ZOOM and COVID-19

Investment Analysis Clubs Saul’s Investing Discussions
#3

Given this thread is looking to crowd source and collate useful anecdotes specifically on teleconferencing/videoconferencing, ZOOM and the virus impact, I can share that:

  1. Telehealth companies here in Singapore are receiving substantial inbound request for telehealth for company employee service coverage (teleconsults)

  2. Singapore hospitals & outpatient clinics are as a direct result of the virus adopting teleconferencing - they are adopting 2 providers Zoom and Skype. Zoom is being used for large format (100+ live participants) for teleconferencing between health care professional staff in hospitals and the outpatient clinics

  3. In addition to the China virtual education players that are already using teleconferencing who are experiencing a massive boom (e.g. GSX techedu), traditional physical format schools in China are already adopting teleconferencing as a standard back up plan to school closures

  4. Singapore schools and educational institutions are also reviewing how they can adopt teleconferencing as their standard back up plan for on campus attendance.

  5. Multi national corporations in Asia are banning non-essential business travel. (I was due to be going to Russia and Brazil for workshops in March and these have all be cancelled). All meetings, workshops and training are being adapted for teleconferencing/videoconferencing format. Business travel specifically to China, Korea, Italy and Japan are facing bans right now for Asian regional HQs.

  6. Many if not most companies and employer organisations in Singapore are running Business Continuity Planning measures involving dividing staff into 2 or 3 groups and rotating either 7 or 14 days in office vs working from home/offsite. I understand similar measures are being adopted in Japan. Clearly for this to function, demand for and use of teleconferencing/videoconferencing is going up just to maintain connectivity and collaboration.

Ant

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#4

Here is a list of some conferences being cancelled.
Asia has seen cancelations of:
Large sporting events (China F1 Grand Prix to Women’s Singapore open golf tournaments etc)
Annual/Biannual Industry conferences
Monthly Working group meetings

Hotels in Singapore are running at 50% occupancy. (Marina Bay Sands has closed 1 of its 3 towers here in Singapore).
Ridership of major public transport is dramatically down - especially in China. Beijing daily ridership for its metro usually is over 10.5m is down to 1-1.5m.

Ant

#5

Our company of a few 1000 people already selected Zoom last year after dropping Skype and choosing not to go with Teams. Today IT issued a note to all employees regarding COVID-19 and preparedness for work at home scenarios. It reads:

Zoom is an essential collaboration tool, whether in the office or when working remote. Please ensure Zoom is working on your phone and laptop and that Zoom is added to all the meetings you host. This will make it easier to continue business as usual regardless of where you and your meeting attendees are working from.

Separate topic - while small companies may rapidly adopt Zoom in reacting to the virus, most large companies won’t adopt Zoom overnight. They will do trial runs with small user groups for months or quarters while also evaluating other alternatives. Point is the carry-on effect from virus induced video conference adoption likely to be additive to Zoom over several quarters, not just the next one.

clydej - long ZM

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#6

I work at a school in Dubai. We are closing down starting next Sunday for at least 4 weeks to prevent possibility of virus outbreak. I just received this email this morning:

Hi all,
I have been talking to my colleagues in China who have been doing this distance learning stuff for a while. They are overwhelmingly recommending a platform called Zoom.
https://zoom.us/
I tried it out last night. I had a video chat with friends in China and Croatia.
The platform is like a conference call. You can see and talk to everyone.
My friends are using Zoom to give assessments, have class discussions, answer questions while their students are working, etc.

Nuts and Bolts:
The teacher downloads the program and starts a meeting.
The students log in to the meeting with the code the teacher provides.

The free version limits the meeting time to 45 minutes (although I ran over that last night and Zoom extended the time) There is a $15/month version that does not limit the meeting time.

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#7

I work at UCLA and received the same email today. One thing that stood out to me is that the Chancellor mentioned Zoom but also Slack. The exact quote: “Second, we are working quickly to expand the use of existing remote teaching and learning tools available, by reaching out to faculty to offer technology support. These tools will include the ability to stream lectures via Zoom or BruinCast, create collaborative online spaces via Slack or UCLA Common Collaboration and Learning Environment (CCLE) and provide opportunities for remote test taking, if needed.”

The reason this stood out is because UCLA is clearly a large enterprise customer of Microsoft, and yet no mention of Teams.

