Zoom in Enterprise


Not sure if this was discussed upstream somewhere to lesser or greater degrees, but with so much Zoom content here recently, hard to keep tabs. So forgive the duplicate question, which runs like so:

"my friend is a higher up over Cisco collaboration (WebEx is part of it) and he stands by ‘Zoom isn’t a big threat in the enterprise.’ So I’d just be careful. If these new users don’t convert, then the stock will likely get hammered. I mean, I’m hearing their position from their own mouths as it relates to enterprise. [this friend saying this quote in italics works over at another big big tech operation] I see it myself when talking with CIOs and Cisco (at least a director) notes the same. Just want to give you all the data points. Enterprise is where the money is. A weak position there will hurt them.

Obviously that’s true, that enterprise is where the real bananas will ripen, but how true is the notion that Zoom is struggling in enterprise? With the huge tsunami of new users, how easily can we parse the low level buys from the big gorillas? Reminds Monkey somewhat of our earlier queries regarding Shopify––like, how many of these little businesses would it take to move the needle, vs. how many of the big operations were adopting the Shopify platform. How did that resolve? Seems like it was both kinds that moved over to Shopify because ultimately there was no competition.

But Zoom obviously has competition, yes?

So let’s imagine we have zero ZM shares. How concerned does the above anecdote make you?

Monkey (long ZM)


Obviously that’s true, that enterprise is where the real bananas will ripen, but how true is the notion that Zoom is struggling in enterprise?

I don’t know the answer but this is how to think about it.

Adoption is a complex issue, it can be top down or bottom up. There are Zoom and Alteryx threads running in parallel, one talking about millions of downloads and the other titled “Hunting the Dark Side.” Compare the two services.

Alteryx seems to offer a mission critical service that has to be approved at higher management levels which translates into a hefty sales force for Alteryx. IT likely is heavily involved in the decision process. As a result the winner likely will be decided by IT or at least heavily influenced by IT which includes a heavy dose of self preservation. Back in the late 1980 it was IT that tilted the balance in favor of Windows over Mac – ease of use was a threat to IT!

Zoom offers a very useful service for which there is a lot of competition but it is not mission critical enough that the choice cannot be delegated to lower levels of management. The service is easy enough to use that Zoom does not need a strong sales force. Because of the ease of use the services of IT are not much required. Unlike Alteryx, it runs in the cloud.

Raptor Dan trots out the traditional investment metrics

While studying several parameters (Valuation, Growth, Performance, Momentum, Debt, and Ownership) for each of these companies, I confirmed (as expected) that most of these parameters for AYX (to my way of thinking, at least) are improving as the price has been falling.

and that misses a key SaaS metric, CAC vs. LTV. Zoom’s CAC is low, Alteryx’s CAC is high. The unknowns are their respective LTVs and I’m not going to guess! What I am going to state quite emphatically is that IT will likely disparage Zoom in favor of a product by one of the larger incumbents, Microsoft, Cisco. In a sense, in enterprise it’s their market to lose. In the comparison, the known cards are stacked in favor of Zoom and the unknown cards are… unknown. :wink: As an investor, on whose cards would you bet?

But I haven’t yet answered your question. The Windows-Mac war was a winner take all situation, standards in and between enterprises were required and each company had proprietary architectures. In automobiles there is a universal user interface standard, same pedals, same steering wheel… In video conferencing the incumbents don’t have much of a moat which means that Zoom can continue to peck at them at a very low cost!

Obviously that’s true, that enterprise is where the real bananas will ripen

My dear Monkey, that’s a faulty generalization! Years ago I was interested in retail. The best investments were not the firms catering to the rich but the ones catering to the lower economic classes for the simple reason that there are many more poor than rich and that adds up to a lot of bananas! Putting enterprise aside for the moment, how large a portion of the non-enterprise users can Zoom monetize? Low CAC makes for a very long tail! Everyone knows about Zoom and it’s free!

Denny Schlesinger