To put it in perspective, Zoom’s net promoter score (NPS) is 62 whereas WebEx, arguably the most formidable competitor, comes in at just 6. This means that 62% of customers would recommend Zoom’s product versus only 6% who use WebEx.
This is not what a NPS is. NPS goes from -100 to 100.
If a customer rates them 9/10 or 10/10 that means that they would recommend the product/service.
If a customer rates them 7/10 or 8/10 that means the customer is passive in terms of recommending the product/service.
If the customer rates them 0/10 through 6/10 that means that the customer is a detractor.
A company doesn’t grow this quickly, at over $300 M in revenue, in an industry that has competition, without having a big competitive advantage. period
I see the risk as how quickly will revenue growth slow down, because we know it will slow, it can’t stay above 100% for long.
Imagine you have employees all over the world (you are a global company) and you’ve invested a lot of time and energy implementing a collaboration tool. You’ve trained nearly every employee on that platform. Your sales, marketing, finance, R&D, and other G&A teams have 4-5 meetings each day that use it. Your customers are familiar with it, as your inside sales team regularly runs sales calls on it and your marketing team runs webinars.
Your conference rooms (50 of them) are all wired for it, and to run a meeting you literally walk into a room and click a button on a screen and you are on a video cast with people on 3 other continents.
Now someone in IT says he wants to you to switch to some other provider. Imagine how big a task that would be. Literally every employee in your company would need to be re-trained. Every conference room would need to be ripped apart. Your customer interactions would need to be adjusted.
And for what? Zoom is already the lowest priced option. Some new competitor is going to, what, save you 10%?
RE: Zoom’s competition
They have already kicked Cisco’s butt and kicked Google and Microsoft’s butt. Who’s next, Amazon and Apple? What kind of competitor are you exactly going to fear? They’ve already beat the absolute best and mightiest. You think that was an easy accomplishment?
I’d say that are doing an awful lot right.
RE: Valuation
I would rather buy a company trading at a high EV/sales multiple that has some end-user stickiness than some IT backend product (like security solutions) trading at a similar multiple which has no end user experience.
Literally every employee in your company would need to be re-trained.
Why?
I work for a Fortune 100 company and we use WebEx. I’ve personally never received any training on it.
Someone sends me a link to a meeting, I click on it, the page takes a bit to load, I enter as a guest or with my user name and ID, and dial in to join the call.
If my company switched to Zoom, why would my end user experience be significantly different?
Every conference room would need to be ripped apart.
Would a switch to Zoom or WebEx really require a change in hardware? I thought these were SaaS companies and not hardware companies? If Zoom requires you to use their hardware, then I would think that would be a competitive disadvantage. Whether I am a new user or someone switching from WebEx to Zoom, I would think it less likely that I would do so if I had to do any significant changes in my existing hardware.
I’m not buying the IPO but I’m going to be watching this and will decide later if I buy shares. However, video conferencing is a big deal. We are on Skype for Business (SfB) here. We have lots of rooms with their hardware. It is relatively easy to use, relatively easy to share screens, and works… mostly. There is something about a VIDEO conference that audio-only cannot replicate. But, SfB has been a PAIN. And it appears Microsoft is abandoning it in favor of Teams. I don’t know what we are going to do, but I know we WILL replace SfB with something. You just don’t want to not have video conferencing anymore. AND IT MUST BE SIMPLE. Sometimes, people, SIMPLE IS THE MOAT. And it is surprising how often companies just can’t learn to do “simple, and it always works”.
The other moat is the H/W for the conference rooms. SfB has hardware for this. I’m unsure if we can migrate this to Teams (I haven’t bothered to ask or investigate).
Every conference room would need to be ripped apart.
Rob, Hawkwin is correct. Zoom is software and is totally hardware/platform agnostic. There is no specific hardware required, so any “stickiness” associated with Zoom will come from its features and ease of use, not the requirement to remodel conference rooms if switching from Zoom.
Given that this is a crowded, competitive space, the fact that they have grown dramatically in the last couple of years does speak well for them being perceived to have a better product … but one also has to acknowledge that it also speaks to the competition not being sticky. The question is, will Zoom be stickier or is it simply going to ride a crest for a while until someone comes out with something perceived as better and then the wave will go elsewhere?
My speaking is not some idle guesswork based upon browsing the web and reading reports. My office at my previous company was set up as a “zoom room” for the last 3 years, and most of our conference rooms were wired for it.