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#8

Free webex
https://www.google.com/amp/s/www.techradar.com/amp/news/cisc…

Free microsoft teams
https://news.microsoft.com/apac/2020/02/12/microsoft-commits…

Free google classroom/hangouts
https://www.google.com/amp/s/cloudblog.withgoogle.com/produc…

Again…zoom didnt invent videoconferencing and in 90%÷ of my non face to face meetings we just use audio and share our screens.

$32b mkt cap and people think this post-er move is a buying dip.

They do $1b next 12 months and they are at a 32 p/s.
Then what is growth the year after, if they have already slowed to 78% growth now?

Will they just have a 30 p/s forever?

What if they get to $2b/yr rev and have “only” a 20 p/s as growth slows a bit…$40b mkt cap or 25% stock growth over 24+ months?

I actually did hear of a client looking at zoom for their conf standard today.

And i also used Teams Skyoe and Webex today too.

Good luck out there!

Dreamer
Long estc lvgo pins and nvee

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#9

Dreamer,

SHOP has a P/S of 37. Ok maybe that’s a little crazy too.

But Zoom is (assuming average beats) going to break the billion dollar mark this year. Probably at least $1.1B. With growth in high 50s or higher, close to what SHOP achieved this milestone.

Zoom will achieve this at a much higher profitability rate than SHOP as well.

I could list a dozen free website building and e-commerce sites.

SHOP succeeded because they built a product for the modern enterprise or entrepreneur that achieves something the others didn’t. Google hangouts is not a Zoom replacement at all. Teams is far behind as well. And WebEx is not even close. Sure, they exist and compete. But are less relevant everyday.

Zooms valuation is an issue. But not their market position.

Darth

Sold out of ZM at $120, bought a little bit back at yesterday’s pullback. Taking it slow again.

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#10

Here is a list [on ZDNet} of some conferences being cancelled.

If you follow the link on that list of conferences to “video conferencing” Zoom is listed first on ZDnet’s list of video conferencing choices.

https://www.zdnet.com/article/best-video-conferencing-softwa…

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#11

The question is; how much of this will be permanent?

That is the all-important long-term question to answer. It’s too early to tell. But I have my suspicions that it will not be permanent.

I work for a medium-sized UK-based semiconductor company that few people know of but nearly all of us have their product. (We make the brains of nearly every smart phone and tablet, and is also widely used in all sorts of products you also own). We are a Skype-For-Business house transitioning to Teams, and also heavily use Slack. In my 3 years here I’ve been in video conference calls at least twice a week, sometimes 6-7 times per week. But we are also a company that travels extensively. Our heavy use of those tools before did not keep us from traveling a lot. This virus is, however, doing that. All travel, even domestic, now must be business-critical and be approved from rather high up. Even guests to buildings must be approved.

What will happen when this virus issue goes away? I don’t know. But I highly suspect our travel budget will go back up once this is all over.

Humans are social creatures. Even the introverted engineers of us.

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#12

I wonder if it will stick. It makes sense that if people like videoconferencing, they wouldn’t need to travel as much. Do people like videoconferencing? Would travel be reserved for more special occasions?

I think that this is an opportunity for more people to gain experience with videoconferencing, and since it saves time and money to videoconference, perhaps it will be used more frequently.

This is a very interesting trend to watch. Thanks all for sharing your anecdotes.

Karen

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#13

If the question IS…

The question is; how much of this will be permanent?

Then, the answer MAY be…

“Zoom has added 3.5x more [monthly active users year to date] (through Feb. 24) than it did in 2019 (2.22 versus 0.64 million), so even if the conversion rate of new users to paid users is half of that seen in 2019, this would still yield 74% net new paid users in the first 8 weeks of 2020 versus 2019,” Chrane wrote.

While it seems somewhat off-color to be debating the merits of a business that will benefit from the misfortune of millions, this is the business, hobby, or passion we have chosen.

However, let’s be very honest and self-reflective for a moment. We come onto this board on a daily basis and debate the merits of the companies we follow and those in which we invest. Some board members use analytics, some financial analysis, others technical analysis, still others use reports from paid services, and most, just the “gut check”. While these approaches attempt to take as much “uncertainty” as possible out of the decision strategies we use, at the end of the day, we are all just predicting and speculating.

So, when we ask the question “how much of this is permanent”; I have the answer! The answer is…We don’t know! But, what we do know is that this unfortunate set of circumstances has resulted in Zoom being introduced to millions more potential customers than Zoom would have been otherwise. Now then, How sticky is the Zoom product and how many new free customers will be retained as paying customers? The answer…We simply don’t know. However, we can speculate that this unfortunate set of circumstances will result in some factor of these new users being converted to paid customers.

