Facebook entering Zoom's playground

Zoom saw a rapid turnaround intraday after reaching ATH near $180 and is now trading under $160 on the news that Facebook is rolling out a video chat feature.

https://seekingalpha.com/news/3564305-zoom-turns-negative-fa…

Zoom makes most its money from enterprise customers, and something tells me there are not many businesses that will be using Facebook’s videoconferencing as a tool to communicate. I personally see this news as immaterial. Taking this opportunity to add.

Would be interested to know if others view this any differently.

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I just posted the a very similar thread with the same article. I agree with business side, they won’t use FB, this is a market for families and perhaps very small businesses that use FB for marketing and such.

Think the market is overreacting.

LakeFisher

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I have seen this movie before. Couple years ago FB announced a dating service and MTCH dropped 15-20% in a week or so. It was a great time to build a position in MTCH which recovered to make new all time highs.

IMO, this is a similar opportunity for ZM investors.

  • Gaurav
    Long ZM
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Hmm … so my competitor is going to take away the unpaid traffic that is clogging my servers that my paid traffic relies on, right? Those dirty dogs :slight_smile:

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Zoom makes most its money from enterprise customers, and something tells me there are not many businesses that will be using Facebook’s videoconferencing as a tool to communicate. I personally see this news as immaterial. Taking this opportunity to add.

Zoom doesn’t have a sky-high P/S ratio because investors are expecting it to do well in enterprise videoconferencing. Investors are expecting it to become the next Facebook (or at least the next Youtube).

This, to me, just shows how easy Zoom is to recreate. I’m thinking their moat is more like an about-dried-up mud puddle.

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That’s definitely one of the bigger risks as far as I’m concerned with ZM, the barriers to entry are small. Zoom obviously has a much better product than anyone else today, but I just don’t see the moat or the real rationale for this valuation.

A friend asked me about the stock earlier today when it was closer to $180/share, and my response was that, even if I had the opportunity to buy it at $120 today, in a hypothetical world where I could only buy the stock today for $120 if I was required to hold it for two years before selling, I would not buy it.

By my math, even if Zoom increases revenue by 400% over the next year, and then increases another 25% in year 2 (keep in mind that incremental 25% would be more than last year’s total revenue), and another 25% in year 3, I still think today’s stock price is a lot higher than what I’d be willing to pay, as I expect other stocks will perform better over that 3 year stretch, even given those assumptions.

Besides revenue possibly not being as high as the market is expecting, I think additional costs related to all the free users could be more than anyone is expecting, when they report their next quarterly earnings.

But obviously I’ve been wrong about them in the short term so far, so I could definitely be wrong. Very curious to see what the numbers look like this quarter.

-mekong

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Enterprise videoconferencing is somewhere around a $6 billion industry. Zoom is already priced for dominating that industry. Any future price appreciation depends on growing that industry and/or somehow entering the commercial space. The more likely scenario, to me, is growing the TAM of videoconferencing in enterprise. But to do so means increasing the number of paying hosts who don’t videoconference already.

As for moat, zoom has already faced competition. They’re playing catch up now. To me the main concern is growing that TAM and I don’t see how we can get a clear picture of that right now when people are FORCED to communicate via tools like ZM right now.

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Hey Fools - remember when Facebook announced they were getting into dating, and Match Group’s stock instantly dropped 35% on the news?

Yeah. Me neither.

This drop is a joke.

Let’s get this straight. Zoom gets ripped to shreds over privacy. So everyone will use Facebook, a company with the worst reputation in history for abusing people’s data?

Pardon me, but get the **** out of here with this.

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This, to me, just shows how easy Zoom is to recreate.

Err, we have yet to see one minute of what the FB feature is like … quality, ease of use, flexibility, performance, etc. Given much of the rest of FB, my expectations are not very high.

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My two cents. This isn’t a moat issue. We had bad luck with Skype for Business so we switched to Teams. That is better but still people complain, so we are looking at rolling out Zoom. Already used it on a company-wide quarterly report with 3,5000 listeners.

Video conferencing is a network effect. I’m going to use Tool X because other people I need to collaborate with use Tool X as well. More people are using Zoom. Its going to feed the network effect.

5% of assets. Not selling. Might add.

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I don’t think FB is a serious competitor in this area, at least not for paid clients. A company is never going to use FB even if it’s free. They would want a secure, reliable connection that can host many people over possibly multiple sites.

WebEx has done that, but apparently Zoom is doing it better (or at least some of it better). I don’t think there is a moat around this. If someone comes along and does it even better, and cheaper, Zoom would be threatened. That’s the point I was trying to make earlier about innovation, and while I didn’t say it previously there is also a diversification of products. Zoom needs to innovate, to develop new features and a better experience before a potential competitor can do it. And ideally they need to diversify so they don’t have all their eggs in one basket (i.e. teleconferencing). I don’t know if they are doing that (they may very well be). But innovation is key in tech. Stop innovating and you’re inviting someone to come along, do it better, and eat your lunch.

