Poll: ZM: What's a download worth?

[PaulWBryant]

Harley (https://discussion.fool.com/zoom-downloads-34453963.aspx) and Saul (https://discussion.fool.com/at-the-end-of-march-zoom-will-probab…) have both mentioned the 2 million+ daily downloads for Zoom, per this article: https://www.cnn.com/2020/03/27/tech/zoom-app-coronavirus/ind…

This is incredible, and of course obviously great for ZM, for several reasons. As many have mentioned, Zoom has gained infinitely valuable recognition over the last several weeks. Also, these downloads could even be potential customers – users that could one day pay for the service (following a “freemium” model a la Wix). But how many?

What we don’t know is how many of these free users will buy $15/month subscriptions to Zoom.

Some of the 2 million will just download it because of the hype never even open the app (I know because I’m one of them).
Some will probably open it, maybe even have a chat or two, but not use it much.
Some will probably continue to use it regularly, but not for business.
Of the few who have a business need, many can get by with just 40 minute sessions, and so they never have to pay.
And lastly, some will subscribe.

So let’s crowdsource a guess: roughly how many downloads do you think will convert to $15/month subscribers?

• 1 in 10,000
• 1 in 1,000
• 1 in 100
• 1 in 10

[VitamanD]

I think there may be a tense issue in some cases…

Many people in universities were given professional accounts as a result of this outbreak (in my university they were previously charging faculty $8.88 for a zoom pro account, now those of us that are teaching this term have been given free pro accounts). All students were also given zoom pro accounts… the question at hand for us is how long will we get to keep our ‘free’ pro accounts.

Will be interesting to see whether new price points are offered to retain people that enjoy having these additional features once things open back up.

[Soludag]

Exactly.

Questions are:

• What percent of downloads lead to a paying subscription (now or when all those students enter the workforce with positive ZM experiences?)
• What % of the revenue jump turns out to be sustainable 2, 4 or 6 Qtrs from now?

I’ll toss out a few other questions to consider:

1. All this video calling is changing expectations for communication. For personal communication will this forever change our preference to video if that capability is easily and freely available? How does ZM monetize the free users?
2. I’ve used web conferencing software for remote client presentations and webinars for the last 15(ish) years. However 99% of that usage was screen sharing with audio - adding video capability to the call or presentation was very very rare. Will this experience change that dynamic and does it favour continued usage of ZM?
3. Has ZM just become the first global video telecom network? So, the new ATT/VZ/T-Mob/NTT etc on a global scale?
4. Is the significant development component from China a security concern - I think of concerns over 5G and do they apply here for businesses and gov’t?

Sadly, no ZM at this time.

[mooo]

I am working in online marketing, the product is an app, my job is to generate signups for this app.
The funnel usually looks like this: Visit Appstore → Download App → Install App → First App Open → Start Signup → Successful Signup → Upgrade Account to subscription.
There are mobile measurement tools like adjust. These tools are integrated into an app via an SDK to attribute the user to a source where he came from and to measure inapp activity.

It also tracks the “First App Open”. This is important, because if the app is being opened, the user can be re-targeted by ads to turn him into a user if he doesn’t signup right away.
Before that step (First App Open), an install and download of the app is worth almost nothing. Here it comes down to how many people are not bouncing after downloading or installing the app.
In the case of ZOOM you don’t even have to signup, you can just join a meeting via a meeting id.

Keep in mind: Here we are only taking about the mobile App. I think most of the paying customers (companies) will be generated through the desktop app/browser, which most of the companies use, right. Individuals are downloading the ZOOM app now to call their friends/family, not only companies.

So let’s assume ZOOM generates about 2.000.000 downloads per day.
Let’s assume 50% of the downloads open the app (1.000.000).
50% of the 1.000.000 users who opened the app, don’t use the app at all / close and uninstall (500.000 left).
50% of the 500.000 users who use the app, only join a meeting (250.000 left).
50% of the 250.000 users are starting to signup but don’t finish it (125.000 left). A conversion rate of 50% is really high, but the ZOOM signup funnel is basically only one screen with email-adress, First Name, Last Name. So 50% is realistic in my opinion.
5% of the 125.000 users who signed up, might upgrade to a paid subscription. I read before, ZOOM is able to convert 20% of their users, but in these times where basically every individual is using it and won’t upgrade to a paid subscription, I just assume a conservative number of 5% (6.250 users).

This means 6.250 users of 2.000.000 downloads become paying customers, which is about 0.3%, or 3 in 1.000.
I assume the final conversion rate of 0.3% will increase above 1% if downloads decrease.

About calculating revenue based on these numbers: I don’t know if you can just calculate $15 per user. But if, then a few 1.000 users per day might become $2.800.000 per month via the mobile App (62503015).

I might be completely off though. All of this is just guesswork of course, but because of my experience in this industry, it can help to have a rough idea.

[Pono]

With respect to Zoom, I work at an extremely large financial institution. We had been using a different video product. It didn’t work well before, and it worked horribly over the last few weeks. So, the business has moved to Zoom for meetings. I’ve downloaded it on my virtual desktop and on my Iphone. On my business app I have a login number and ID when I initiate calls. I assume that means my company has an enterprise subscription for Zoom now. That’s potentially thousands of new users - we’d be a new top tier client.

