How I Learned to Stop Worrying and Love the Zoom

[BobbyBe]

My school just began its school year. We are entirely distance learning and all teachers are using Zoom. Last year, after going into lockdown literally the day after we had a meeting to discuss the possibility of maybe going into lockdown at some point in the future, half the teachers were using Google Meet and the other half were using Zoom.

Now we are all on Zoom, and its very evident how much Zoom blows Google Meet out of the water. Breakout rooms, and screen-sharing are enabling me to create rich learning experiences. Within my account on the Zoom website I can create a nickname for my personal room. All teachers create their nickname with a set format, so students are able to just type their teachers name/our school initials into the url to access their teacher’s rooms - super easy for students. I can take attendance using meeting reports. I can record what I am presenting for students who might be missing class, and I can record PD presentations for other teachers.

The functionality is just amazing. Zoom is so far beyond Google Meet, its not even funny.

My wife also has a Zoom account. She has an NGO that she started last year. She conducts a lot of training for facilitating women’s empowerment, especially within a development context. She is in the process of transitioning her online training to a digital format. She has her own Zoom account and it has enabled her to keep working and accelerate her organization’s growth during the pandemic. Her network is very large and she works with lots of independent contractors, small businesses and enterprises.

I asked her yesterday, “Do you think that eventually Zoom will have more subscribers than Netflix?” She answered with a definitive yes. Netflix has 182.8 million subscribers. Zoom’s basic plan is $15 per month. I don’t think its too far off to imagine that in the future everyone will pay for their personal Zoom room as a matter of course just as they currently pay for their phone line. I think my wife is right on.

Napkin math here: $15 per month x 12 months x 182.8 million subscribers = 32.9 billion dollars in revenue. Zoom has great profitability and will support a high multiple even as a mature company. At a P/S of 10, Zoom would be a 329 billion dollar company. The currently have a 69.24 billion dollar market cap. In other words, there is still plenty of growth yet to come.

I’m off to buy some shares.

[Hawkwin]

Zoom’s basic plan is $15 per month. I don’t think its too far off to imagine that in the future everyone will pay for their personal Zoom room as a matter of course just as they currently pay for their phone line. I think my wife is right on.

I think that is a bridge too far.

I hosted a [free] Zoom call on Tuesday for about 8 people. One of the first things I did when I was done with the call was to delete the app from my phone. No way am I going to pay $15 a month for something I might only use once a month (and would not use at all if not for Covid). If Covid keeps me from hosting that same meeting in person next month, I will download the app, run the meeting, and then delete the app again.

As easy as Zoom is to use, I find little about it that is “sticky.” Instagram, Facebook, TikTok, Twitter, even Netflix all have something that makes them at least a little bit sticky if not a lot sticky. What is sticky about Zoom? Are there things that about it that make it sticky for the personal end user that would turn them into a subscriber?

Hawkwin
Who previously owned and sold out of Zoom with a nice profit (albeit too early), but struggles to see how this is anything special absent Covid.
And, who did not have a subscription to Netflix until Covid, but is likely to keep that post Covid.

[fdoubleol]

I hosted a [free] Zoom call on Tuesday for about 8 people. One of the first things I did when I was done with the call was to delete the app from my phone.

If Covid keeps me from hosting that same meeting in person next month, I will download the app, run the meeting, and then delete the app again.

As easy as Zoom is to use, I find little about it that is “sticky.”

Hawkwin, isn’t this the very definition of sticky? You personally download the app, delete it, and then download it again. Why on earth would you keep downloading Zoom instead of Duo, Houseparty, Skype, and so on.

Maybe because it’s sticky?

And yes, just because you don’t pay the $15/mo doesn’t mean others aren’t. There are plenty of anecdotes on this board about how Zoom has massively transformed their small business, as well as all the corporate use cases.

Chris

[1poorguy]

Hawkwin, isn’t this the very definition of sticky?

Not Hawkwin, but I don’t think so. Well, maybe sticky like a post it note. I’m actually surprised he doesn’t use Duo (if on Android). It’s free and part of the included Android apps. And it works just fine. The uninstalling seems like unnecessary hassle to me. I wouldn’t bother if I had to do that. Just use Duo and be done with it.

[AThinkingFool]

I think that is a bridge too far.

I hosted a [free] Zoom call on Tuesday for about 8 people. One of the first things I did when I was done with the call was to delete the app from my phone. No way am I going to pay $15 a month for something I might only use once a month (and would not use at all if not for Covid). If Covid keeps me from hosting that same meeting in person next month, I will download the app, run the meeting, and then delete the app again.

