Teams Now at 115 Million Daily Active Users
Teams grabbed the headlines in Microsoft’s FY21 Q1 results in the Microsoft 365 space with a 53% jump in daily active user (DAU) numbers from 75 million reported in April 2020 to 115 million now. Adding 40 million active users over six months is impressive. It’s even better when you consider that Microsoft boasted a 13 million number in July 2019 (Figure 1) when it announced that Teams usage had surpassed Slack.
Adding 102 million daily active users in 15 months is a great streak that’s come on the back of people needing to work from home and leverage features like video and audio conferencing more extensively. Satya Nadella said: “Microsoft 365 users generated more than 30 billion collaboration minutes in a single day this quarter.” He was talking about Teams at the time, but this might also include Skype for Business Online use. Another interesting data point is that Teams is being used by nearly 270,000 educational institutions for remote learning.
Microsoft has responded to customer demand by shipping a huge number of improvements and new features to make Teams more usable, to push the boundary to accommodate larger number of people on calls, and meet the needs of enterprises. Recently, Microsoft announced the intention to increase the number of members in a team to 25,000, up from 999 when Teams launched in 2017. Although the system sometimes shows signs of growth-created strain, Teams is obviously a huge success story.
Marketing drives demand, and in the case of Teams marketing the spend to help create the level of growth now reported has become so large as to be cited as a reason why operating expenses for the Productivity and Business Processes segment (Office 365, LinkedIn, Dynamics 365, and some other smaller products) grew 4% in the last quarter (Figure 2).
Slower but Profitable Growth for Office 365
At times you’d be forgiven for thinking that Office 365 revolves around Teams (successful marketing!). In fact, Exchange Online and SharePoint Online are still larger workloads and without these Teams couldn’t function. At the same time, a lot of SharePoint Online usage is driven by Teams and the way that every Microsoft 365 group is provisioned with a team site for members to store documents in.
Curiously, Microsoft didn’t update the Office 365 active user number. They did talk about growth in the number of Office 365 consumer subscribers to 45.3 million, which is nice, but it’s not related.
The last number Microsoft gave for commercial Office 365 usage was six months ago, when they changed the metric and said that Office 365 had 258 million paid seats instead of monthly active users. This time, we learned that paid Office 365 commercial seats grew 15% year over year (CFO Amy Hood clarified that the figure was for paid seats not usage in their analyst briefing). In October 2019, Microsoft reported 200 million monthly active Office 365 users. If usage tracks payments for seats, a 15% year-over-year gain puts the current number for monthly active users at 230 million (Figure 3).
If Office 365 has 230 million active users then Teams is now used by half that population, which is pretty staggering for an application launched in 2017.
Difference Between Paid and Active
The delta in the numbers between paid seats and active usage is large enough to make me think that:
- Growth is slowing in Office 365. Amy Hood noted that Office 365 now accounts for “over 70 percent of our existing Office commercial paid installed base.” If Office 365 is at 258 million paid seats, then the overall base is around 360 million, including the on-premises servers. However, the organizations which remain on-premises are harder to move to the cloud and many have good reasons to stay on-premises, so the easy pickings which once existed aren’t around any longer.
- Companies are being more cautious with software licensing. Layoffs and furloughs resulting from the pandemic allied to some company failures reduce the demand for Office 365 licenses.
For several years, Microsoft grew Office 365 active users at between 3-3.5 million per month. A 30 million uptick in a year is good, especially on top of a large base, but the growth rate is slowing to around 2.5 million/month. This might be why Microsoft was so reticent in reporting a new number. On the upside, Office 365 commercial revenue grew 21%, reflecting the continued success in upselling customers to higher priced licenses and to use add-ons like Microsoft 365 E5 compliance. Overall, Productivity and Business Processes delivered operating income of $5.71 billion and the overall revenue for commercial cloud reached $15.2 billion, or an annualized run rate of $60.8 billion. That’s three times the $20 billion target set by Satya Nadella in 2015 reached three years ago.
Tracking License Usage
Obviously, there’s a big difference between licenses sold and people using them to interact with Office 365. Many large organizations buy substantial numbers of licenses and don’t use them all, which is one reason why ISVs offer license management products to help companies reduce the number of licenses back to what they really need. While ISV products offer lots of features, our Graph-based usage analysis script can help find inactive accounts free of charge. Either way, eliminating a bunch of $35/month Office 365 licenses assigned to inactive accounts is a good way of boosting the bottom line.
Azure AD Closes in on 400 Million Monthly Active Users
According to Nadella, Azure AD has “nearly 400 million monthly active users.” As Office 365 users discovered with recent outages, when Azure AD has a problem, applications like Teams come crashing to a halt because users can’t authenticate. Let’s hope that Microsoft continues to work on bullet-proofing Azure AD to avoid recurrences of those incidents.
Chapter 1 of the Office 365 for IT Pros eBook is where we cover stuff like this. Things move so fast in Teams, Office 365, and Microsoft 365 that we republish the book monthly.