Zoom and Schools

[BobbyBe]

Last March, Zoom offered schools free access to its product. More than 100,000 schools were on the platform.

I just visited their education page. While there is still a free tier, it seems as though they are already funneling schools into a paid tier.

The minimum number of hosts is 20. Most schools should have more than that. Our school has 150. For 20 hosts, the charge is $1800 annually.

How much of that goes into the quarter just reported? Schools are just starting, but they probably signed up over the summer.

If half of the 100,000 schools are using the paid version, and we are very generous and say that they are all paying the minimum 20 host, 50k*1800, that is $90 million in revenue, most of which will evaporate when schools go back to in-person learning.

That number could easily be way more. I wouldn’t be surprised if they were pulling in north of 300 million from schools (spread over this and next quarter).

Has anyone thought about this aspect of Zoom’s revenue?

I’m long Zoom for the long term. One analyst that I respect, Chaim Siegel, just predicted they will hit between $10-$11 in EPS for the next year. I’m just wondering about the education revenue. What are your thoughts?

[KayakerRW]

Has anyone thought about this aspect [education] of Zoom’s revenue?

Yes, as a recently retired teacher, this side interests me, and I see tremendous potential for Zoom, even post Covid.

Early this year, Zoom was not planning on expanding into schools at anywhere near the rate they have, but once the need arose, they have adjusted rapidly to meet schools’ needs, to fix problems quickly, and to innovate for future use far beyond what most schools imagined 8 months ago.

In talking with former colleagues and reading education articles (and using it myself), I am impressed with what already can be done with Zoom, and even more impressed with their plans for innovation.

For example, learning stations (where students rotate to different parts of a classroom, sometimes with the same small group, sometimes with different groups) are an effective way to help students of all abilities learn. Many classes had their rooms set up to facilitate this approach. Replicating that experience in a standard video conference was difficult, so Zoom and others added breakout rooms.

Breakout rooms are an incredibly useful feature for teachers using Zoom; however, one drawback was that students couldn’t select a breakout room on the spot which created more work for teachers.

Zoom has dealt with that concern, and just announced that

Coming in September, students will have the ability to select a breakout room and move between rooms. This allows even greater flexibility in the way you structure your small group learning. You can create themed breakout rooms or reading groups and invite students to move between them based on their interests in topics. The possibilities are endless, so get creative!

https://blog.zoom.us/teachers-top-features-for-securing-virt…

This is feature will make Zoom even more valuable to teachers and help them plan and conduct more engaging lessons with their virtual learning classes.

This quick response to teachers’ needs shows that Zoom knows what to focus on in the education field in order to improve its product and expand its market.

Zoom’s feature page for teachers provides clear guidance and discusses a number of useful features that a company only focusing on the business market wouldn’t consider.

Zoom is also working on its virtual reality meeting room offerings, which has potential for education.

Post-Covid, there are a number of potential uses for Zoom in education:

1. Teaching students who struggle in a typical school environment.

2. Teaching students with chronic illnesses that cause significant absenteeism.

3. Offering advanced or elective classes that only 1 or 2 students at a school might want to take

4. Encouraging students to learn from home to reduce crowding (cheaper than building new classrooms or buying trailers for classes).

5. Teaching on bad weather days when transportation is unsafe (“Yeah, it’s a snow day” may become obsolete in some districts).

6. Pairing students/classes with students/classes from other states/countries to study an issue. [Note: in the late 1980’s, early 1990’s, I had my students participate in a telecommunications (closed network) writing project where they shared writing/research about different subjects with classrooms around the world. The exposure to different viewpoints and learning how to not over-react to different opinions was invaluable. I can imagine incredible opportunities for even more cooperative learning projects with Zoom].

I haven’t seen the numbers on how many schools are paying for it now, but it’s unlikely that they will completely drop Zoom even after returning to more typical in-person education.