I find comfort being a long term holder of companies at times like these because it reduces anxiety, it reduces speculation and prognostication and allows for the facts to reveal themselves over time.

RELATED ANECDOTE: I am an owner of a position in Slack. I read about Slack, I analyze Slack, I have been known to speculate about Slack and never thought I would use or needed Slack. However, earlier this week, a fellow “Saul’s Investing Discussions” board member sent me a Slack invite to a Slack investing channel. I accepted the invitation, joined Slack, and joined this particular channel. I have thoroughly enjoyed this experience. A few days ago, I had never used Slack and now I monitor this particular investment channel daily and have set up a Slack Channel for my extended family. Harley; What is Your Point? My point is that there are millions of people around the world having this exact same experience with Zoom and perhaps Slack under these unfortunate circumstances. Perhaps, once these millions of individuals use the product, they will see its value and become paying customers.

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#14

I work for a medium-sized UK-based semiconductor company that few people know of but nearly all of us have their product. (We make the brains of nearly every smart phone and tablet, and is also widely used in all sorts of products you also own).

ARM/Softbank?

Humans are social creatures. Even the introverted engineers of us.

You can socialize locally instead of professionally. For a few years I took care of customers on there continents from my home office.

Denny Schlesinger

#15

ARM/Softbank?

Ding! Ding! We have a winner!

As per socializing locally instead of professionally, a big part of the Arm culture is rooted in collaboration and being together. Hence all the travel. I’m not saying we can’t adapt to a work model that depends far less on personally visiting people you work closely with in other locations, and relying more on Slack, Teams, etc. It would require a shift in culture. We are literally the reason why British Airlines was able to do daily non-stop from Austin to Heathrow, for example. We pushed demand for that flight over the edge. Can it be done? Yes. We are currently kinda forced to. Will we go back to our old ways eventually? Yet to be seen of course. :wink:

#16

I wonder if it will stick. It makes sense that if people like videoconferencing, they wouldn’t need to travel as much. Do people like videoconferencing? Would travel be reserved for more special occasions? I think that this is an opportunity for more people to gain experience with videoconferencing, and since it saves time and money to videoconference, perhaps it will be used more frequently.

Karen, I think all these COMPANIES are gaining experience with video conferencing! Think of the immense cost saving for example, for someone on the East Coast to not have to go out to the West coast for a meeting: Taxi or limo to and from the airport, at both ends (four trips), airline tickets both ways, hotels for a couple of days, taxis in the new city, restaurants for multiple meals. For just one person this is a substantial, definitely non-trivial, cost. Plus inconvenience for the traveler of getting to the airport early, having to go through security, being away from work and family. And inconvenience for the company: this guy is away from his job for days for this one conference. When the company finds out how easy Zoom is, do you really think it won’t stick, except for highest priority meetings?

Saul

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#17

I work for a company that was a very early adopter of videoconferencing technologies and it’s at the heart of how we communicate. I’m on the East Coast and HQ is in San Jose; I will regularly participate in meetings with a roomful of 5-10 CA-based people while several others of us will join by videoconference from various locations all over the world. I also see these people on a semi-regular basis so there’s nothing lost by me being there virtually instead of in-person. I’m also able to see all of the documents or powerpoint slides as well since that’s directly built into Webex (which we use) and i can make a presentation to the group myself. It’s even possible for a group of us working globally to edit a document together using these tools. I’m assuming it’s a feature in Zoom’s pay version, same for MSFT Teams.

We also use videoconferencing as a replacement for regular phone calls; when someone calls me, my computer rings as well as my desk phone and I simply answer and up pops a video call from my colleague in Brussels. We have a nice chat, and it’s much easier for me to comprehend what she’s saying since I can watch her speak to me, which is most helpful since English is not her first language. Same for her, since i speak quickly! It’s a much richer and personable interaction.

You don’t think about it much but this is now the next of several rounds of pandemic scares - Ebola, SARs, MERs, etc - where travel has been rapidly interrupted. However there are other instances such as the Iceland volcano eruptions in 2010 virtually shut down travel in Northern Europe. I remember there was a surge in the use of videoconferencing at that time as well. Once you start using it, you find multiple other ways to use it as well to improve existing communications.

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#18

Add to this the ever increasing pressure (in Europe at least) to be seen to be doing something for the environment and it may well stick.

