Leading video conferencing platform Zoom seems to be zooming out of momentum as it cut its annual profit and revenue forecasts as demand for the video-conferencing platform cools off from pandemic highs.
The emergence of competitors such as Microsoft Teams, and Cisco WebEx coupled with lifting of lockdown restrictions which has pushed organizations to engage more in physical interactions have forced Zoom Video Communications to cut its annual profit and revenue forecasts as demand for the video-conferencing platform cools off.
Eric Yuan, zoom founder
Shares of the pandemic darling fell 7% in extended trade after it reported its slowest quarterly revenue growth on record at 8%, as people switched to in-person meetings from virtual conversations.
Finance chief Kelly Steckelberg told analysts on Monday that the firm’s online business was likely to decline by 7% to 8% in fiscal 2023.
Shares fell 7% in extended trade after it reported its slowest quarterly revenue growth on record.
Founded by a former Cisco executive, Zoom was a little-known company when the pandemic hit in early 2020, but posted triple-digit revenue growth at the peak of the crisis as people stuck at home took to video conferencing to communicate.
Zoom now faces an uphill task of onboarding high-paying clients to sustain its growth, and has seen expenses rise as it shells out more dollars to attract customers which have been reining in spending amid high inflation.
Operating expenses grew 51% to US$704-million in the three months to July.
The company forecast annual revenue between $4.39-billion and $4.4-billion, compared to its earlier outlook of $4.53-billion to $4.55-billion. It now expects annual adjusted profit per share between $3.66 and $3.69, compared to $3.70 to $3.77 forecast earlier.
“Zoom remains a ‘show-me’ story, where the company believes there’s a lot of potential and higher growth ahead, but Wall Street clearly doesn’t believe it yet,” Rishi Jaluria, MD of software at RBC Capital Markets, said.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Before COVID-19, spending on business travel totaled $1.5 trillion a year (about 1.7% of world GDP). Now it is down to a trickle, as countries have closed their borders and social distancing has taken hold. Planes have been grounded, hotels are closed, and executives are not earning frequent flier miles. Many travel and hospitality jobs are feeling the consequences. But if this were all there was to it, the impact, however large, would probably be much smaller than the decline in general international tourism and easily reversible, once the pandemic is over.
Alas, recent research by Harvard’s Frank Neffke, Michele Coscia of IT University in Copenhagen, and me, just published in the peer-reviewed journal Nature Human Behavior, finds that the impact of closing down business travel may be much larger and more durable. To understand why, we first must ask ourselves why business travel was so big to begin with. And why had it been growing at three times the rate of global GDP, despite the availability of Skype, Facetime, WhatsApp, or just e-mail – all tools that predate both COVID-19 and Zoom?
Ricardo Hausmann, a former minister of planning of Venezuela and former Chief Economist at the Inter-American Development Bank
Was it all about perks, or was that $1.5 trillion mostly money well spent? If so, why, and what are the implications if those activities are now restricted?
Clearly, when we started this research, we could not have imagined such a complete shutdown of business travel. But our analysis does shed light on the possible consequences.
At the time, we were studying technological diffusion. Technology, we argue, is really three types of knowledge: embodied knowledge in tools; codified knowledge in codes, recipes, formulas, algorithms, and how-to-do manuals; and tacit knowledge in brains. Of the three, tools and codes are easy to move around, but knowhow moves very slowly from brain to brain through a long process of imitation, repetition, and feedback, as when learning to speak a new language or to play a musical instrument.
As Malcolm Gladwell argues in his book Outliers, it takes 10,000 hours of practice to become good at something. Faced with the difficulty of moving knowhow from brain to brain, people long ago figured out that it was much easier to just move the brains. Many scholars, including us, had studied the movement of knowhow between firms, regions, and countries through labor mobility, migration and diasporas.
But what about business travel? In previous work, we had shown that it is poorly correlated with trade or even new flows of foreign direct investment. It seems to be much more closely correlated with the number of establishments in one country that are owned by firms in another country.