Zoom didn’t provide the hardware, it was a partner organization. But it was completely and deeply integrated with zoom. Prior to zoom we had a Webex conference room. It had totally different hardware. You had to rip out stuff when we switched to zoom. Not conjecture but historical fact.
Webex conference rooms sucked by the way, they never worked right. You needed a booklet to figure out how to use it, etc. It was a big issue where people pulled their hair out literally every day.
Regarding Webex not requiring training. Yes, if you are computer savvy or you want to do simple things, you didn’t need any. But if you aren’t that computer savvy or if you want to do sophisticated things (pass sharing of documents around from different locations, have a collaboration whiteboard, use it on your mobile phone, jump from meeting to meeting on different devices) there is a need for training.
Once I arrived at the newco, they implemented zoom within a month of my joining (they used GoToMeeting before). I went ahead and trained people as needed. Fortunately we are a small company so it wasn’t that difficult. I still miss having zoom conference rooms (especially my own office!). We will get there one day…
Good discussion, folks; thanks for chiming in. It’s why I started this thread. I did want to respond to this one comment, though:
Now someone in IT says he wants to you to switch to some other provider. Imagine how big a task that would be. Literally every employee in your company would need to be re-trained. Every conference room would need to be ripped apart. Your customer interactions would need to be adjusted.
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We just did this, in fact, at my employer. Full Cisco tele-everything – Jabber, phones, WebEx, videoconferencing (with and without WebEx) rooms, the works. We switched to Zoom in a matter of a few days, really. And, it would seem that with the savings we’re apparently getting, many of the conf rooms are now getting MASSIVE (and I mean massive… the boxes are bigger than my car) new TVs – like 85" or whatever big. While I’m not sold on Zoom being “better” (and I’ve shared already that it’s crashed on my several times while the worst thing WebEx ever did was take too long to dial out to get me on the bridge), if it’s cheaper and “just works” that is A Thing ™ to take note of.
I’m likely not going to bother with the ZM IPO, especially knowing that share lock-up is down the road. Think I’ll wait and see if there is another buy opportunity; or if not, that’s OK, too.
Imagine you have employees all over the world (you are a global company) and you’ve invested a lot of time and energy implementing a collaboration tool. You’ve trained nearly every employee on that platform. Your sales, marketing, finance, R&D, and other G&A teams have 4-5 meetings each day that use it. Your customers are familiar with it, as your inside sales team regularly runs sales calls on it and your marketing team runs webinars.
Sure. But didn’t you just make the case against Zoom as well? Imagine that your current provider is NOT Zoom. And you have all sorts of equipment all setup for Skype for business or Webex, etc.
You are going to switch to Zoom to just save 10%?
My company happens to use Skype for business and we have one button video conferencing in dozens of rooms as well as in a dozen other locations. I have had two Zoom meetings (setup by other companies) in the past month. Both were a bit of a pain, relatively. One had terrible internet audio, the other was OK. One was on site with others back in the other company’s office via Zoom. I asked them why their company chose Zoom. They said Zoom is better than Skype for 100+ people on a video call.
I’m sure that the problem in comparing services is that you have to compare like to like. In other words, you have to see, hear and use the best setup of each provider in a well configured conference room…not only on a laptop.
My guess is that all the money is made on the medium to big company setup…and here switching costs are very high.
Zoom is not going to have 100% marketshare. It is like not investing in Zscaler or Mongo because some companies choose an alternative. The numbers and collateral evidence indicate that Zoom is a special company and they are disrupting the industry.
This said, this IPO is not so much related to fundamentals and more to mania. Everyone wants to get that Elastic or Zscaler bounce and fighting to get in and then out if they can.
The other stocks that had great IPOs went public at much lower market caps. That left a lot more upside as the businesses thrived. Zoom appears to be priced to take better advantage of demand and not going out at a ridiculously low valuation as was the systematic case the last few years. You don’t need to own everything and I will wait a few moths and see what happens.
The usual pattern is the IPO taking off, and then at some point crashing and then rebooting itself. May not happen to Zoom. All depends on how that first earnings call goes. But it happens often. If such happens then I will get interested in investing in Zoom and not just buying into an extremely oversubscribed IPO mania.
Literally every employee in your company would need to be re-trained.
I’ve never received any training on any of the half dozen TC/VC providers or over a dozen migrations I’ve ever been through.
