Longtime lurker (since Jan 2019) and occasional contributor of snippets here. Many thanks to Saul, muji, Gaucho, stocknovice, Paul Bryant, and many others from whom I have crowdsourced knowledge. I am on the verge of retirement now thanks to TMF and this board, and hope to contribute more often.
In another thread the captain said:
Don’t let the numbers scare you. Think “S” curve. Covid-19 simply expanded the teleconferencing TAM explosively. Try to figure out what the teleconferencing TAM really is and what market penetration has been achieved. Market penetration governs the growth rate.
A lot of my confidence in ZM this past quarter was due to Zoom Phone and entry into the PBX market, which I assumed expanded their TAM significantly. Zoom is competing in the much wider uCaaS space, which includes:
- PBX (traditional phone communications)
In the conference call, Eric Yuan positively gushed over the various use cases that were coming to his attention, but when asked which ones he saw as opportunities, he held his cards close to his chest. What came across loud and clear is that ZM is chasing the enterprise space with their “unified communications solution”. If ZM can deliver a cloud PBX solution which integrates seamlessly with their VC app, enterprises will be all over it.
So I tried to figure out the TAM this morning:
"… global Unified Communications as a Service (UCaaS) market size is expected to grow from USD 15.8 billion in 2019 to USD 24.8 billion by 2024, at a Compound Annual Growth Rate (CAGR) of 9.5% during the forecast period. "
- TAM is growing by 1.8B per year.
- TAM is 17.6B in 2020. If ZM revs are 2.5B this year, market penetration is 14%.
“The global UCaaS market size is projected to reach USD 36.45 billion by 2026, thereby exhibiting a CAGR of 10.5% during the forecast period.”
“… USD 16.73 billion in 2018.”
- TAM is growing by 2.465B per year.
- TAM is 21.66B in 2020. If ZM revs are 2.5B this year, market penetration is 11.5%.
So let’s take a rough average and assume 2020 TAM is 20B and growing by 2B per year, so by 2023 it would be 26B. Let’s assume ZM rev this year is 2.5B and growing 100% per year. By 2023 it would be 20B, or 77% market penetration.
So it looks like there is room to run but not for too long. What optionality is there outside of the UCaaS space that would add to the TAM? Possibly customers who are interested in pure VC solutions, such as schools and small businesses, who already have basic phone solutions and aren’t going to implement a cloud PBX?
For schools let’s just consider the US. 3.7M teachers x $200/year adds 750M to the TAM. Not moving the needle much.
How about SMEs? I don’t know how to estimate the TAM for this.