The outbreak of the COVID-19 pandemic in March 2020 has led to incredible challenges for the global economy, public health care systems and societies as a whole. While the crisis has caused many globally operating firms such as Virgin Atlantic or Hertz to file for bankruptcy (Clifford & Wahba 2020), not all companies have in fact suffered from the pandemic. One astonishing example is the video conferencing company Zoom, that has experienced an unprecedented growth within the last two quarters (Evans 2020). Ironically, in an interview back in 2017, Zoom’s CEO Eric Yuan mentioned that he did not want the firm to grow too fast but rather focus on increasing customer satisfaction (Tonneson 2020). However, due to the massive shift from employee’s physical to virtual presence, Zoom did not have the time to slowly grow its business. For instance, Zoom’s daily users skyrocketed from just 10 million in December 2019 to 200 million in March 2020 (Evans 2020). Additionally, the year-to-year revenue for the first quarter of 2020 increased by 169% (Beauford 2020) – growth figures most other companies can only dream about. So, what exactly is it that Zoom does better than its competition?
Success factors of Zoom
When analyzing Zoom’s video conferencing service, several competitive advantages can be identified. First of all, Zoom allowed its free users to host 40-minute video calls which could be easily restarted after the time limit (Tonneson 2020). In order to further benefit from a growing user base in the long-term, Zoom later lifted the time limit during the pandemic (Hern 2020). At the beginning of the outbreak, Zoom struggled with scaling and security (Beauford 2020). Security lapses allowed malicious users to join a meeting and show explicit images which quickly raised privacy concerns (Evans 2020). However, Zoom demonstrated an incredibly fast market respondance and soon after launched an adjusted version with increased security (Beauford 2020). Besides free services and security, Zoom dominates competitors with respect to video quality and functionality (Tonneson 2020). For example, Zoom allows larger meetings, customizable backgrounds and a ‘breakout room’ option to split participants into smaller groups (Tonneson 2020). From my own experience studying at RSM, the latter function is particularly valuable when discussing case studies in smaller groups during lectures.
Looking into the future
One important question remains: Will the rapid success of Zoom continue even after the pandemic? According to several analysts, Zoom’s momentum will remain even after lifted lockdown regulations, because the service has established itself as the video conferencing standard in many companies (Haider & Rasay 2020). Moreover, many companies find that their employees prefer to work more from home (Hern 2020). As long as high levels of productivity are ensured, employers could be incentivized to allow their employees to work from home, as overhead cost (e.g. rent and utilities) will be reduced (Haider & Rasay 2020). Hence, if the trend of working from home will continue even after the pandemic, Zoom is in a pole position to grow even further. What is your forecast? Do you think that Zoom is able to build on its past success?
References:
Clifford, L., Wahba, P. 2020, ‘A running list of companies that have filed for bankruptcy during the coronavirus pandemic’, Fortune, viewed 16 September 2020, <https://fortune.com/2020/08/04/companies-filing-bankruptcy-2020-due-to-covid-list-filed-chapter-11-coronavirus-pandemic/>.
Evans, D. 2020, ‘How Zoom became so popular during social distancing’, CNBC, viewed 16 September 2020, <https://www.cnbc.com/2020/04/03/how-zoom-rose-to-the-top-during-the-coronavirus-pandemic.html>.
Tonneson, S. 2020, ‘Zoom Becomes Video Conferencing Leader During COVID-19. Why?’, ZoomInfo, viewed 16 September 2020, <https://blog.zoominfo.com/zoom-video-growth-coronavirus/>.
Beauford, M. 2020, ‘ COVID-19’s Transformed Zoom into a Powerhouse’, UC Today, viewed 16 September 2020, <https://www.uctoday.com/collaboration/video-conferencing/covid-19s-transformed-zoom-into-a-powerhouse/>.
Haider, A., Rasay, S. J. 2020, ‘Zoom’s massive growth amid COVID-19 set to continue after pandemic, analysts say’, S&P Global, viewed 16 September 2020, <https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/zoom-s-massive-growth-amid-covid-19-set-to-continue-after-pandemic-analysts-say-58907516>.
Hern, A. 2020, ‘Covid19 could cause permanent shift towards home working’, The Guardian, viewed 16 September 2020, <http://www.miamidadetpo.org/library/2020-03-13-uk-covid19-could-cause-permanent-shift-towards-home-working.pdf>.
Dear Svante,
Thank you for this post. I do believe that Zoom success will continue to grow even after the pandemic. As you mentioned, it gained a larger user base and as people find it straightforward and easy to use, there is no reason for people to switch platform. However, an important point that Zoom should consider is to differentiate themselves from other platforms and competitors that exists or that might emerge. Thus, Zoom should really understand what its customer base is looking for and what additional feature could be beneficial for online meetings to feel as “real” as possible. I do believe that companies all around the world realized the trade off between efficiency and cost reduction, and concluded that online meetings could be a method implemented for still a very long time.
Thank you for your comment, Amandine! I fully agree with you, if a business nowadays does not understand it‘s customers‘ needs and wants, it is very unlikely to succeed in the long-term. Luckily, the internet provides a magnitude of data analytics opportunities that can help companies to analyze their customer‘s habits. Do you have any specific suggestions how Zoom could implement new functions in the future?
Thank you for sharing this interesting and current topic!
I have a good experience with Zoom myself. But without the pandemic I would not have heard of Zoom by now, and I assume a lot of our fellow students with me. I think that Zoom is able to build on this, still ongoing, success.
While using the service for lectures, students and professors figured out that it works well so they might use it more often as digital learning becomes increasingly convenient. Many professors, at least at RSM, did not want to record lectures before which I partly understand. But Zoom has a lot of advantages, from which the main one for me is the solution for noisy classrooms which improves my concentration level, as professors can unmute and mute students whenever they want.
Zoom does have to manage their big growth by developing their features even more by doing market research and get feedback from users. They also must enhance the capacity software, so the service cannot be ‘overused’. In combination with direct network externalities (the amount of consumers who use the same service), this will positively affect their growth and Zoom will have a bright future ahead!
Thank you for your comment Stéphanie! I agree with you that virtual classrooms yield certain advantages over physical lectures, especially regarding noise level. However, I think virtual meetings can‘t replace the „crowd“ atmosphere and lively discussions among multiple students in class. Therefore, I hope we will be able to have this experience again very soon!