Companies like Intel have huge moats because it costs a substantial fortune to build a sub-micron fab. Entry into that market now is almost impossible. Software generally doesn’t have that advantage, so you need to keep ahead of “the other guy”. Someone is always going to be nipping at your heels.

1poorguy

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Re: “My two cents. This isn’t a moat issue. We had bad luck with Skype for Business so we switched to Teams. That is better but still people complain, so we are looking at rolling out Zoom. Already used it on a company-wide quarterly report with 3,5000 listeners. Video conferencing is a network effect. I’m going to use Tool X because other people I need to collaborate with use Tool X as well. More people are using Zoom. Its going to feed the network effect.

Good points! Here’s another one, Facebook is going to be limited to 50 users… I’m betting that some of the smaller groups (elementary/high school classrooms, bible study, etc) are going to switch to it. That will only help to get some of the free customers off the Zoom network and free up bandwidth (if that’s an issue) for paying customers. I see this as a win for Zoom '-)

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Thoughts:

  1. Schools are not moving to FB (a social media platform where bullying can occur) to facilitate video conferencing between teachers and students. At least not lower than 12th grade…

  2. A relative uses Zoom to host MLM direct marketing “parties”… but 95% of her marketing is done via FB, to FB users. That is going to go away for Zoom, is my guess…

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My school district banned using Zoom with students due to the security issues. They would not move to Facebook because that is also banned. They use Google Meet instead because it is more secure and part of the Google Suite of educational tools that we use with students. I think this is probably true for many K-12 school districts.

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LONG on ZOOM here! And my intention is to stay LONG on ZOOM!

But, it comes across as a bit disingenuous or perhaps too much about “eating our own cooking” inside our message board echo-chamber if we are to discount, so quickly, the FaceBook news when we have been talking for the past 2 months about how ubiquitous Zoom is and will become. I and perhaps others have envisioned Zoom as being the dominant “go-to video conferencing tool” for the world; enterprises, SMBs, educational institutions of all sizes, organizations, non-profits, churches, synagogues, families and friends, etc. etc. etc.

So rather than be so quick to discount the “POTENTIAL” effect that a new market entrant will have on the addressable market share, an entrant that happens to be a goliath in social networking and just happens to have 2.45 billion monthly active users; we may want to take a deep breath and consider the consequences of a new market entrant of this size.

I don’t have thoughts beyond this at this time, because I am just finding out the news. I’m just pushing the “stop and let’s breath” button because my immediate reaction is to not be so quick to discount this so quickly as a Match.com dating situation.

Harley

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“I don’t have thoughts beyond this at this time, because I am just finding out the news. I’m just pushing the “stop and let’s breath” button because my immediate reaction is to not be so quick to discount this so quickly as a Match.com dating situation.”

Well that’s always been the problem with stock message boards. Unpopular to ever have a different view of the populous. I’m not saying I do, but I also don’t understand or see any clear path here to incredible profitability other then wild guesses

For instance, before this Facebook news, the consensus was “hey look at this incredible growth, 200 million, now 300 million, clearly some of these free users will pay and that’s going to add up”, to now “good riddance, I hope Facebook takes all those free users because it will free up much needed bandwidth for paying customers”.

You can’t have it both ways. If indeed Facebook, which isn’t some little start up, if they can actually come out with a competing product, it certainly doesn’t help Zoom. The other question is who’s next?

Something to take seriously IMO until Facebook proves otherwise.

TMB

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TMB…I think we are saying the same thing.

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  1. I still think ZM has the momentum in this space “Zoom-ing” and all.
  2. Facebook is at a disadvantage for ‘real’ business-- do you want to use your personal FB account, or have two FB accounts? “Neither.”
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I am long ZM. From what I’ve read, whatever Facebook is offering is not as flexible or sophisticated as Zoom, which offers breakout “rooms” for its meetings. That feature is quite valuable for teachers, business owners, religious organizations, etc. who want to create a more intimate or focused experience within a larger group event or online class. Anyone who has gotten a taste of Zoom’s features, and who needs a reliable video conferencing platform, is not going to migrate to Facebook. Plus, a lot of organizations, including schools, won’t use FB because they have a terrible reputation for privacy.

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I work at a large university and due to the pandemic, our institution bought enterprise licenses for approximately 40,000 staff, faculty, and students. The university tried other products, including go-to-meeting, and cisco web ex bought decided to switch to zoom due to the ease of use. When you’re moving to an all-online learning environment, they wanted to have the product that was easiest to use. My boss held a meeting with 50 people where we each shared our background, we did a poll, and we were able to vote on items using the Yes, No buttons.

Overall, people are stressed but I think they’re thankful that zoom has allowed them to connect easily. There was a scare about security but the IT department is confident in the changes Zoom made.

At our university facebook has a bad reputation. I’m hopeful that facebook will serve as sort of an alternative to Houseparty, not an alternative to zoom.

When I’ve talked with friends and colleagues, the only time zoom is not used is when they’re discussing HIPAA protected information, and even that is just occasional.

We looked into purchasing slack as a team and our IT department discouraged it citing some of Zoom’s new tools that resemble slack.

Just sharing my experience in the hope that it adds context and value.

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