ZM

[knyc]

Swift,

IF, they can become the “It just works” version of video conferencing, that ease of use and simplicity alone could have them dominate the TAM. But I agree, I also see them as a likely acquisition. Think Slack + Zoom to dominate corporate communications (although I’m not sure who would buy whom in that scenario) or Microsoft buying them to replace their sub-optimal Skype product. Salesforce already participated in their IPO so I could see that tie up as well. One less obvious candidate might be Amazon - Zoom’s seamless experience fits in with Amazon’s customer ease of use focus, pairs well with their voice powered Alexa, gives them an entry way into the corporate market, and they could gain synergies by using their AWS platform to power it.

Kevin

[Aphalite]

You mean like Amazon (“on-line book seller”), Apple (“Mac Desktop Computer maker”) and Google (“Search”), Square (“Payments company”), MELI (On-line marketplace), etc, ect. etc…?

The simple answer is that companies that are rigidly focused on delivering on one product are more fragile and susceptible to being disrupted.

You are trying to make a point about “optionality” of businesses but then quote a Gardner speech that focus in on… Google, which has 99.5% of its revenues in 2018 from search. Doesn’t that prove my point?

Amazon the stock didn’t start making big money for investors until AWS took off (that’s its killer product, not selling books), Apple the stock didn’t start taking off until the iphone (still 63% of all revenue in 2018). Point is you don’t get outsized gains from spreading your attention all over the place, you find something that you can monopolize in the short term and expand like crazy with huge S&M spend. That’s the atmosphere of SAAS today. I’m looking at this from the perspective of a shareholder, looking for huge compound returns on my capital, not the board of directors or the CEO, looking to make long term strategic investment decisions (although you can argue that both perspectives are aligned with respect to the outsized S&M spend in the SAAS industry).

This board doesn’t really have longevity as a key trait in stock selections. I agree with you that if you’re looking at the long term plays like Gardner does (buy and never sell), then you’d want to look for businesses that can continue to survive and expand into different services. I would not recommend anyone buy the stocks from this board and then never sell. That is insane. If you are looking for a widow and orphan stock, you’re better off with a Coke or Johnson & Johnson. If you’re gonna bet on any of TWLO/AYX/ZS/ZM/etc. or the field over a long period of time (say longer than 5 years), bet on the field. But for the next 2 years or so? These companies have focus and don’t really need to expand into different services for huge revenue growth.

[Aphalite]

Correction, google is 99.5% of alphabet’s revenue, and advertising is 86% of total, so search/adwords is not 99.5% but 86%

[XMFBreakerTinker]

There are certainly lessons to learn. Amazon, as you mention, only became almighty because of the profits of AWS. No one, perhaps not even Bezos, has that in mind until they purposefully or accidentally hit on becoming the first mover public cloud. It is a natural fit for Amazon but almost certainly not in mind when Amazon went public. The expanded business case, leveraging the infrastructure and expertise is an awesome fit however.

Cisco was routers but now switches are its largest revenue source (last I checked). Moving to switches was and is a completely natural extension f routers.

Microsoft was Office and DOS and those alone were not enough to propel them but practically everything Microsoft does is leverage Office or leverage original DOS now Windows.

What they all did was hyper grow their core and then found avenues to leverage their market dominance into adjacencies.

Amazon was the first big cloud. It’s whole business is cloud. Going from cloud merchant to cloud enabler a natural extension.

I think that is the type of optionality. Not conglomerates but using their dominant core business to leverage I to adjacencies.

OKTA is huge at this. Elastic has this as their business plan. Zscaler is hyper focused on two products at present, the newer is recent. Zscaler has many adjacencies it can move into. Twilio is doing this as they moved from their basic messaging to higher valued packaged services. Mongo…TEAM…

You get the drift. Taking your core and leveraging it into adjacencies.

Amazon’s next high margin adjacency is advertising enablement like TTD and Google do. Amazon’s world’s largest group of merchants is an enormous point of leverage here. Amazon prime was enabled only because of the mass of unprofitable retail businesses. They laughed but Bezos saw the power in owning the eyeballs of the masses and their merchants.

Amazon appears to be the ultimate optionality creator. Close running w Microsoft and how it leveraged and continues to leverage the dominance it creates on the desktop computer.

Google…you are correct, nothing has worked much beyond their core ad business. Seems autonomous driving with Waymo is their big hope. But that is not really an adjacency like their cloud titan business is.

Anyways leveraging your core business to move into and dominate adjacencies. That is the optionality that has created the giants of modern time and we see this w so many of the companies we follow now.

Look at Nvidia. They took the GPU and turned it into the engine of AI world wide! Little crypto currency hang over not withstanding.

Tinker

[XMFSwift]

I think that is the type of optionality. Not conglomerates but using their dominant core business to leverage I to adjacencies.

OKTA is huge at this. Elastic has this as their business plan. Zscaler is hyper focused on two products at present, the newer is recent. Zscaler has many adjacencies it can move into. Twilio is doing this as they moved from their basic messaging to higher valued packaged services. Mongo…TEAM…

You get the drift. Taking your core and leveraging it into adjacencies.

Exactly, Tinker.

So bringing this back to ZM (so as not to create a OT debate about Google or the merits of optionality as an investing concept)…

For each of the companies you mentioned (OKTA, ZS, ESTC, TWLO, TEAM) it is not very hard to see or imagine how they will/are using their core business to leverage adjacencies (to use your definition of optionality–one I agree with); my question remains: can one imagine how ZM will leverage its current advantage in cloud video conferencing (its “core”) to become a more robust version of itself?

As you say well: Anyways leveraging your core business to move into and dominate adjacencies. That is the optionality that has created the giants of modern time and we see this w so many of the companies we follow now.