While I wouldn’t necessarily compare Zoom’s opportunity to Netflix subscribers, we are talking about different target markets. Zoom’s target market are truly Enterprise customers, at least in the near term. Non Enterprise customers made up 30% of Zoom’s revenue in Q1 (up 1000 bps sequentially) - THIS will be most likely to churn post Covid. However, you and I are not in the demographic who subscribes to this fee in the first place, and the ones who do may well still find more value in subscribing (as plenty anecdotes on this board attest to).

Businesses are a different kettle of fish, and the revenue is sticky. As we have seen with multiple use cases ranging from e-learning, law courts and working from home, businesses are unlikely to unsubscribe from Zoom once they have discovered the benefits of these.

Zoom’s key Enterprise customer facts:

• Number of customers contributing more than $100,000 in TTM revenue up 90% year-over-year
• Approximately 265,400 customers with more than 10 employees, up 354% year-over-year

As easy as Zoom is to use, I find little about it that is “sticky.” Instagram, Facebook, TikTok, Twitter, even Netflix all have something that makes them at least a little bit sticky if not a lot sticky. What is sticky about Zoom? Are there things that about it that make it sticky for the personal end user that would turn them into a subscriber?

What makes Facebook sticky? 1. It’s brand, 2. it’s number of users, 3. the fact that it’s a verb. Could you not say the same for all three things about Zoom? Nothing about Facebook’s technology is inimitably better than other social networks, and yet it emerged the winner over rivals like Bebo and Myspace and many others along the way. What made Google better as a search engine than Yahoo, or AskJeeves or Bing? And what makes Zoom better than all the rest that came before it? Zoom’s moat is its product, its brand and its customers - and the relationship is symbiotic, one drives the next.

Zoom was a market mover pre Covid. Covid has both supercharged the company’s short term and long term prospects. It is a mistake, in my opinion, to put Zoom’s success merely down to the outbreak of a pandemic, and that once over so will it’s potential dissipate. After all, why was it Zoom and not another video conferencing tool that was the BIG beneficiary of Covid in the first place?

And perhaps even yet we are being short sighted. If Zoom is successful in the ‘land expand’ in the next few years, who’s to say that video conferencing is their total addressable market in the end game? What put the stoppers in Amazon from developing from an online bookstore into the beast it is today, or Google from a Search Engine to a giant with its hands in every pie. Perhaps one day Zoom could be the cream rising to the top of the virtual world, perhaps not - for now it just needs to execute on its current opportunity.

Remote working is its infancy and so is the potential of e-learning and just about anything that video conferencing can do. This is part of a global paradigm shift - ask yourself how do you visualise people working 10, 20 years from now, and perhaps the answer will become clear to you. A flexible, work from home future, enabled by tech (AI, VR & video conferencing at the forefront). What this pandemic has done is bring this future 10 years forward. At the beginning of Covid (and before finding this board), I too was a Zoom sceptic. But that’s because I didn’t understand the company or its opportunity properly.

The future is virtual and Zoom is in a good place in this moment of time to capitalise on it and to be at the forefront. These statistics, PRE Covid, provide some remarkable evidence of this shift. Now imagine the supercharge that Covid has had on them (I would like to see these updated this time next year):

https://skillscouter.com/work-from-home-statistics/

If you were to only pick just one statistic from the study, mine would be “82% of workers would like to work from home at least one day per working week”. Simply, supply follows demand.

And yet Zoom’s future is not guaranteed. It needs to continually innovate, improve and focus on its vision to put the customer first, to make sure that it is the product of choice - this is what makes its revenue ‘sticky’. My bet is that it will.

[Hawkwin]

Hawkwin, isn’t this the very definition of stick? You personally download the app, delete it, and then download it again.

No. Sticky would be converting me into someone that uses it for free into someone that depends on it as a paid subscriber. I am a freeloader. It would be different if Zoom was making some add revenue off me, like other free platforms do but I am not aware of any revenue stream based on such. I am open to being corrected.

Zoom has massively transformed their small business

In compete agreement. That doesn’t mean the end user (e.g. someone other than the host) has a high dedication to it.

[Hawkwin]

What makes Facebook sticky? 1. It’s brand, 2. it’s number of users, 3. the fact that it’s a verb. Could you not say the same for all three things about Zoom? Nothing about Facebook’s technology is inimitably better than other social networks, and yet it emerged the winner over rivals like Bebo and Myspace and many others along the way. What made Google better as a search engine than Yahoo, or AskJeeves or Bing? And what makes Zoom better than all the rest that came before it? Zoom’s moat is its product, its brand and its customers - and the relationship is symbiotic, one drives the next.

