Will Zoom’s acceleration continue?

Zoom’s main offering is online video conferencing and, although it is predominantly associated with business meetings, its service is also being used in the education, government and healthcare sectors. This versatility could be one of the reasons Zoom recorded such huge uptake during the pandemic. The number of companies (with at least 10 people) subscribing skyrocketed by 458%, from 66,300 to 370,200, during May-July. Meanwhile, during the same period, its revenue stood at USD 663.5m, up 355% YoY – and as a result of this better-than-expected performance the company revised its growth estimate for the full year to USD 2.37bn-2.39bn. Subsequently, its shares jumped by 47% in intraday trading on 1 September 2020.

According to one Interview, Zoom should be considered as a communication, rather than collaboration, tool. Although these two categories often coexist within competitors’ products, Zoom’s “feature sets and their specialisations will be about augmenting the experience and information capture within a real-time communication system”, the specialist from SHI International Corp explained. Zoom has been noted for its ease of use and high-quality video – and as a result people “will go out of their way to go buy Zoom when their competitors are offering it for free”.

Microsoft Teams, on the other hand, excels at the collaboration side. Indeed, a senior executive at Totalcom Solutions Inc called this player the “biggest challenge” for Zoom. Microsoft’s dominance in office software and Teams’ inclusion in many of the company’s licences make it an obvious solution for companies. What’s more, the way Teams integrates its products “appeals more to corporations on the longer run” than Zoom does. CIOs may therefore be more inclined to stick with Teams, as “users don’t have to jump into other brands or other platforms to do their collaboration”, which offers a more seamless experience. Zoom’s other competitors include Cisco’s Webex and GoToMeeting.

One of the aforementioned experts questioned whether Zoom could open itself up to becoming more of a collaboration tool and competing with companies such as Slack in the future. At present, third-party tools are required for integrating with other platforms on Zoom. As a result, one “uphill battle” the company will face is proving that it is worth buying alongside other products, which can essentially offer the same as Zoom: “they’re going to have to continue to just out-innovate Microsoft, and Slack and several others, on their ability to be valuable as an additional investment.” 

Another pertinent question regarding Zoom’s future performance is what will happen when we return to the office. Although the company had been expanding in previous years, its revenue has soared because of the pandemic – and it remains to be seen how demand will hold up once these conditions start to abate. Some companies have already made working from home permanent, including Facebook, Twitter and Square, but this isn’t feasible everywhere. While there will undoubtedly be a return to work at some point, there has been speculation that more flexible working patterns will become the norm. With productivity up and the potential to keep office costs down, it stands to reason that employers would consider this option. Zoom’s continued acceleration relies on this shift.

Indeed, a former regional director at Shanghai BizConf Telecom Co Ltd believes that, even after the effects of the pandemic evaporate, this habit would become normalised. In China, he predicts that “the penetration rate of video conferencing SaaS software may only drop a little bit, from the current 40% to 30%”, and said it’s unlikely to revert to original levels. If this trend can be extrapolated across the globe, then the TAM will remain substantial for companies like Zoom. Other behaviour shifts could also support this. In another recent Third Bridge Interview, it was reported that 5-10% of business travel might disappear altogether – and this is another way that video conferencing can benefit. “It can replace about 80% of the face-to-face meetings virtually, and so you can knock out more meetings with more people at a lower cost”, an alliance director from Rightpoint Software Inc commented.

While Zoom’s stratospheric rise this year has earned the company plenty of press, its security and privacy issues have been a sour point for the company, particularly in late March. These problems included phishing attacks and uninvited people accessing random meetings. In addition, Zoom was sued over its claim that it used end-to-end encryption (the company released a statement to apologise and said it was using the term incorrectly). It was instead using transport encryption, which protects data while in transit. However, it was reported in April that Zoom would take three months off making new products to focus on improving its security – and announced in June that end-to-end encryption would be rolled out to all customers. As a result, one specialist has a positive outlook: “From what I’m seeing, the way they are really addressing problems, I think I’m pretty confident that they will be addressing it, and giving people the security level that they expect.” 

The pandemic has undeniably changed the way we work and communicate. How long-lasting these effects are, whether the company can continue to overcome the security challenges that are inherent in these types of platforms, and continuing to innovate also form the basis for their future performance.