For Yuan, while the sudden growth has certainly been exciting, he’s eager to get out of the spotlight and back to focusing on enterprise customers.
“I don’t think we know how to play in the consumer market, but we do know how to focus on privacy and security,” he says. “It doesn’t mean we want to be in the consumer market. This is a crisis, we want to help. After it’s over, we want to go back to serving our existing enterprise customers.” But given how long we may find ourselves social distancing, Zoom may be in the consumer business for some time.
It’s very difficult to imagine a world where Zoom could generate enough paying consumers to offset hosting costs. So it is pretty obvious that they will focus on enterprise where to date they have generated very good gross margins.
IMO while revenue growth is likely to be very high across fy2021, gross margin is likely to be low due to the influx of free users.
They have 20 times of users now, many of them are free users and will never pay, in the mean time, 200 M users will create many issues, security, hacking, etc. What about they come out and stop free unlimited plan, and start to charge people, if only a certain % users stay, they will increase revenue by many fold while also get rid of large % of free users? That should solve their margin issue as well as current mess with such a large population of users. Just a thought from business standpoint.
I work for a Fortune 100 company and I found out last week we are making the switch from another video conferencing company to Zoom. So here is some more anecdotal evidence and this is on the enterprise side.
I’m not in Tech, but support them and there is a lot of chatter on a Slack channel full of our Tech Operations and Cyber Security teams about the move to Zoom. Most in that channel agree that the security issues are mostly media hype and not to be concerned.
Basically, the consensus is that most software has some level of security issues and this has just been in the spotlight due to the meteoric rise of Zoom.
Long time observer, first time poster. Thanks Saul and others on this board for all you do.
Couldn’t personal use also help adoption at the enterprise level? If companies’ employees are already using it personally, there will be less resistance to change and change management is a critical task at the enterprise level.
What about they come out and stop free unlimited plan, and start to charge people, if only a certain percent of users stay, they will increase revenue by many fold while also get rid of large percentage of free users? That should solve their margin issue as well as current mess with such a large population of users. Just a thought from business standpoint.
If you think they have had bad publicity now, can you imagine if they started kicking people off their connection with the world because they couldn’t pay, in the middle of the pandemic, with millions of people out of work? Wow!
I’ve become more and more reluctant to make observations based on my years of experience in IT at a very large enterprise. I’ve been retired for ten years, so my experience grows increasingly stale. But I distinguish between technical analysis and business processes. My technical knowledge is pretty much out-dated at this point. But business processes change more slowly, and business objectives change more slowly than processes.
In the last ten years of my career I was an enterprise architect. One of my jobs in this position was to participate on a team that would evaluate software for internal use. I am quite confident that this function is common across all large enterprises. Although Zoom would have gone to the desktop team (I was on the data/information management team), every team performed at least a high level review just to insure that there were no issues relevant to their domain.
In response to your question, at no time do I ever recall personal, non-business use of a product ever being investigated during the evaluation process. Usage was a sort of peripheral factor, but it was usage by enterprise customers that was considered, wide spread deployment for personal use simply didn’t enter the analysis.
You are correct about change management being an issue with any new software products, especially those that were deployed to a large percentage of employees irrespective of their management reporting lines. Zoom would be in this category. But the fact is that Zoom is so easy to use that anyone with a mobile phone can use Zoom to join a meeting with virtually no training. Scheduling and hosting a meeting requires a bit more knowledge and may even demand some internal training and support for some users, but this would fall under the category of business as usual for IT.
If you think they have had bad publicity now, can you imagine if they started kicking people off their connection with the world because they couldn’t pay, in the middle of the pandemic, with millions of people out of work? Wow!
And a more positive way to frame that is: People love to jump on the moment and take their shots at Zoom for anything they’ve done poorly, but look at the millions of people they’ve helped! Shouldn’t Zoom be benefiting from a little more good will, at least alongside the recent castigation, if not to mitigate it?
Freelancers. Yoga instructors, music teachers, tutors, coaches, etc. For many, it’s free, and for those who pay a mere $150/year or whatever, think about the outsized potential revenue generation it opens up for them!
Families and friends. Many of us have used video chat before, almost always one-on-one, to visit with loved ones who are far away. Zoom is the first time I’ve ever experienced that with many folks in different cities all virtually together.
Just the entire world economy. Zoom profits from this of course. But that doesn’t change the fact that there are hundreds of thousands of businesses that now can’t go into the office, and with Zoom they can meet almost as easily as if they were face to face, and for a price that’s a drop in the bucket (compared to oh, for example, office space…a thought which I’m sure has crossed the minds of the leaders of many businesses).
When you go from 10 million users per day to 200 million, things just don’t work seamlessly. But somehow Zoom has managed it. In the midst of the frenzy, as every talking head and writer gets in their pot shots, Zoom’s CEO has always appeared humble, cheerful, and contrite about his failings.
I am impressed. And I think Zoom deserves a little appreciation, especially from those of us who will probably never pay them a dime.
Bear
PS - Maybe you disagree. Maybe you think Zoom is the devil. Maybe you think I’m giving them too much credit. I won’t argue with you, because I think we can all agree to disagree. Sorry, I’m just tired of reading posts that see only black or white. The world is gray.
As a shareholder, I feel like I am helping the world through ZOOM by sacrificing margins to connect people and help kids during COVID19. While the rational me is worried about high valuation, the altruistic me wants to buy more shares.
“But the fact is that Zoom is so easy to use that anyone with a mobile phone can use Zoom to join a meeting with virtually no training. Scheduling and hosting a meeting requires a bit more knowledge and may even demand some internal training and support for some users, but this would fall under the category of business as usual for IT.”