What makes Facebook sticky is its community. You can be in a spider-web of interconnected interest groups. That is not easily duplicated outside of Facebook. Same could be said for Tiktok, Intagram, Twitter, etc.

You don’t have that with Zoom. You open yourself to public participation at your own risk, as we have learned.

Additionally, you mention Google but it is a free service for the end user. Google gets their revenue from advertisements. That is not the revenue model for Zoom. If the OP thinks that Zoom is going to have a subscription model anything like Netflix, then there is going to have to be a reason for people like ME to pay $15 a month. Can you think of one? I can’t.

None of that is to say Zoom has anything wrong with their business model. What they are doing is clearly working but I think there is some irrational exuberance in thinking they are going have a participant subscriber base for people that either don’t host meetings or don’t host them with any frequency. There is just no current reason for anyone to pay anything if you are not a regular host.

If you were to only pick just one statistic from the study, mine would be “82% of workers would like to work from home at least one day per working week”

I don’t doubt that statistic at all. But, I don’t think that necessarily translates to a correlating increased use of video chat. I worked from home for three months and had the ability to use Zoom with my clients (corporate approved) and I did not use it once. People preferred a phone call over video chat even when I offered such. I assume because they didn’t want to have to make themselves “presentable” if they did not have to and no reason to download the software for something that could be done over the phone.

[eaglehaslanded]

Looking at the notion of sticky, right now, I deal with zoom in several ways.

1. Both of my kids are attending school via zoom.
2. All Texas state courts–trial and appellate–are operating via zoom.
3. All federal courts in this area are operating via zoom only.

For brief criminal appearances (initial, arraignment, plea), its probably cheaper to pay zoom than it is to transport defendants from jails to court. This may result in long term usage for these purposes.

These are sticky gov’t contracts. Gov’t rarely move away from things that work and have worked out security issues. They are not extremely price sensitive. Even without the pandemic, I suspect that courts and out of town lawyers much prefer video conference to phone appearance. So the state and federal courts’ zoom contracts may be extremely long term.

I have some web meeting service bundled with my office hosting provider. I dont even remember what it is. Anymeeting, maybe? I can use skype and other systems. But if the courts use zoom, them I am going to use it. So I am going to hast client meetings, etc., with it.

It’s the same reason I’m stuck with an Iphone. So long as that’s what my wife and kids have, there’s quality of life; imessage, facetime, find my iphone, and that’s where the bought songs and apps are. I’m stuck.

[stocknovice]

No. Sticky would be converting me into someone that uses it for free into someone that depends on it as a paid subscriber. I am a freeloader…I am open to being corrected.

You seem to be arguing the definition of stickiness is whether Zoom can convert YOU into a paying customer. It’s not that binary. There are many others who WILL be converted even if you decide not to pay for the service. To your point, that conversion rate clearly matters in determining Zoom’s success. My guess is those who hold it are banking on conversions being higher than the 0% your sample of one suggests.

Please don’t take my comment personally. It is only an effort to balance your 5-foot view with a 5,000-foot one. A huge part of Zoom’s thesis and current valuation is based on the company converting free into paid and hopefully into enterprise. On that I believe everyone is in agreement.

[AThinkingFool]

Some fair points, but my perspective:

What makes Facebook sticky is its community. You can be in a spider-web of interconnected interest groups. That is not easily duplicated outside of Facebook.

But is that really what made Facebook the winner it was? I remember when it first came on the scene, it was initially reserved for university students (my brother had access but I was still at school). People didn’t use it because it was a community, it developed into a community because everyone used it . People used it because their friends did, their family did, every man and his dog did. And why? In my opinion because it offered a better user experience than other social networks at that moment in time, and it maintained that advantage. And once everyone uses it, it’s very hard to get off it. Zoom is now at the early stage of every man and his dog using it, it offers a better experience than other video conferencing tools, and its innings are just begun in this respect.

That is not the revenue model for Zoom. If the OP thinks that Zoom is going to have a subscription model anything like Netflix

I agree, I would not personally compare it to Netflix. But that’s not to say that non-Enterprise customers won’t continue to pay for it.

I don’t doubt that statistic at all. But, I don’t think that necessarily translates to a correlating increased use of video chat. I worked from home for three months and had the ability to use Zoom with my clients (corporate approved) and I did not use it once. People preferred a phone call over video chat even when I offered such. I assume because they didn’t want to have to make themselves “presentable” if they did not have to and no reason to download the software for something that could be done over the phone.

I mentioned in a post a couple days ago, I don’t personally use the video feature on calls often, but it is simple to turn the video off which is surely a better experience than using a mobile device, and enables screen sharing etc. Not to mention any calls which aren’t 1 vs 1.
Even so, features will be (and are) developed that might encourage people who don’t feel presentable, see my post:

https://discussion.fool.com/zoom-new-features-and-innovation-345…

[Hawkwin]

1. Both of my kids are attending school via zoom.

Your kids use it for free.

