoom, Slack, or Dropbox might be superior products to Hangouts and other products (or that at least Hangouts or Drive are insufficient for their needs).
We chose to look specifically at these companies because they represent companies at varying early stages of being public companies, and also have roughly one-to-one overlap of the products they offer with one or more of G Suite’s services. Dropbox has been public for several years, while Zoom went public in April and Slack is preparing to go public with a direct listing.
Here is a rough breakdown of the product overlap we considered:
- Google: Online documents (Docs), Video conferencing (Hangouts), text-based communications (Hangouts), Cloud storage (Drive), file-sharing (Drive)
- Dropbox: Dropbox Paper, Cloud storage, file-sharing
- Zoom: Video conferencing
- Slack: Text-based communications, file-sharing
While Google’s services are much, much broader than these specific products – Gmail is one of the most-used services in the modern Internet — Google’s business is still dominated by its search advertising. It’s made significant efforts to try to expand into enterprise products with G Suite as it looks to additional services that can grow beyond just search. Brex customers — predominantly early-stage startups based in the Bay Area — represent a cohort of Brex customers that may eventually grow into the Ubers, Facebooks and Microsofts of the world. As such, it’s a critical market that Google needs to retain.
Each company will look to incrementally improve its products, or add new ones, which could further exploit the shortcomings of larger companies like Google or Microsoft. The Brex customer overlap has remained roughly within the same range, which could indicate that Google’s products are compelling enough to keep Brex customers from opting to pay extra for additional potentially duplicative efforts.
The dominance of big tech platforms like Google and Facebook may have alarmed many — particularly in the consumer space — and raised fears that startups cannot compete with the internet giants. But the proliferation of Dropbox, Zoom and Slack among startups suggests that competition is alive and well in the B2B space.
Brex examined monthly spending data beginning in August last year, two months after the Brex corporate card launched. Account overlap is defined as the number of Brex customers that are paying for both Google G Suite and the services listed above each month. Slack’s overlap, for example, is the total number of Brex customers paying for both G Suite and Slack over the total number of customers paying for G Suite. Google G Suite, Slack, Dropbox, and Zoom are all broken out as individual expenses for Brex.
Brex is transforming B2B payments by creating financial products that are tailored to specific industries. In 2018 Brex launched the first corporate card and rewards program specifically designed for startups. By rebuilding the credit card tech stack from the ground up, Brex is able to reimagine every aspect of corporate cards, including underwriting, transparency and approvals, to create a radically better experience for customers. Brex has raised $215M in funding and is backed by Y Combinator Continuity, Peter Thiel, Max Levchin and more. The company’s headquarters are in San Francisco.
As part of its underwriting process, Brex maintains visibility into the spending of companies that use its products. Companies who asked that their data not to be shared were not used, and any company that does not wish to share its data for future aggregated analysis may request to exclude it from being shared in the aggregate.