With respect to Slack, I recently tried to get it added as a solution. Unfortunately, my firm uses a product that many financial institutions use (and I believe have invested millions in). I downloaded it before (when I was one of the first group of employees to implement it), but I since deleted it because it was not user friendly, useful, or reliable. It was just annoying. Lately, the business is pitching that product to a wider audience. I asked to add Slack instead, but was denied and told to use the other product. We will see if that changes in the future.

Mike

[PaulWBryant]

This means 6.250 users of 2.000.000 downloads become paying customers, which is about 0.3%, or 3 in 1.000

Fantastic stuff, Mooo, thank you! So let’s say they convert somewhere between 0.1% and 1% of downloads to paying subscribers.

If 1% (more than 3x Mooo’s estimate) convert, that’s 20,000 * 15 or $300,000 in monthly revenue, or $3.6 million annually. That’s a good day! But how many days would they need to keep it up to really move the needle? In just March alone would have added over $100 million of annual revenue but remember that’s only $25m for the quarter). I don’t this is likely, but I’m trying to set a total upper bound of how good this could be for them.

If it’s only 0.1%, that’s only $360,000 annually, so even if they do it for 365 days in a row, 730 million downloads, it’s $131 million annually (vs $623 million of revenue in 2019), so not really a needle mover.

When Saul says:

3. They had $188 million revenue in their December quarter.

4. I’m not estimating that having eleven times as many customers will give them eleven times as much revenue although logically I could hope for six or eight times, but let’s say they just have three times as much revenue as in December.

5. Am I being too conservative? I’m trying to be

6. Three times $188 million is $564 million. That’s a run rate of two and a quarter billion dollars of revenue, and with continued growth during the year, and based on the assumption we were using, their yearly revenue would probably be over $3 billion.
https://discussion.fool.com/but-do-you-really-think-zm39s-market…

…I think the exuberance is really getting out of control. So I’m just trying to stay grounded in regard to what we can possibly expect. Obviously this is great for Zoom, and they’ll benefit from the exposure in a big way. It’s just that when it comes to actual revenue in the short term, I don’t think they are going to suddenly have 3x or 5x or 10x as much revenue in the coming quarter as they had last quarter.

And just like these iPhone users, I also don’t think large corporate accounts will suddenly triple or better. Thousands (even tens of thousands) will sign up, but only a small percentage of them will ramp into $100,000+ per year accounts, and they will do so over time (maybe after a discount or free trial period for a couple months or quarters).

The last 4 quarters revenue has been:
122m
146m
167m
188m

I think they see a huge bump to maybe something around $300 million in the next Q (or more likely the Q after it), but not anything close to $564 million. That’s me making a prediction, but only time will tell.

Bear

[mooo]

Hey Bear,

I would like to add something. What we just don’t know, how many of these downloads are from employees of companies, which just got a subscription for ZOOM.
So if a lot of companies are subscribing now, and the majority of downloads are from their employees, then it could move the needle more than if the majority of downloads are from individuals, who will never pay. Many companies also pay more than $15 per month, I guess.
I don’t have any clue if and how many employees are using the ZOOM mobile app for business purposes.

We will find out at the next ER.

mooo

[utahchris]

Just one data point. I work at a technology consulting firm in the USA with several thousand employees. Teleconferencing has always been common, though using the video feature was not used that much - mainly the calls were just for voice and sharing a presentation with very occasional video.

Now however since we are 100% remote, the company has asked that we always use video, to try to increase engagement and sense of team. And we are complying. And frankly to some degree it’s working. This has increased the importance of the video features.

Now onto the products…

When interacting with a client, we use whatever our clients use. And for internal purposes we use Microsoft Teams. Teams is a good service and has served us well.

But there are limitations. 1) It has a cap of 250 members per call, at least the way we had it implemented. We didn’t know this and hosted a very large internal call last week and it was an issue, as after 250 people the options were to dial in using a phone to do voice only or watch a recording later. The subsequent large calls I’ve been invited to at our company have been hosted on Zoom. My guess is we’ll keep using Teams generally, just not for large sessions, due to the file sharing/news feed features.

Also, in Teams if you have say, 50 people on a video call, only the 4 most recent speakers are shown in video. That works fine. However In Zoom it’s 25, and you can page through grids of 25 at a time if you want to see everyone. We had a call on Friday with just about 75 people, and to be honest it was pretty fun. Several people had clever custom backgrounds, which are easy to upload, and during the call you could 1:1 chat someone pretty easily on the side just by clicking their picture. Watching the reactions of 25 people to what is being said/shown definitely adds to the experience of the meeting. Also the atmosphere had a certain levity to it I didn’t anticipate.

Do I think my company will keep using Zoom for larger calls? Yes. Do I think we will pay for the privilege? Yes. Do I like using Zoom? Yes.

[mschmit]

I think the poll question is the wrong question.

Last year the market for paid video conferencing was $X.
By Q3 or Q4 of 2020 what will be the TAM? 1.5X, 2X, or what?

I don’t use Zoom at my company (we use Skype and Teams). I’ve used Zoom a few times.
But in the last 2 weeks I have seen Zoom mentioned about 50 times in mass market newspaper articles, TV news, business emails, etc. I’ve seen Teams mentioned maybe 5 or 10 times. And nothing else except Facetime. Zoom is clearly positioned to take mindshare from those who were video conferencing naive before this year.

Mike (owned ZM since last summer)