Alex

1 Like
#19

I have to add my voice to the sceptical side on Zoom. No question that they are growing revenue at a tremendous rate, but let’s assume that is already baked into the price.

How long can they keep growing revenue at this rate?

I would answer by saying that companies that can grow revenue at a tremendous rate year after year need to have a tremendous moat. Typical moats are technology advantages, a business model that works for a very specialized market that makes it hard for others to compete, or a network effect.

Zoom obviously is in a very competitive space, nothing specialized here, everyone and their grandmother is doing video conferencing. A friend of mine developed his own solution for this a couple of years ago, and is selling it with some success.

I don’t think Zoom has any significant technology advantage. I literally use 5 different video conferencing solutions every work day - Zoom, Blue Jeans, WebEx, Teams, Skype for Business, etc. Our corporate choice is WebEx. Out of these solutions, Teams and Skype are not great, but the others pretty much work. Zoom is nice to use, but I prefer Blue Jeans which works better under low bandwidth and is even more user friendly in my opinion. And to be honest, the differences aren’t big enough for me to care about.

Finally is there a network effect in video conferencing? I would say no - it is trivial to switch between solutions.

So I think there is no significant advantage for Zoom, compared to say other new solutions like BlueJeans. They are all growing quickly as video conferencing takes over the business world. As they grow big enough that they need bigger and bigger deals to move the needle, the immense competition is just going to slow their growth rate. I think this is a case of enjoy the growth now, because competition is going to slow revenue growth, with increasing sales expenses eating into margins.

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#20

How long can they keep growing revenue at this rate?

I would answer by saying that companies that can grow revenue at a tremendous rate year after year need to have a tremendous moat. Typical moats are technology advantages, a business model that works for a very specialized market that makes it hard for others to compete, or a network effect.

Addressable market is the answer. The “S” curve shows that growth slows as the industry approaches high market penetration. If the growth rate is accelerated the top of the “S” is reached sooner. There are a number of actions the seller can take to sell more such as create new needs (covid-19) and release new versions but in the end it’s addressable market that sets the limit.

Denny Schlesinger

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#21

I don’t think Zoom has any significant technology advantage. I literally use 5 different video conferencing solutions every work day - Zoom, Blue Jeans, WebEx, Teams, Skype for Business, etc…

OT with this comment: I am not an investment person so will not comment on the viability of investment in Zoom. My daughter, currently stuck in US because her school is closed, flights canceled, has experience using Zoom in China. You have to use Chrome to use Zoom. You cannot use Chrome in China without a VPN. That is not easy for her students to use/access. Over half her students don’t have a VPN and for some that do, the internet goes in and out (poor VPN package).

So it may be a great product for some, but it does have some limitations.

Heather is using Skype and WeChat (from google: http://www.wechat.com https://www.wechat.com/en/ Available for all kinds of platforms; enjoy group chat; support voice, photo, video and text messages. /// Does China spy on WeChat? Yes, it does. The local government has access to all the chats and monitors. Not only over WeChat, but also QQ, all the searches on Baidu / Sogou / 360, all the video apps and so on), plus she makes videos she puts on ManageBac (ManageBac: Platform for the Modern IB Continuum School https://www.managebac.com/ ManageBac is the leading planning, assessment and reporting platform for IB PYP, MYP and diploma schools.)

The Chinese teachers at her school are all using CCTalk.

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#22

Regarding ZM’s usability in China, I have a different take. Lst evening, I spent some time on Baidu site (Chinese version of GOOGLE) to get a feel of Zoom’s usage in China. From what I saw, Zoom is far more popular that all of its Chinese counterparts, including CCTALK.

One thing speaks volume about Zoom’s superiority over other products: The Chinese government banned ZM in Sept. of 2019. There was news article discussing that the event may provide an good opportunity for Chines companies to catch up with Zoom.

Most recently, however, the ban on Zoom was lifted in China. Why? The COVID-19 caused all the universities to cancel conventional classroom classes, and instead, students take Viode-Conf. Classes at home. Zoom is needed for this purpose.

One thing caught my eyes was that the government is prompting a collaborate project between Zoom and the Chinese Educational Network (???) to provide free video conf. classroom platform for all the universities. If you read chines, you can check it out:

https://www.eol.cn/news/t9/202002/t20200220_1712925.shtm

My guess is that Zoom is the only viable option for the Chinese Educational Network. If not for this, Zoom would still be banned in China.

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