Hey Brittlerock,
Valid points and I’ll defer to you on what happens in the IT “war rooms” but I think the point you note above can support what I was thinking. The fact that so many people are already using it (and liking it) could potentially be, at least one, factor in the decision. While some training would be required it would make training easier (theoretically anyway).
And back to the “less resistance” aspect of my post, just some anecdotal support from my personal experience: At the company I worked for, we have gone from webex, to GTM, to skype, to GTM, to MS Teams, to GTM, to mix of teams and GTM. All of those reversals were due to push back from the employees. The decisions to move were originally straight IT decisions that they won support from management on…no end user feedback was solicited…but solicited or not they sure got plenty of feedback after making the changes because users had significant issues with the new platform.
If our IT team sees value in ZM I can definitely see it being part of the discussion that there are probably plenty of employees already using it.
When you go from 10 million users per day to 200 million, things just don’t work seamlessly. But somehow Zoom has managed it. In the midst of the frenzy, as every talking head and writer gets in their pot shots, Zoom’s CEO has always appeared humble, cheerful, and contrite about his failings. I am impressed. And I think Zoom deserves a little appreciation, especially from those of us who will probably never pay them a dime.
I agree, Bear, and Alex Stamos put it perfectly:
“To successfully scale a video-heavy platform to such a size, with no appreciable downtime and in the space of weeks, is literally unprecedented in the history of the Internet.”
Everywhere i turn i find hickups .
I get my text messages from my bank spending late, i never receive confirmation codes for online purchases, videos on cnn are breaking up
Everywhere except for zoom and netflix
Looks like the whole world struggles from the excess internet usage but those two.
One which grew 20 fols so kudos to zoom
I think a lot of people are missing the obvious here.
ZM has a lot of good will going from all the free users that have been able to keep in contact with friends and family, and all the employees who are able to produce some actual work through virtual meetings with management and clients, all while working from home.
Think of all the small businesses that continue to function through video contacts with clients (and new clients) as well as critical employees.
Personal video communications have been a “forgone conclusion” for 40 years. Yet the reality of personal video is only beginning to take shape, and for most of these 40 years, has been in the realm of science fiction. Now we are seeing high quality video and sound for the masses, and we expect high-quality video and sound for the most sensitive of business and government meetings.
Zoom is closer to that reality than anyone that I’m aware of, and much closer IMO than most believe.
People will not forget Zoom or stop using it when Covid finally loosens its grip on daily life, any more than they forgot microwaves when the advertising flurry for the new best thing was over.
It doesn’t take too much imagination to envision myriad ways to monetize the huge citizen following that Zoom is building, and I think that Zm management has plenty of imagination.
While ZM is already receiving a lot of benefit from this situation, it would be a shame to dump this huge following and good will.
$2.95/mo., for example, for personal video conference access would not be prohibitive to most consumers.
ZM could have a “Zoom Lite” app that is high-quality, but kept completely separate from the enterprise program.
Zoom familiarity could become almost automatic for new employees on their first day of a new job, kind of like familiarity with Excel or Word. ZM has almost zero learning curve.
$2.95/mo. x 33,000,000 citizens and growing, could pay for a bit of infrastructure and/or profit. Can you say “recurring revenue”?
A lot of this “attention” is not totally negative for Zoom.
Read with a grain of salt, I’m long ZM
Dan
Worldwide, 33m could easily become 300m
$2.95/mo could become $49.95/yr
300m x 49.95 = $ 16.5 b
“Thank you for joining Zoom. Will that be Visa, MC or Paypal?”
Just curious if you, or anyone else actually pays for a personal Zoom account? You want to virtually talk to all your buddies or family so you get on a Zoom call? Is anyone doing this? If so, what would cause you to do this instead of Facetime for free or some other commercial focused app?
I do not; but I also use and don’t pay for InstaGram, Pinterest, House Party, TikTok, etc. That is why I have commented in previous posts on Zoom and about how might Zoom monetize all of the millions of free users? What about a short 15 sec ad impression prior to joining a Zoom conference? Or, a corporate logo or banner placed on the Zoom screen. Most of my newsfeed apps require that I watch a brief ad before watching news video content. I am not really sure how “free” works. Perhaps it is not really free in the truest sense of “free”; maybe data is being collected on users and monetized somehow. Thoughts?
“Just curious if you, or anyone else actually pays for a personal Zoom account? ”
I am paying as a pro member. I want to support my own company, using the money earned through its stock price appreciation. In addition, 40 minutes limit can be annoying. I mainly use Zoom for meeting with my coworkers. Company doesn’t pay for it because IT selected Webex. My coworkers seem to love Zoom more than Webex.
Zoom - you can join a zoom meeting by just entering meeting ID. Also you can share your screen during the meeting, which is valuable for Seminar, training, classes,etc. My daughter’s teacher is a new paid customer to use zoom to teach a language classes. I think, Zoom is a good fit to hold live seminar and classes for yoga class, financial advisor, professional continuing education courses,and so on in my limited knowledge.
FaceTime - I couldn’t figure out how to make a group call. The user has to know Your attendee’s phone number and have an apple device.
Hangout - you have to make a group before you make a group call. Everyone should have hangout app too.
Both FaceTime and hangout don’t have screen sharing function.
However, zoom has gone beyond all the limitations. Everyone can attend the meeting just by entering the meeting ID, no matter what device you have. MF is holding a lot of zoom meetings. You can experience those features yourself.
We have asked to reduce Zoom posts. Please help us with that instead of littering the board with additional discussion of the same subjects that have been discussed ad nauseam.