An observation on Zoom's ability to self-pro

This is a little thing but I thought I’d share anyway.

I just finished one of my many Zoom meetings today and went to close the browser tab I used to start the meeting earlier and I saw this:


Immersive online experiences are OnZoom

Discover, attend, and share free and paid events from experts in pilates, mixology, event management, baking, finance, and so much more.

[ Experience OnZoom ] <---- button


…I clicked it just to see what it’s all about. (Sent me to https://on.zoom.us/e/view if interested)

My point with this little anecdote is that Zoom has a powerful channel to advertise its own products! Think about the number of meetings - multiplied by the number of people - that happen all day every day, and they can directly show all of the people a value-added proposition (advertisement) for their other services. How much would a company pay for this amount of targeted advertising? The value has to be enormous!

This is an aspect of the network affect value I hadn’t really considered because we know Zoom has no interest in monetizing its meetings with outside ads, but that doesn’t mean they won’t do it with their own ads!

76 Likes

This really touches on something that has made me less bullish on ZM than I was when it was my majority holding. We know they have this spotlight while the virus rages and WFH is the norm.

This should be the time we see them doing DDOG/NET-style innovation, launching products, integrations, and utilizing self-promotion as you alluded to. However, I feel that thus far they have executed subpar, missing out on what I see as a huge opportunity.
I love Eric Yuan, his passion and customer-centric view, but they really need to capitalize on what is their moment in history.

As Saul said, they already conquered the world. They either have to leverage that for what it’s worth, or they become incrementally less exciting to me as an investor. My two cents.

7 Likes

"This should be the time we see them doing DDOG/NET-style innovation, launching products, integrations, and utilizing self-promotion as you alluded to. However, I feel that thus far they have executed subpar, missing out on what I see as a huge opportunity. "

I can’t see this view point. While I do feel an internal tug on my bullishness, especially due to the general bearish viewpoints expressed around here, which I greatly respect, I still can not share this view.

If you think they haven’t been innovating and adding products I think you may have missed a lot of information that has been flowing through this board. Look around their site. They have new products, new platforms, new verticals. Zoom Phone alone has grown into additional countries at a nearly alarming rate! They have managed to improve things while adding new things. So far Zoom has been innovative and on point. I see no reason to start questioning management’s vision now when seemingly everything is progressing.

They ARE cross-promoting right now. That is the point of my original post. I saw them doing it and thinking about the scale of the targeted audience is huge. To back that up, we just saw a press release that the expansion in Zoom Phone is going exceedingly well. This other platform of monetizable content is still small but is expected to grow, but that isn’t as interesting to me as the big communications solutions and how they attract new, or scale out to, enterprise customers.

There have also been several numbers-oriented threads recently. I don’t think they have taken over the world. Perhaps the minds of the world. I think that there is a saturation in perception rather than an actual percent of TAM. Also, I just saw a whole thread about DOCU (another big holding of mine) that showed an expectation of less growth than Zoom QoQ. I think DOCU is waaaaay closer to having taken over the world of signature then Zoom is to taking over the world of communications. This is why DOCU only takes up about 9% of my portfolio, while Zoom is at 15% (ZM was actually around 12% when I made the decision to hold), and I have been thinking about reducing DOCU a few % further if a need arises.

We’ve had Zoom management telling us all long to expect flat growth and they keep getting surprised by better than flat growth. If Zoom, at this scale, can continue to grow at pre-pandemic rates of around 13-17% QoQ, at today’s prices, I’m pretty darn bullish overall. The more negativity I hear out there the happier I get. I consider reducing my holdings around the New Year but the price had pulled back enough that I couldn’t ignore what I could only see as a bargain. The fact that I didn’t add to my position is as significant to the point though. If I was truly all bull, then I would have. I guess my point is I agree we should expect less growth and I’m looking at QoQ growth in revenue and larger customers as a way of ignoring the insane outlier quarters we saw recently because those don’t matter in the long run. The aspect of this I do think matters is that at this scale they should be able to capitalize on their brand and balance sheet to expand nicely.

Of course this could all be true and they could still not grow enough. Only quarterly reports (and maybe press releases) will tell. I’m hoping to see them continue close to the 50% growth range but we’ll have to figure out how that math works until we lap the outlier quarters for a true YoY comparison…until then we’ll have to lok at QoQ and perhaps model/simulate forward-looking YoY or TTM for now.

47 Likes