Some maybe more complicated than others but even global MNC Fortune 500 corps I’ve been with don’t bother to train on these tooks. User experience and choice appears to have zero influence in staying or migrating and even jabber and hardware installations don’t seem to make a difference to stickiness or loyalty lock in. Somewhere in corporate a decision gets taken and within weeks the employee base gets switched and user preferences and client continuity be damned.
When we switched from Webex to zoom, we saved more than 50% (I think it was 70% actually). So zoom not only gives you better capability but it was at a substantially reduced price. It was definitely worth it, we saved a bundle.
I don’t see pricing going much Lower but I guess anything could happen.
…The numbers and collateral evidence indicate that Zoom is a special company and they are disrupting the industry. This said, this IPO is not so much related to fundamentals and more to mania. Everyone wants to get that Elastic or Zscaler bounce and fighting to get in and then out if they can.
The other stocks that had great IPOs went public at much lower market caps. That left a lot more upside as the businesses thrived. Zoom appears to be priced to take better advantage of demand and not going out at a ridiculously low valuation as was the systematic case the last few years. You don’t need to own everything and I will wait a few months and see what happens. The usual pattern is the IPO taking off, and then at some point crashing and then rebooting itself. May not happen to Zoom… But it happens often. If such happens then I will get interested in investing in Zoom and not just buying into an extremely oversubscribed IPO mania.
Excellent analysis Tinker, I agree, and will probably do the same.
This is why sometimes it’s best to wait unless your broker can get you in and out for a quick profit if that is what you are after…
Lyft Investors Sue Over Slump, Claiming IPO Was Overhyped
Lyft Inc. was sued by investors who claim the ride-sharing company overstated its market position when it went public last month, leading to a dramatic plunge in its stock price.
Two separate class-action complaints against Lyft, as well as its officers and directors and underwriters, were filed Wednesday in state court in the company’s hometown, San Francisco.
Since going public March 28, Lyft has declined 17 percent to $59.51. That compares with the offering price of $72. The stock sold off sharply amid larger rival Uber Technologies Inc.’s filing for an initial public offering last week, as investors will soon have another option to bet on the potential of ride-sharing and gig-economy.
The investors claim Lyft was exaggerating in its prospectus when it said its U.S. market share was 39 percent. In both suits, the plaintiffs also dinged the company for failing to tell investors that it was about to recall more than a 1,000 of the bikes in its ride-share program.
The company didn’t immediately respond to an emailed request for comment on the lawsuits.
Lyft Investors Sue Over Slump, Claiming IPO Was Overhyped Lyft Inc. was sued by investors who claim the ride-sharing company overstated its market position when it went public last month, leading to a dramatic plunge in its stock price. Two separate class-action complaints against Lyft, as well as its officers and directors and underwriters, were filed Wednesday in state court in the company’s hometown, San Francisco. Since going public March 28, Lyft has declined 17 percent to $59.51. That compares with the offering price of $72. The stock sold off sharply amid larger rival Uber Technologies Inc.’s filing for an initial public offering last week, as investors will soon have another option to bet on the potential of ride-sharing and gig-economy. The investors claim Lyft was exaggerating in its prospectus when it said its U.S. market share was 39 percent. In both suits, the plaintiffs also dinged the company for failing to tell investors that it was about to recall more than a 1,000 of the bikes in its ride-share program. The company didn’t immediately respond to an emailed request for comment on the lawsuits.
This seems off topic but since it was brought up, I guess it’s reasonable to comment. I’m not an attorney so I’m not an expert but I just don’t understand how these lawsuits can be considered legitimate. Stock prices go up and down. There are always known or unknown risks. In any case, I suspect all companies are beset by these nuisance lawsuits/extortion attempts and deal with them as an expected cost of doing business. I doubt there is anything unique in the case of the Lyft IPO. Does anybody else here have a different perspective or expert opinion?
But I just can’t get too excited about Zoom despite the great numbers. They are offering a product in an already reasonably crowded space of virtual meeting software. They have two primary selling points (the way I see it): It works and it’s easy to use.
Agreed. The company I contract for switched over to Zoom from Lync, and as a user can’t say I’ve seen any difference in quality or downtime…both have had issues and fairly frequent equipment downtime events. About a year ago it was much worse than Lync, which led to a lot of grumbling about switching back. Basically, nobody outside of IT knows why the switch was made, it was more disruptive than productive. Perhaps it’s easier to administer. In fairness those issues seem to have been resolved, but it’s also true I’m in fewer meetings now
In any case, this is one where I don’t see a compelling lead in or moat around the product. It’s just a productivity component, and too easily replaced.
