The impact of the novel coronavirus (COVID-19) crisis is leading to a rapidly growing video communication service market, as tech giants battle it out to introduce new remote working services or expand their existing offerings.
The impact of COVID-19 has resulted in an urgent need for remote interactions, as people across the globe have been forced to substitute their in-person meetings with virtual networking sessions, from corporate meetings to music concerts, funerals, weddings and family meetings, with video-conferencing players getting a big piece of the pie.
Yesterday, Google announced it will make its Google Meet video-conferencing service freely available to all Google account-holders, as the platform reaches 100 million daily users.
According to Google, from early May, anyone with an e-mail address can sign up for Meet, formerly known as Google Hangouts, and gain access to many of the same features available to its priced G-suite business and education tools.
Meanwhile, Zoom’s stock reportedly dipped when Facebook introduced Messenger Rooms, a service that will let users invite as many as 50 people to a video call with no time limit, while WhatsApp has expanded its video-calling service to now include up to eight people instead of just four.
As more companies and educational institutions introduce remote working policies, video software providers such as Microsoft, Cisco, UberConference and Zoom Video Communications have reported a dramatic surge in demand for their work-from-home services, as the industry’s revenue projections reach billions of dollars.
Arthur Goldstuck, head of World Wide Worx, says the previous forecast for video-conferencing revenue growth, which suggested the market would double over eight years, was completely overturned by the massive growth seen in the first quarter of 2020.
“The global video-conferencing industry is worth anywhere between $4 billion and $8 billion, depending on who is doing the counting and how they're counting.Traditionally, the enterprise market is by far the largest. But we've seen a significant shift as remote working and remote teaching begins to dominate that market,” he explains.
Massive revenue growth
While the video-conferencing industry had seen steady growth in the past few years due to geographically-scattered business operations and increasing remote workforce management, the biggest driving factor this year has been the COVID-19 pandemic which has led to a flourishing market, even as the global economy takes a huge blow.
This week, Zoom signed a cloud deal with Oracle to use its cloud infrastructure support after the video-conferencing company’s daily users spiked to 300 million, up from 100 million two months ago.
The company’s growth has reportedly contributed to founder and CEO Eric Yuan adding $1 billion to his net worth in the last month.
Microsoft Teams, available through the tech giant’sOffice 365-based collaboration platform, has reached 44 million daily users across the globe, while Cisco says its conferencing platform Webex recorded four million daily meetings on its busiest day on 18 March.
Goldstuck believes that while the greatest appetite is for the free versions of these packages, their growth represents massive revenue increases as more users see the benefits of the commercial paid-for versions of the software.
“This has been reflected in the stratospheric rise in Zoom's share price. But this tends to mask what is happening in the enterprise environment, where we've seen Microsoft and Amazon’s share prices also shooting up as a result of massive growth in cloud usage. Microsoft's first quarter results reflected a 39% increase in revenue, thanks to the massive demand for cloud computing, partly driven by the explosion in use of Microsoft Teams,” he points out.
This kind of growth, notes Goldstuck, is mirrored throughout the industry, meaning the doubling of the market that was expected between 2019 and 2027 is probably all happening in 2020.
Google was an early leader in video-conferencing for the mass market with Google Hangouts; however, it failed to capture the enterprise market when it introduced Meet as a commercial tool, he adds.
“Opening up Meet for free use is an astute move by Google because it then introduces a far wider user base to the full power and versatility of Google as a platform for video-conferencing and collaboration.”
New way of working
In terms of growth beyond the COVID-19 pandemic, Goldstuck believes users will relax into what's already a cliché, of the new normal, where the use of video-conferencing tools will be standard, and free versions will be the most commonly used.
However, the benefits gained from the commercial tools linked to paid-for versions will start growing from a new base of users, he adds.
“So any astute investor who's in it for the long-term is going to look at what the reset base will be after lockdown – the proportion of new users now will be ongoing users later, and then from that level, determine what growth can be expected.
“This is why it is so important for the likes of Zoom, Google, Microsoft and Cisco to ensure their products become bulletproof from a security and scalability point of view, so that there are no reputational issues hampering growth at a later stage,” concludes Goldstuck.
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