Colleges and universities already offered virtual learning classes before Covid; Zoom will let them do this even more effectively, so they have an incentive in paying for Zoom or risk having their virtual classes become less effective and less desirable. As young people and parents question the high cost (and associated debt) of the traditional on-campus experience, some will seek high quality on-line offerings. Traditional universities would be wise to develop and expand on-line offerings.

Finally, K – 12 schools will spend on technology, but spend very little on educating teachers how to use that technology, so switching to new technology is often frustrating for teachers. Teachers are finding Zoom easy to use. Many schools started with it because it was free, which made its many virtues apparent.

Post-covid, as Zoom charges and drops the free option, teachers will push their districts to keep Zoom as a platform rather than having to switch to a new platform (if any emerge as potential competitors).

All the best,

Raymond

[mattmacauley]

This is a phenomenally insightful post, Raymond. I second just about everything in it. The points about the breakout rooms and other innovative educational opportunities cannot be understated.

I’m in higher education, and I’d like to add a few things from my perspective.

When I first heard that Zoom was giving away free trials in March, it immediately reminded me when I was in grade school (80s and 90s), a small cap computer company named Apple gave away computers to schools all over the country. Part of this was because they valued education, but also it was clearly a long-term business play as well. Hook 'em when they’re young, and you’ll dominate the market for years to come. Eric Yuan, Hero, also deeply values education, humanity, and he happens to be a top notch businessman.

Schools everywhere are planning to go back face-to-face soon, but I’m almost certain that most of these plans will get delayed. Of course, they have to plan for it anyways, because plans need to be in place – and they’ll happen eventually, whether it’s this fall, or next spring, or the year after that. Not a waste of time. And when it does happen, it will likely be a blended/hybrid model at first. They’ll have to prepare to pivot back to online-only at any moment, and Zoom will be essential. Schools won’t be dropping it anytime soon.

And then? Well, some bells simply can’t be unrung. When I used to have on-campus office hours, they would conflict with some people’s schedules. And they were inconvenient for students who were across campus, or off-campus. It shouldn’t be, but it’s also more intimidating to show up alone, in person. I’d usually get just a few students a week, sometimes none at all. Now, I have daily office hours on Zoom at 7pm, that I call “Happy Hour”, because it’s more inviting. Every single day, without fail, multiple students show up. Last week, more than half of one of my classes was on there all at once. This is an incredible shift. Even when things get back to normal (I’m not saying post-COVID, because I don’t think there will be a post-COVID era), I’ll probably continue to have evening Zoom office hours. I’ll no longer need to walk 15 minutes to get to a faculty meeting, find a sub when I’m sick, or when I’m traveling for a conference. When my 1-year-old is old enough to go to high school, she’s gonna find the concept that schools used to be canceled (!!) for snow as amusing as the fact that we used to call the radio to request a song, or go to the store to get a movie.

I had to use Blue Jeans for a meeting recently and it just didn’t compare with Zoom. It showed me a fixed number (9, I think?) of random people in the grid, but I couldn’t scroll and see others, and sometimes couldn’t even tell who was speaking. Every educator in the country is going to get fluent and skilled in using Zoom and all of its innovative features, and I just don’t see any competitor making much progress. (For an example of such features, see the “OK Zoomer” workshop, http://dougshaw.com/okzoomer/. One of my colleagues took it and gave rave reviews.) In a decade, we’ll look back at Zoom hitting the scenes like what happened with Google in the early 2000s. Remember how there used to be Lycos, Altavista, Yahoo, WebCrawler, Excite, AskJeeves, etc.? Do they even exist anymore? I have no idea. That’ll be the fate of Skype, WebEx, and BlueJeans. Will one of the other big players try to compete, or is that a lost cause? Microsoft tried with Bing, and that failed miserably. (For fun, check out those old search engines on the Wayback Machine at https://archive.org/web/ ).

