Shortly after a lockdown brought about by the Covid-19 pandemic, one company which has taken the world by storm and has become a household name is Zoom. It has become a synonym for video conferencing services as people use ‘Zoom’ for any web or video conferencing activity they participate in. Zoom has transformed from an enterprise video collaboration platform to a verb as ‘we Zoom’ even when we are on another platform—to use video conferencing services to connect and continue with businesses and online classes as work from home has emerged as a new norm.
With its simple user experience and a freemium model, Zoom dominated the market while it addressed the changing needs of the ‘non-customers’ of the existing video conferencing industry. In June 2020, Zoom announced its April-end quarter results and reported revenue of $328.2 million with a growth of 169%, year-on-year. In the previous quarter, its revenue growth was ‘just 78%’. It is estimated that the Zoom mobile app added 159 million active users between March 4 and May 27; also, its stock rose by 200% in the year till that date. Interestingly 265,400 firms with more than 10 staff were using their videoconferencing platform across the world, a 354% annual increase! The market value of Zoom rose to $63 billion from $16 billion in 14 months since it went public. Founded by former Cisco executive Eric Yuan in 2011, Zoom has come to be rated highly in recent rankings.
What explains this performance? Zoom has successfully expanded a market beyond the boundaries of the video conferencing industry with a non-disruptive creation. The lockdown across the world opened the doors for the need of a virtual connect and Zoom seized the opportunity. Chan Kim and Renée Mauborgne suggest that there are three market-creating strategies with which blue ocean shifts can happen. One, offer a breakthrough solution for an industry’s existing problem; two, redefine an industry’s existing problem and solve it; and three, identify and seize a brand-new problem or seize a brand-new opportunity.
Zoom did not disrupt the market as it did not eat into the shares of the existing players but won new buyer groups with its simple, friendly offering. This emerged as a standard for connecting with others for a ‘face-to-face’ meeting for business and personal needs. Zoom has become a preferred option for many, including governments, startups, education institutes, casual chat-up sessions, and personal parties too.
There have been ‘first movers’ such as Skype much before Zoom and other video-conferencing apps swept the market away in the last few months. One may argue that Skype laid the egg for video communication but Zoom hatched it! In the world of blue ocean strategy, Zoom may be a value innovator as it offered a quantum leap in value for users with an experience beyond just a technology innovation.
In the last few months, Zoom has seen a surge of users but has also faced the brunt of being the target of ‘Zoom bombers’ who gained unauthorised access to a meeting or hijacked the event. Privacy issues have also emerged as a security threat for the users, but Zoom has acknowledged and worked on this. The recently launched Zoom 5.0 is the current update with a higher level of encryption, more so for paid accounts. Earlier in May, Zoom introduced three security features: password requirement for all meetings, waiting room, and screen sharing facility only by the host of the meeting. The latest update gives more power in the hands of the host such as enabling/disabling waiting rooms, in-meeting chat, screen sharing and the ability to remove or report a participant. Successful products typically attract more hackers. Zoom has to live with this even as some corporates and governments have pulled the plug on its usage. Microsoft has gained with the concerns raised against Zoom. They were quick to take steps to improve their market position and to publically state that “At Microsoft we safeguard your privacy by design.”
A large part of Zoom’s success lies in its simplicity. It is easy to get started and the app is lightweight. The interface is intuitive with options of live chat, screen share and its most popular feature, gallery view. In the gallery view, one can see all those who have connected, with about 49 users in a single frame. This feature has been a game-changer leading to higher acceptability of Zoom, when compared to other options such as Microsoft Teams. Realising the importance of the visual connect (being able to see the faces) Microsoft Teams has recently introduced a gallery view similar to Zoom. Currently it has a limit of 9 visible faces on a single screen versus 49 faces on a single screen in Zoom. The education industry has latched on to Zoom due to its inbuilt facilities of breakout rooms, polls, whiteboard, hand raise, recording options, and the ability to connect on multiple platforms of Mac, Android, Windows, Linux and iOS. But is Zoom likely to stay very different from Microsoft Teams and Google Meet?
In the past, companies like Microsoft have worked with competitors and partners to integrate services, but now Microsoft seems keen to ‘muscle in’ and win. Microsoft has reported that in April, Teams grew to have 75 million daily users which is more than twice its March figures. Zoom is comparison recorded 300 million daily users in April 2020. There are other deep-pocketed rivals in the game. Facebook Inc. launched Messenger Rooms in April and Google Meet was made free to all in late April. How is competition likely to heat up in the time to come? Will Zoom sustain its strong position? Will it achieve its sales range projection of about $1.8 billion for fiscal 2021?
Many questions arise: Will Teams, Meet, Messenger with their strong brand names be able to beat the revenue growth of Zoom? Will easing out of lockdown across countries change the growth trajectory? The battle has begun as competition spans out in the video-conferencing industry. Interesting times await.
Views are personal. Sivaraman is a professor at Bharatiya Vidya Bhavan’s S.P. Jain Institute of Management & Research. Kulkarni is an associate professor at Bharatiya Vidya Bhavan’s S.P. Jain Institute of Management & Research.