According to Dun & Bradstreet, there are 1.5 million such establishments in the world. To run a firm, you need not only information, but also the capacity to figure things out. You need knowhow. One of the advantages of multinational corporations and global consulting, accounting, and law firms is that they can move that capacity to different points in their network.
With anonymized and aggregated data on business travel provided by the MasterCard Center for Inclusive Growth, we were able to figure out if business travel was important in technological diffusion by making knowhow available to recipient countries. That is exactly what we found. Business travel from countries that are good in a particular industry translates into higher productivity, employment, and exports in those industries in the recipient country in the subsequent three years. Moreover, the variation in business travel associated with differences in bilateral visa regimes enables us to interpret this relationship not just as a correlation, but as a causal link.
The countries that benefit the most from inflows of knowhow through business travel are Austria, Ireland, Switzerland, Denmark, Belgium, Hong Kong, and Singapore. There are no developing countries among the top 25 recipients. The best performers in the developing world are Panama, Uruguay, Serbia, Malaysia, South Africa, and Chile. The countries that share their knowledge more profusely are Germany, Canada, the United States, the United Kingdom, South Korea, France, and Japan. India, Brazil, and China rank 12th, 15th, and 17th, respectively.
According to our estimates, a complete permanent shutdown of international business travel would shrink global GDP by over 17% of GDP, an order of magnitude larger than the 1.7% of GDP that was being spent in 2018, before the pandemic. The worst-affected countries would be those that currently benefit the most from inflows of knowhow.
The pre-Covid-19 world as we knew it increasingly relied on the ability to source knowhow globally. Economies that were able to connect to these knowhow flows benefited from higher productivity, output, and exports. Much of the developing world was quite peripheral to these flows, but whatever they got was still very important for their diversification and development.
Many people, including me, are finding that they can be as productive working from home and connecting through Zoom as they were in the office or traveling for business. But this may be a short-term illusion that varies significantly by activity. The International Monetary Fund has been able to disburse financial assistance to many countries quickly, by doing deskwork, talking through Webex, and then just wiring funds. But development banks have had much more trouble putting together infrastructure projects, where physical presence is unavoidable. Local firms have had trouble building structures, repairing equipment, or figuring out how to improve operations without access to global in-person knowhow.
Our research implies that the world will pay a significant price for the shutdown of business travel, which will become apparent through lower post-crisis productivity growth, employment and output. Time is a non-renewable resource and the lost travel is not coming back, even if future travel returns to normal. Although the shutdown of travel is unavoidable, given the public-health imperative, the costs are real. These costs will rise further if we forgo the global investments in vaccinations and certifications, needed to reopen travel safely as quickly as possible. And, obviously, countries will pay an even higher price if they use COVID-19 as an excuse to advance a restrictive visa agenda, as US President Donald Trump’s administration tried to do by restricting professional visas and barring foreign students whose campuses do not reopen in the fall.
To be sure, the pandemic and technologies such as Zoom is likely to show that some business travel will really not be necessary. But our research suggests that moving brains to share knowhow will be just as crucial in the post-COVID-19 world as it was before, and that the consequences of shutting down business travel will be long-lived.
Ricardo Hausmann, a former minister of planning of Venezuela and former Chief Economist at the Inter-American Development Bank, is a professor at Harvard’s John F. Kennedy School of Government and Director of the Harvard Growth Lab.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
As part of efforts to strengthen its security amid outcry globally, Zoom has acquired Keybase, an encryption and security service meant to serve as a secure home for your online identities. The acquisition is meant to quickly add a team of security-focused developers to Zoom, which has been widely criticized in recent weeks for lapses in security inside its increasingly popular videoconferencing software. Keybase co-founder Max Krohn will now lead Zoom’s security engineering team. The Keybase team is supposed to help Zoom build end-to-end encryption for its videoconferences “that can reach current Zoom scalability.” Zoom has been working on building true end-to-end encryption for videoconferences since coming under criticism over the last month for making its calls incorrectly appear to be fully encrypted. The company plans to publish encryption designs on May 22nd, but there’s no specific timeline for when the feature will be finished.
