Zoom or bust?

The popular video platform has erupted onto the scene as a standout during the Covid-19 lockdown, but mirroring its meteoric rise could be an equally dramatic decline, even if remote working becomes more widely adopted post-pandemic.
Read time 4min 10sec
Paul Both
Paul Both

Few companies have been able to find positives in the Covid-19 pandemic. Food retailers saw a spike in panic-driven trade in the period between the President’s announcement of the lockdown and its actual commencement. Telcos will have undoubtedly experienced an uptick in traffic on their networks as people have been forced to work from home. But perhaps the biggest winner has been the video communications platform Zoom.

Founded in 2011 by Eric Yuan, a former lead engineer at Cisco’s WebEx, Zoom Video Communications began offering services in January 2013. By May that year, it had one million participants, rising to 10 million by June 2014.

Its growth has been continually impressive, entering the Unicorn club (startups with $1 billion valuation) in January 2017 and attracting $100 million investment from Sequoia Capital. In April last year, the company went public. The year-end results, released at the end of January this year, show a turnover of $620 million, which is an 88% growth over the previous year, with net income of $21.7 million. Its market cap is close to $40 billion.

In December last year, it hit a then-record of 10 million daily meeting participants. However, in March, its daily users topped 200 million.

With 40-minute sessions being offered for free, there are three additional pricing tiers providing increasing levels of service features, with prices rising to $19.99 per host per month for large enterprises. Its user base includes the full gamut, from individuals and small businesses through to large enterprises and even governments, all adapting to the sudden need to communicate away from their usual premises.

Zoom markets its technology as being easy-to-use, reliable and interactive, and defines its mission as bringing teams together to get more done in a frictionless video environment. Its video-first communications platform provides video meetings, voice, webinars and chat across desktops, mobile phones and conference room systems. And its solutions are highly regarded by analysts too; in the Gartner recent Magic Quadrant for meeting solutions, it was highlighted as a leader.

All that glisters is not gold

As the company’s adoption has boomed in recent weeks, so too have several concerns come to light. I believe Zoom is a company that has grown too quickly, trying to do too much in its short lifespan and, as with so much of today's software, some aspects in the application design have been ignored.

Despite early documentation stating that end-to-end encryption was in place, this seems not to be the case. The term ‘Zoombombing’ has even been coined, which describes the ability of people to gate-crash virtual meetings. While some of its data was ‘mistakenly’ routed through China, there are also allegations and pending court cases that it was passing some user data to third parties, including Facebook.

Zoom has been banned by some organisations, including the Taiwanese and Singaporean governments and Elon Musk’s SpaceX, over these concerns. And a class-action lawsuit has been filed by one of its shareholders claiming lost value due to overstated security measures. The CEO Yuan has said that the company will, for three months, not release new feature updates, but rather focus on addressing the numerous issues raised. Unfortunately, with all the negatives coming out, people's perception may well change, and usage would decline.

What might also threaten Zoom's future is the number of market challengers, both current and incoming. Not least of which is RingCentral (the former employer of Zoom’s current president David Berman), and then there's the likes of Microsoft Teams, Google Hangouts, and of course Cisco’s WebEx – former employer of both Yuan and Berman.

With the stock markets taking a battering in recent weeks, Zoom has been one of the few tech exceptions, with its valuation and share price not suffering anywhere nearly as badly as the rest of the market. As such, it may well be open to acquisition offers, whereas a lot of other companies will feel currently undervalued according to their share prices. Because it's not going to be a cheap buy, which a lot of the big players are probably looking at currently, and given who already plays in the market, I predict any acquisition will be made by an unexpected player, perhaps IBM or even Amazon. As an aside, the company's cloud-native services run on AWS.

Paul Booth

ICT veteran and has been an ITWeb columnist for over 20 years.

But before we get carried away with talk of acquisitions or even Zoom’s own meteoric rise, how the company addresses the concerns raised over the next few months and will undoubtedly shape its future.

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