I came across this excellent article on ZOOM. As I mentioned before, I do not think Zoom has any moat. Switching cost for video conferencing are relatively low. Our company moved from Bluejeans to Zoom and since the product is so wonderful, we are happy customers. So a good product could be a moat but not for long. Agora, as mentioned in this article is supposedly a good product too. I have not used it so cant comment on its capabilities. Regardless when you have such strong margins, competition is bound to come. Question is, will zoom be able to build the moat around its castle?
Every time this question comes up, the discussion inevitably results in a back and forth between people with different definitions of a “moat”.
In my opinion, it doesn’t matter. They’re growing incredibly fast with high margins. Whenever any potential absence of a moat begins to matter, it will show up in growth rates and margins. With a large amount of subscription-based revenue, there will be plenty of time to get out while still enjoying plenty of gains. One of the benefits of being an individual relatively small investor is that you can always move on when weaknesses in a business begin to matter. We have no requirement to leave money in a company as it loses market share or otherwise maintain an investment indefinitely. If something comes along that is much better than Zoom and actually takes market share, Zoom growth will slow or reverse. I think it’s highly unlikely that all companies will simultaneously switch away from Zoom because of a better product.
The analogy of a moat is kind of silly anyway because a moat does nothing to protect a castle from a catapult or a siege attack.