2. All Texas state courts–trial and appellate–are operating via zoom.

OK, but the end user is not paying a fee. The host is, not the participants.

I will remind folks of the original claim in the OP as I think the argument has wondered a bit:

I don’t think its too far off to imagine that in the future everyone will pay for their personal Zoom room as a matter of course just as they currently pay for their phone line.

Can anyone elaborate on why they think everyone will pay $15 a month, $180 a year, for their own personal Zoom room?

[Hawkwin]

People didn’t use it because it was a community,

We are off on a tangent but actually people used Facebook specifically because it was a community.

The original name (“Facemash”) literally comes from the idea that it was created to allow students at Harvard to rate the attractiveness of other students in a head to head competition. It was a social network from day 1.

If Zoom wants to turn itself into a social network that generates add revenue, they might be very successful…

But, that still has no comparison to the OP claiming that people would be willing to pay $15 a month for such a service (something no one does for Facebook, Instagram, twitter, etc.).

[RafesUserName]

I loved reading the list of benifits being noticed for education! having taught myself in Singapore where I had a hard time with names I can appreciate easy roll call! Having recording for those who miss class would be really great!

Most of my thoughts below are a summary of key points already mentioned so I’ll try and distill as well as add.

Not a NETFLIX
Zoom is for ENTERPRISE. Individual users are great but almost a cost-leader. Most will remain free users. I only watch customers with 10+ users (since that is the smallest business-only customer cohort they report, but note that there can still be LOTS of smaller business this misses and I think those will make up most of the longer term subscribers in the “individual” user numbers.)

“Sticky” is not “Moat”
“Sticky” is getting close to becoming a synonym for “moat” in this thread. Sticky is all about barrier to switch away from a company’s products.

The only reason I still use Facebook is because others I know are there. The network pulls me back in making them sticky. Google search is not sticky at all as an individual user, it is just what is mostly used and works well; it is there so I use it. GMail and GoogleDrive on the other hand are sticky because my data is there. I could start using a new service but I would have to migrate old things which is not very easy at all with these services (ever try to take a 100+ GoogleDocs to another format, like PDF or Word? It isn’t easy)

What makes Zoom sticky is that it is integrated in to companies at various levels.

Zoom is lightly sticky because

• teams get used to it
• it has features that others don’t have, but could replicate in theory.
• It is lightly integrated in to things like calendar events which would all have to be updated. Etc.

Zoom is very sticky because

• Zoom Rooms gets used/installed in to physical meeting rooms. Some equipment can be used with other services but it still takes more effort than you think to switch, including security/firewall integrations and such.
• A partial remote workforce needs to communicate with those in the office meaning more security/firewall integration, installing on multiple computer and mobile operating systems, etc.
• HaaS users would have to get new hardware (perhaps by purchasing outright adding capex), making this new offering great for Zoom’s stickiness!
• Zoom Phone, which is a sticky service itself but is also an integration with Zoom Meetings
• Apps marketplace adds snap-on and deeper integrations that are Zoom-only and would also need to be given up or rework if switching. E.g. integration with Salesforce, Zendesk, so many more.
• General API integrations or embedding of Zoom platform tech. This is the stickiest of all.

…I think you can see why Zoom is very sticky to Enterprise customers and why individuals with more options and no integrations are not as attractive from a business standpoint. This is also why I really only see MS Teams as a real competitor. The rest is noise to me.

[Hawkwin]

Nothing wrong with that but I pretty much stopped reading further after that.

LOL! OK, I hope you realize that increasing your subscribers can only come from either freeloaders or non-users. The opinion of such should be VERY important to Zoom stockholders (at least as it pertains to the theory put forth in the OP).

Perhaps I should do a poll of Zoom stockholders and see just how many of them are paid subscribers. My guess it is not a large percentage.

Hawkwin
Who made a ton of money on AAPL over the past decade but never owned an AAPL product. Who also made a bunch of money on and still owns LVGO, CRWD, TTD, OKTA, etc. etc. but never paid for their products either. Freeloader proud!

[Hawkwin]

Not a NETFLIX
Zoom is for ENTERPRISE. Individual users are great but almost a cost-leader. Most will remain free users…

I think you can see why Zoom is very sticky to Enterprise customers and why individuals with more options and no integrations are not as attractive from a business standpoint.

In complete agreement.

