LOOM’s acquisition by Atlassian

Yesterday, Loom – a video recording app got acquired by Atlassian for a staggering $975 million. But, what seems like a simple “acquisition for distribution” isn’t one. The insight why Atlassian really bought loom for 👇🏼

For the record, this is Atlassian’s 21st acquisition so far. It’s biggest acquisition was Trello ($425 million) back in 2017. It’s been on a acquisition spree since then – most being smaller cheque sizes/ stock-swap deals.

Last night was different 💵
Atlassian announced the $975 million mostly cash deal to acquire Loom, a video messaging tool that helps you screen-record & send video message instantly. Their best product market fit is for remote distributed orgs – and for the obvious reason.

But, remote work isn’t growing 🤒
So, loom had to pivot into a new pitch – “With Loom, send AI powered video messages for your team & customers”. But, that’s not easy. Getting your customers to consume loom videos isn’t a easy adoption curve if it’s a standalone offering.

So where will growth come from? 💭
Enter the giant Atlassian – makes $3.5 Billion in annual revenues & has the perfect distribution. Atlassian has 882 enterprise customers that spend $500,000+ annually, up 44% from a year ago – that’s ~$440 million right there, friend.

For context, Loom’s 2023 revenue was $35 million or in other words 1/100th of the whole Atlassian world. Loom plugged into JIRA can be massive. Ask me “why”?

The JIRA ecosystem has one major problem. It does not have a video walkthrough feature. The Atlassian marketplace has a bunch of these free tools but the adoption is extremely poor.

Plus, JIRA is hard to adopt for first time users and especially for large organisations with hundreds/thousands of users. The native Loom record will solve 2 large problems.

First, Jira ticket description can be a video (eventually transcripts into summary/ action items and more).

Second, it will replace the scrum meetings that happen just to explain a ticket and align someone – considering loom has two way communication in terms of comments/ reactions.

But, is the $975 mil price tag too much? 🤐
I am no public market expert but distribution is definitely not the play JIRA wanted when it acquired loom. What Jira wants to do is offer the upsell on their existing $7.75 per Jira user pricing.

And it will use loom to do just that. Of-course the added adoption from first time JIRA users will solve account expansion and new revenue retention (adoption driving retention – classic).