12X…perhaps you are correct; however, perhaps we are just talking past one another. Perhaps the difference lies in our discussion that is not addressing one-sided network effect vs. two-sided network effect.
As it relates to WhatsApp, Skype, InstaGram, TikTok, Zoom, etc. it just does not make sense to say “an additional user of the product or service provides no value to that product and the users of that product” (which is in essence the definition of network effect).
What value would an InstaGram account have to you if the network was limited to just you and your sister on the InstaGram network…it might have some, but the value increases for you with each friend, family member, former classmate, etc. that joins the product network which allows you to expand your network. The same with Skype, Zoom, etc. The same argument can be made for Zillow…what value would the network have to you if the network consisted of one buyer (you) and one seller…Match.com; what value would the network be to you if it was just you in Maryland and a compatible match in California?
I could continue to expand on this thought, but it is just so clear to me that I don’t think it warrants further explanation.
Zoom has a network effect…value is added and value expands with each additional Zoom user added to the network whether they are paying members or not.
All this focus on paid users and enterprise customers is warranted in terms of money flowing to the bottom line, but it ignores the very powerful effect of huge numbers of people who are being exposed to Zoom, whether for work or not, and then, even if they go back to the office after this is all over, and corporate tries to get them to use another product which does not work as well, there can be a strong push to convert to Zoom. Plus, I expect that lots of people will not go back, at least not full time. Plus, lots of small businesses are discovering ways to deliver their services without being in person and that may continue as well. If a very large part of that new usage is happening with Zoom, then a lot of it is likely to stick with Zoom as long as Zoom continues to deliver superior service and some will turn into paid use.
E.g., a friend of mine who is treasurer of an AAII chapter and I were talking about this area. Their chapter lost a very desirable location a few years ago and has had less than desirable places for meetings since. And, unsurprisingly, the audience has shrunk with the flowering of resources on the web. This chapter just had their first Zoom meeting … despite a national lean toward GoToMeeting … and the users were very pleased with lots more interaction than they were used to having with their in-person meetings. This included a screen sharing presentation by one of the members.
What value would an InstaGram account have to you if the network was limited to just you and your sister on the InstaGram network…it might have some, but the value increases for you with each friend, family member, former classmate, etc. that joins the product network which allows you to expand your network. The same with Skype, Zoom, etc. The same argument can be made for Zillow…what value would the network have to you if the network consisted of one buyer (you) and one seller…Match.com; what value would the network be to you if it was just you in Maryland and a compatible match in California?
I could continue to expand on this thought, but it is just so clear to me that I don’t think it warrants further explanation.
Zoom has a network effect…value is added and value expands with each additional Zoom user added to the network whether they are paying members or not.
Harley, that’s why a Zoom customer can send a meeting invite to a non-Zoom customer and talk to them anyways. To me, network effect equals, “I sure would like to talk to someone on Zoom, but I’m not a paying customer. I guess I’ll sign up for a Zoom account and start paying so I can use Zoom and talk to this person who wants to talk to me.” THAT to me is network effect. Not, “I got a meeting invite from a Zoom customer, so I’ll download this free app so they can talk to me and never give a dime. I have Teams I am not going to buy Zoom but this person uses Zooms not Teams.”
Now if everyone on Zoom was a paying customer, that would be a huge network effect, and I’d be on board. But then, nobody would use Zoom if they could only talk to paying customers, because then they wouldn’t be able to talk to half the people they wanted to talk to. So, in reality, there is no “network.” Anybody at any time can talk to anybody on WebEx, Zoom, bluejeans, GoTo, etc, all the rest any time as long as someone has an account. So that’s why I go back to my comment of Zoom is winning due to best in breed, modern software, whose only real contender at this point is Teams. Not trying to get the last word in here but I wanted to make that key difference about a “Zoom Network” and end this, because I know this board does not like excess messages.
This whole discussion just seems to be due to a difference in opinion in what “network effect” means. Clearly you don’t feel there is a value in adding non-paying users and that network effects by definition must include every added user being monetized. Others are looking at the “viral” effect where adding users begets more users, some of which may become paying customers.
