How Does Zoom Make Money?

How Does Zoom Make Money – The Zoom Business Model

Zoom is an easy to use cloud based conferencing tool allowing users to interact with each other virtually, using video, audio and a chat function.

Not only is it user friendly but the video and audio output is of high quality.

The business model of Zoom is subscription based.

It charges its users recurring subscription fee.

Another way Zoom makes money from is hardware products promotion.

The company was founded by a former Cisco executive back in 2011.

As it was a superior product, it started attracting attention instantly, leading to its IPO in 2019.

Due to the pandemic, people changed their working habits and started working mostly from home. As a result, Zoom became popular globally aiding this relatively new working concept.

How Does Zoom Make Money? Let’s find out.

The Zoom Business Model

What Is The Zoom Business Model?

Zoom is a SaaS application based on the cloud.

Users can use this platform to interact with each other on a virtual basis.

This can happen using a chat, video, audio or a combination of functionalities.

Zoom is used for video conferences of up to 500 people or simple one on one meetings.

The participants can do screen shares fro better meeting coordination and information distribution.

It has launched 2 core products:

  • Zoom Meetings & Chat
  • Zoom Rooms & Workspaces

All one needs to hold and attend Zoom Meetings is desktop and mobile applications or just a web browser.

The Chat is an extension of Zoom Meetings. The participants can communicate with each other using chats, create groups and do file sharing. You know, because sharing is caring!

Rooms and Workspaces work a bit differently. Businesses hold online meetings using a range of hardware products such as PCs, laptops, tablets, cameras and microphones. They are targeted to large corporations needing to hold virtual meetings across their different offices.

Zoom has collaborated with hardware manufacturers to develop its own hardware products. DTEN ON and Poly X Series are some examples.

Here is a list of hardware and software products Zoom has developed:

  • Zoom Video Webinars: a conferencing tool aimed at businesses looking to host online events with video, audio and screen sharing on a large scale
  • Zoom App Marketplace: to enhance their product experience, Zoom users can install third party apps like Trello, Slack or HubSpot
  • Zoom Phone: this is not a traditional phone. It is a cloud based phone system packed with features ranging from dialing personas, call recording and voicemail to automated attendants and intelligent call routing

All Zoom products are available worldwide. Some of the biggest Zoom clients are companies such as TransferWise, Rakuten and Uber.

The Story Behind Zoom

The founder of Zoom is Eric Yuan, a former executive of Cisco WebEx, a video and web conferencing company.

Yuan founded Zoom 2011. Before this, he had 14 years of experience as an engineering teams leader. First at WebEx then, at Cisco following WebEx’s acquisition by Cisco in 2007.

In fact, he was the first software engineer of WebEx hired in 1997.

Fan fact, Yuan applied for a visa 9 times.

After joining the Cisco workforce, he identified the company’s weaknesses in slow product iteration and listening to customer feedback.

For example, WebEx conference users were complaining about the fact that every time they were logging in, the system had to identify whether they were using iPhone, Android, PC or Mac, slowing the process down.

Moreover, when the number of participants was large, the system would get overloaded resulting in poor video and audio quality.

Lastly, the features available were very limited. For instance, there was no screen sharing for mobile phones.

In 2011, Yuan decided it was time to leave Cisco and start his own venture, taking 40 engineers from Cisco with him.

His company name was Saasbee, rebranding later to Zoom.

Initially, it hard to find investors as they believed it would be impossible to penetrate the market when WebEx, Google Hangouts and Skype were present.

Yuan used his network, including the former CEO of WebEx Subrah Iyar, securing a $3 million seed round investment.

Two years later, Zoom’s first product was launched and according to TechCruch, a $6 million Series A round was announced as well.

There was no longer a limitation on the platforms that could be used to hold video conferences and the software could host up to 40 participants. This made Zoom a leader in video conferencing.

Its price was highly competitive as it was the cheapest option out there, making it the preferred solution right away.

Zoom started with hosting in excess of 140,000 virtual meetings, serving over 1,000 businesses.

Come May 2013, Zoom reached the milestone of 1 million participants.

The company kept evolving its products, adding more features and expanding its customer base.

In 2019, most tech companies like Uber, Pinterest and Lyft were operating at a loss. Zoom on the other hand, was profitable and announced its IPO in April 2019.

During the recent COVID times, Zoom became even more popular as became the go to video conferencing platform.

However, people started getting concerned about possible security breaches.

The New York Times reported instances of Zoombombing or else, Zoom trolling where unintended individuals were becoming meetings participants.

According to CNET, the US Senate as well as government entities of other countries advised people not to use Zoom.

The security nightmare didn’t end there.

There were reports claiming that at least 500,000 Zoom accounts were on sale in hacker forums and the dark web.

To tackle the security issues, Zoom acquired Keybase, a messaging platform.

It is worth pointing out that despite the security mess, the Zoom stock (ZM) tripled in value.

How Does Zoom Make Money?

Zoom has adopted a freemium model.

Its customers, both individuals and businesses, can use Zoom Meetings and Chat for free for up to 100 participants for 40 minutes.

If additional capacity or more features are needed, there is a paid version.

The company adopted this freemium model to enable potential users to get to know the product first leading to benefits from word of mouth advertising.

Below are the different revenue streams of Zoom.

Zoom Meetings & Chats

Zoom Meetings & Chats is Zoom’s main product. People can participate in virtual meetings or chat. To join the meetings, they can use desktop or mobiles apps. For up to 100 participants and 40 minutes duration, the service is free. For the premium version, the price is $14.99 per month per host or $149.90 per year per host. This works out to $12.49 per month per host.

Zoom Rooms & Workspaces

Zoom Rooms & Workspaces are video conferencing systems for conference rooms. Participants can use their own hardware or purchase Zoom certified hardware. The certified hardware providers pay Zoom commission for every hardware sale they make. Customers pay a monthly subscription fee of $49 per month  per conference room or $41.58 per month billed annually.

Zoom Phone

Zoom Phone is a cloud based phone system enabling users to make quick VoIP calls without using video, using the same tools as in the Zoom Meeting suite. They charge $14.99 per host per month or $12.49 per host per month billed annually.

Here are some of the Zoom Phone features:

  • Call recording and voicemail
  • AI call management
  • HD audio
  • Auto-attendant and IVR for call redirection

Zoom Video Webinars

Zoom Video Webinars allows organizers to broadcast Zoom meetings to a group of up to 10,000 people that are view only attendants . They can do screen sharing including video and audio. The attendees can chat or use the questions and answers feature. Webinar registrations can be mandatory or optional, it is up to the organizer to select the preferred settings. The webinars can be evergreen or occur only once.

Pricing starts from $14.99 per month per user. A purchased webinar licence is also a requirement. There is no fixed price as it depends on the number attendees.

Organizations in the following industries can enjoy special rates:

  • Finance
  • Education
  • Government
  • Healthcare

Zoom Valuation, Revenue & Funding

Zoom has raised a total of $146 million from venture capitalists such as Emergence Capital, Horizons Ventures and Sequoia Capital.

In its IPO in April 2019, it raised an additional $356.8 million. It started trading in the Nasdaq stock exchange under ZM.

The year before it went public, Zoom registered $7.58 million in net income.On the other hand, most of the other tech companies that went public at the same time, were operating at a loss.

Zoom is currently, valued at $47 billion.

What Next? How Does Zoom Make Money

Hope you now have a better understanding of how does Zoom make money.

Zoom is a global phenomenon offering the right tech solution to people at the right time and price.

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