And Zoom is as likely to retain their dominance in their niche as Facebook is. Does anybody really think that Apple or Microsoft could launch a product that could compete with Facebook? Or that they will even try? Not worth the time and effort. The untouchable Google did, with G+, and that failed miserably, a la Microsoft and Bing. What percentage of people in the US use Facebook regularly? I bet it’s like 80-90%. That’s not going to change in 20 years. It’s gonna be the same story with Zoom. Especially because every educator in the US will be fluent with it. Moreover, almost every college graduate henceforth is going to be well-versed with Zoom. Heck, every high school graduate will. These are the people who will be the next generation of workers, managers, executives, company founders. Zoom will be as ingrained in them as the QWERTY keyboard is. Good luck getting them to switch to Dvorak, Yahoo, or BlueJeans, or Celsius. And regarding future growth and TAM, look internationally. They still have tons of room to grow. And if every company in the US is locked on Zoom, global adoption is inevitable.

As BobbyBe said in his initial post, the paid version of Zoom for schools starts at $1800 for 20 people – that’s $90/year, or $7.50/month per person. Compare that to how much schools pay for utilities, or office supplies. What school isn’t going to pay for that? There’ll be a revolt if they don’t. Heck, pay for it by dropping my landline. Or add it to parking fees, since I’ll save more than that in gas by working from home twice a month. And it’s in Zoom’s best interest to keep those prices low, because of the reasons I outlined above.

One more thing that I want to mention in passing, but not really get into a debate about, since it’s just my prediction. A few months ago, I posted my thoughts about “Zoom in 15 years”. (https://discussion.fool.com/zm-in-15-years-34440249.aspx) I still stand by everything in there, but I want to add one more item that I missed, because of the timing with current events. We all know Eric Yuan is very interested in social and racial justice. I’m sure everyone is aware about the talk about police reform that’s all over the news. I don’t know how things will play out, but it wouldn’t surprise me at all if in 15 years, Zoom is an essential part of police department infrastructure and the body camera industry. I don’t know enough to speculate about details, but I’m sure it’s been on Eric’s mind, and that he and his company will be involved in national conversations going forward.

Finally, one OT comment that I’d like to share. In March, after my school bought Zoom licenses for everyone, and then hearing about Zoom’s free trial for schools, I knew it was the real thing. So I bought a bunch of it, or so I thought. Then Saul said that he built it up to his largest holding, which I knew meant ~20%. I looked at mine, and it was 4-5%. And then it quickly went up >$150. The realization was like a slap to the face. He moves fast, I don’t. Even though my conviction wasn’t any less than his. Lesson learned. Luckly, I was able to get back in when it dropped, and bought a whole bunch more, and I have an average cost basis in the low $120s. It’s now 28% of my portfolio, and I don’t plan on selling a single share. Unless the story changes, why the heck would I, given my views on it from this post, and my earlier “ZM in 15 years” post? However, I still struggle with moving into positions quickly. I didn’t build up LVGO or FSLY as big as I should have (but still much better than I would have pre-Zoom), but I’m still learning, and at least know what I need to do. I recall Muji saying something along these lines last month as well, how he still has room for improvement. This is such a quintessential example of what I’ve learned from the experts on this board, which I probably wouldn’t have picked up anywhere else. Thank you to everyone who has made this community what it is. You know who you are!

[TMFMktmusician]

I’m a public school administrator and we switched to Zoom

I think this is an enormous market opportunity, even beyond COVID.

The two determining factors in our decision to use Zoom were its reliability and the breakout rooms feature. That’s huge for education

Another under discussed use is for training teachers. Education conferences and professional development can be replicated rather seamlessly on Zoom.

The pandemic opened the door (wider) for Zoom in the education space and I think this is only the beginning.

[JAWalck]

I suspect most schools will keep some type of online learning after the pandemic to help children with chronic illness, suspensions, learning disabilities etc… I also suspect that virtual teaching will become required training for all teachers and this will become a teaching specialty. Smaller schools can collaborate and share resources. The possibilities are just starting to unfold.