The only idea put forward so far for ZM, and an excellent one, is in VR space as it further develops. But that all seems a ways off. ZM isn’t a little start up, it’s a company with a $16B market cap. That we struggle to see what’s next for this company in terms of opportunities to build out a line of offerings and services, gives me pause as an investor.

My question stands and I’ll avoid ZM until I have satisfied myself with a clearer view of the durable advantage this company might have (or does not have)…

My goal, for my growth stock investing, is to try to find and invest in the up and coming “giants” of our time.

'Nuff said. Not going to beat the horse further. Especially since this thread is getting a little long in the tooth.

Foolin’ on! Swift…
Long OKTA, ZS, TWLO, TEAM, GOOG
No position ZM

[BenDubya]

It’s marketing 101. Focus on a specific market and dominate it before spreading yourself too thin. Once the market niche is yours, it’s yours unless someone comes along and disrupts you (e.g. a slightly better and slightly cheaper competitor isn’t going to steal customers away from you). Veeva is a current classic example. They’ve saturated their original SAM and yet maintain a high P/E. Why? Because of their reputation in their original niche market, they’re making pretty good inroads into adjacent.

Zoom? I think we want them to focus on video conferencing. They’re a measly 330million a year. 550 million revenue next year. They need to focus on this growth and muscle on in MSFT and webex, and take as much market share as possible before the incumbents catch up.

Then we want signs of them exploring adjacent markets.

Consumer market? Probably not much money made there, but a good marketing tool.

Data - if they catch the vast majority of video conferencing/chat made around the world, that’s potentially a lot of data they could use. I’m aware they already have a feature to automatically make transcripts in a number of languages. Are they using AI to improve on this? Natural voice communication with machines is something that will happen eventually. A good number of companies are trying to crack this. I know of one that’s looking specifically at navigation, in cars, with the goal you can effortlessly ask the car ‘navigate me to the nearest McDonalds with a drive-in and um, then I need to buy a new shirt, so a Macy’s or TJ Max will do, and then afterwards to Jim’s house, so find me the shortest route’

With all the voice and video, potentially they have some good data to work with. I don’t know. It’s all speculation. Much like NVIDIA and autonomous cars. It’s currently an educated speculation, sure, but the original thesis was continued growth in their core game and datacentre markets for a good number of years yet, before the new adjacent markets reached their own S-curve inflection.

[12x]

It’s one of the things I was wondering with ZM. I don’t see videoconferencing being a $42 billion industry. I don’t see what ZM currently offers being a $42 billion industry. Maybe if you add up every conceivable b2b communication such as internet phones, call centers and whatever else. But we won’t know how successful they would be there with new products. It becomes speculation to buy $16b Zoom and hope they can successfully enter new markets.

Heck even Nutanix brought new product offerings and created a buzz, but now that they’re widely available we’re not hearing one word about it. DocuSign just expanded into new markets before and after the signature and all we can do is hope it’s the new growth driver.

We can see this playing out with Twilio with their Sendgrid acquisition adding synergy and their new Flex product just released, ON TOP of the products they already have that just provided 70%+ growth. But yes, new products are the lifeblood of growth. Unless your original market is so huge (operating systems for Microsoft in 1990 for example). Then you may want to be a master of one instead of a jack of all trades.

This is one of the reasons I am in TTD. The advertising industry is huge and they are offering a unique solution.

[Darthtaco]

I was thinking that I’ve highlighted a couple of optionality’s before on Zoom.

Mainly inserting video and screen sharing into places that it hasn’t existed before.

I highlighted the Zendesk platform, where Zoom integrates into the Zendesk on a helpdesk call and with the click of a button the technician can start a video meeting with the customer. This integration also can make use of other parts of Zoom’s collaboration platform and do things like share the screen and files, etc.

So there’s at least one. Visual virtual helpdesk.

Are there other app platforms where a visual element could be useful? What about visual security authentication? Okta sure likes Zoom. Or how about visual virtual call center? Twilio sure likes Zoom. I could imagine a lot of uses in a platform like Everbridge or Pager Duty.

Many verticals in Education or Healthcare. I think those are going to be big players in the future of video communications.

I could sit here and go on and on quite honestly on so many areas where a visual communication would be helpful/desired. And think how easy it is today. A camera, a screen, and an internet connection. Plus a subscription to the service. No I think we are only scratching the surface. All we needed was a realistic platform to make it possible. No, the ones that came before weren’t there yet.

I’ll leave it to the individual to make a judgement on whether Zoom is that platform. I’ve made mine.

Darth

[XMFBreakerTinker]

In regard to taking dominance in the core product and spreading it into adjacencies, I recommend reading Smartsheets March earnings call transcript. The entire business is taking adoption of the core product and increasing use cases and creating solutions not just for different verticals but also specific use cases used by all verticals.

It is taking off virally and Smartsheet is on fire growing the platform and understanding the tremendous benefit of first mover advantage.

I do not know the size of their opportunity. Currently they have more Han 800,000 paying users and certainly the paying user base is much more than this. That is a big unknown. But assuming their user base is at least Atlassian in size then if you are looking for optionality into adjacencies, read their last earnings call.

There is some context to understand. As for example SMAR is not only selling its product to users, but also selling “accelerators” that come pre-set up for various universal needs such as Mergers and Acquisitions. Companies pay a premium for these accelerators.

Anyways, for whatever it may be worth to SMAR they are creating adjacencies left and right and increasing use cases at a rapid pace.

Tinker

[XMFSwift]

I recommend reading Smartsheets March earnings call transcript.

SMAR has been on my list to study. Just moved it to the top.

Thanks, Swift…