[Tamhas]

There is an interesting thing about anecdotal reports of being impressed with or being unimpressed with Zoom use. The former can help us understand the possible attraction and/or the differentiation from other products. The latter, however, don’t tell us a lot because both are just anecdotes, not surveys. It isn’t necessary for Zoom to dramatically appeal to everyone, just lots of people. Indeed, it doesn’t need to appeal to everyone right away, just enough to keep them growing rapidly. The person unimpressed with Zoom today, perhaps because of limited occasions to use, may become a big fan at some later date when the culture shifts to make it more common.

E.g., we used it a couple of times in the beginning of this mess for small wine tasting events. With the warmer weather we have shifted these to socially distanced outdoor patio events. But, hey, winter in Illinois is not a time for a patio event!

[sstaylo]

The Pandemic and WFH movement have opened corporations’ eyes to the cost savings that can be achieved using cloud software including Zoom. Think about it - if companies can reduce their commercial real estate footprint then they save on rent, utilities, and office supplies which are now being paid by their employees who are working some or all of the time at home. Their employees are happier (usually) and actually work more hours/week since they are not commuting.

Then add on the cost savings of greatly reduced business travel (since they can conduct routine business via Zoom or other videoconferencing software) which isn’t just the money they spend for lodging, food, and transportation, but also includes the opportunity cost of lost productivity during travel days.

Some companies in expensive areas like NY, SF, and Seattle will also save additional money in reduced salaries for remote employees who can work anywhere and not have to pay expensive living costs in these really expensive areas.

These savings can easily add up to Save a company many millions per year, which should far surpass the cost of enterprise Zoom licenses they would need to spend for each employee. I don’t think we are ever going back to the “old way” of doing business.

Even small businesses are surviving the pandemic using Zoom and its competitors where they may have had to declare bankruptcy without this option. My wife owns a small healthcare company and they were able to quickly pivot to telehealth to avoid layoffs and minimize the lost business. The $100/month she spends for her corporate Zoom license is worth 100 times as much in revenue that would have been lost each month starting in March.

If we agree that videoconferencing is a “killer app” that companies can’t live without, then the question becomes which companies will win the war for revenue in this market. It will never be a true winner-take-all market, but with a huge TAM and the laser focus on making the best videoconferencing software that Eric Yuan and his team at Zoom have compared to Google and Microsoft, I for one like Zoom’s chances to continue growing revenue for years to come even after vaccine(s) allow us to return to a more normal lifestyle.

I am personally very bullish and long Zoom. They don’t need to have individuals paying $15/month to increase revenues at the rates we have seen this year for years to come. I think they are just scratching the surface of potential customers (e.g. education, legal, etc) that never would have been considered as potential customers just a year ago.

Cheers,
Steve

[Smorgasbord1]

What makes Zoom sticky is that it is integrated in to companies at various levels.

How hard are these integrations? I don’t believe they’re hard to do - certainly Zoom tries to make that easy and I’m sure Microsoft and Cisco also try to make that easy (and in the case of Microsoft, integration is practically built-in to Office 365, which the vast majority of companies use). And don’t all support integrations with Salesforce, etc.?

The last company I worked at used WebEx. We hated it. Many of the other supplier companies we dealt with used Skype or GoTo Meeting. Skype was the worst, but my point here is that depending on who would host the meeting, we used various video conferencing software. I think my company could have switched from WebEx to MS Teams or to Zoom with very little effort.

So, while I’m expecting great things from Zoom, I don’t believe it’s sticky.

Yeah, maybe if you purchased the hardware option you’ll stick with Zoom, but in general for most companies, I don’t think a video conferencing solution is any stickier than the fixed-length contract that was signed.

[SaulR80683]

Okay, there are now 20 posts on this thread, and three since I asked it be stopped. Further posts will be deleted unless there is something extraordinarily useful about them.
Saul

[MonteWagAZ]

I work closely with a company that provides enterprise data management solutions for school districts around the country. We are basically the ERP for student and instructional data management within a school district. Our users are teachers, school and district administrators, parents, and students. In my role, I work very closely with these districts for a year at a time as they are implementing the new system.

Lately, I have been polling informally on the approach these districts will take to instruction as the upcoming school year gets rolling. These customers are scattered all around the country, from California to Florida and Maryland. And they range in size from very small districts to a couple that are top 15 largest districts in the country.

Each and every district are adopting Zoom as their platform of choice for their remote learning deployments. And, more importantly, we have developed an embedded integration between the instructional components of our ERP solution and Zoom. That’s an example of stickiness.

Avid Saul reader and appreciator, first-time poster.

Long ZM, CRWD, DDOG, FSLY, OKTA, PINS (yes PINS), and a handful of others not mentioned in these parts.

Wag