Whether you want to call it a network effect or just good publicity, becoming the most commonly used verb for communication in the general public certainly has its advantages (and some disadvantages as evidenced by the security issues being raised).
In a personal example, one of our hospitals carried out a Zoom medical staff meeting where even the most technophobic doctors were able to join. One of our doctors who only got a smart phone a couple years ago (he finally gave in since we all text each other) mentioned how easy it was to just click the link he got in the text. Since then our group has signed up for an account to have meetings and I have heard other doctor groups do the same. For the 100 or do new users generated by the hospital holding a meeting, it might have resulted in only 5 low level paying customers. Whether that can be considered a “network effect” I don’t know but it’s certainly good for business.
IRdoc, that’s an important consideration. It’s not that I don’t value the free users. It’s that I consider a network effect as when a person joins a club, or buys a product, to become “part of the network”, which I don’t think applies here. That, to me, is a short definition. However, you’re right, what is going on right now, is great publicity. Right now people are getting exposed to Zoom via pushes by other Zoom users.
Now, people are also getting WebEx, GoTomeeting, etc, pushes as well. But if we consider Zoom best in breed, these pushes that Zoom is experiencing, is the best advertising possible. So I could see people calling it “network effect” for that reason. It’s not network effect in the classical way I think of it, but people themselves are promoting Zoom product and the company is gaining exposure that way. Not just because they are getting links to a videoconference, but because they are getting links/exposure to a very good videoconference system. Your doctor friend who just got a smartphone is probably the best example of that!
It is sort of like those AOL.com CDs that used to be everywhere. Those things were all over the place, and it was very easy to get signed on to the internet that way. You go to a store, and there are a big stack of AOL.com CDs free for the taking. It was the best form of advertising that made it simple and easy to become an AOL user. Rather than having a computer and trying to figure out how you were going to go on to the internet for the first time when you had no internet.
Meanwhile Zoom is experiencing the same thing, just because they’re the best out there. That’s why it’s going viral to begin with.
So not “network effect” as a moat, but a great “network effect” as namebrand recognition, exposure, and, in turn, growth. Viral or Network Advertising if you will.
How many times has a large company purchased a small one to enter a new industry to catch up to a leader? How many times does it pan out? I’d say very rarely.
This has been my experience as well. I’m even less worried about BlueJeans now. The market always seems to get a little spooked when a behemoth buys a competitor to one of our companies. I tend to feel the opposite. That competitor likely trailed our company anyway, and it’s likely to fall even further behind as its R&D efforts get swallowed up in the sluggishness and bureaucracy of the acquiring company. I find the often-touted “bigger distribution channel” very rarely comes to pass.
Count me among the people who think that it’s nuts to say Zoom doesn’t have a strong network effect. It’s actually one of the strongest network effects I have seen for any product in years.
A few insights into my view…
*Zoom is a verb now, just like Skype used to be a very common verb. Everyone from Fortune 500 CEOs down to stay at home moms are using the verb Zoom and installing the app.
*Zoom is a juggernaut in the small to midsized business market, especially for anyone that’s B2C or that has a client base of other small businesses. I have my own coaching business, and am in mastermind groups and various other communities. EVERYONE is choosing Zoom, except for my friends that are MicroSoft consultants that use teams. Most already were already using it, but people who used to be out and about and Had to start working at home started using paid accounts, and a number of my business friends have upgraded their paid zoom. The primary reason they are doubling down on Zoom is because their clients want to use it and they don’t want to be the vendor who tries to get their clients to install something else.
*Teams is a day late, a dollar short, and a garbage user experience. I attended a virtual happy hour for one of my friends today. She’s a Microsoft MVP so she naturally it a teams meeting. She had far fewer people attend, everyone except her Microsoft colleagues was complaining that teams was a pain, and people left early because they couldn’t figure out what they were doing because the interface for Teams isn’t intuitive. The sound and video quality was horrible, and the Microsoft geeks were talking about cool new features that just rolled out for teams that Zoom has had for months. The audience for this meeting was NOT technophobes either.
I could go on, but my point is…Zoom has gained an insane amount of traction with the humans of the world, and more of them are paying clients than you think.