founder and CEO of Zoom, Eric Yuan
The founder and CEO of Zoom, Eric Yuan says that “Keybase brings deep encryption and security expertise to Zoom.” Zoom announced a feature freeze last month to focus on security, and this addition “significantly advances our 90-day plan to enhance our security efforts.” Keybase launched in 2014 as a directory for public encryption keys and has since grown to include secure messaging and file-sharing features. Keybase profiles are meant to serve as the center of your online identity: Keybase verifies you, and it verifies that you actually own other online accounts that belong to you. From there, people can visit your Keybase profile and feel confident that any account claimed is an authentic one. Usually, these profiles include encryption keys that can be used to securely contact a person.
It’s easy to imagine ways Keybase could be used to address Zoom’s recent security issues, but it’s less clear what will happen to Keybase in the meantime. Krohn is taking over Zoom’s security team — and the company hasn’t made any statement as to what this means for future development of Keybase products. In an email to The Verge, a Zoom spokesperson said “leaders from Zoom and Keybase will work together to determine the future of the Keybase product.” Keybase’s tech will be built into Zoom somehow and included as part of Zoom’s paid offering, according to CNBC. The startup currently has 25 employees, according to the report.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
While Zoom stole the show at its First Public Offering and investors smiled home, feeling better that at last here is a technology company that can work, Zoom’s CEO, Eric Yuan, is the man to laugh last. That the company was valued at $9.2 billion from the IPO and that Yuan is now a new billionaire in town is not a story to be dismissed. Eric Yuan who recently shared his most private life with Forbes Magazine, shared deep insights about what we did not previously know about the 49-year-old billionaire.
From Burning Down His Neighbor’s Cottage to Being Denied Travel Visa
Life has been tough, but not to the degree we see it in Yuan’s case. On a normal day in Chinese eastern Shandong Province, in fourth grade, Yuan was supposed to be home playing or stuck to his parents’ TV set, but he would choose to go on a holy cause of making the planet better and safer by collecting construction scraps to recycle his parents’ broken-down chopper. The aim was not to rid the environment of wreckage, but of course — as you would expect from all serious minded entrepreneurs — to make profit. But then the facility needed only metal to be reconstructed and sold, and Yuan having none of those, decided to set the whole thing on fire, which would have almost caught and razed down his neighbor’s home but for the quick response from firefighters. This is just the beginning of the frustration in his life. Years later, he would be at the US embassy (after a Mathematics and Computer Science degree from the Shandong University of Science &Technology and a marriage at the age of 22) applying for grant of visa and having his visa applications denied for 8 times.
“I told myself, okay, great. I’ll do all I can until you tell me that I can never come here anymore. Otherwise, I’m not going to stop,” Yuan said, in annoyance.
Failure To Innovate Is Another’s Opportunity.
Yuan won! In the summer of 1997, he started work in a two-year-old Webex, based in California, which went public in July of 2000 and was acquired by Cisco for $3.2 billion in 2007. Yuan was very sad about this move by Webex, nevertheless. He finally left Webex (then Cisco’s acquisition) because his bosses at Cisco wouldn’t let him rebuild Webex, leaving behind a job so lucrative that he was managing 800 people. Yuan’s reasons:
“Someday, someone is going to build something on the cloud, and it is going to kill me,” Yuan told Bill Tai, a venture investor who became one of the first backers of Zoom. “Cisco was more focused on social networking, trying to make an enterprise Facebook,” he said.
“ Three years after I left, they realized what I said was right.”
Concerning the loss of the security of his job and earning, Yuan told his wife:
“I know it’s (going to be) a long journey and (is going to be) very hard, but if I don’t try it, I’ll regret it.”
Within months, Yuan found out that he would shoot his shot at video conferencing business against Microsoft’s Skype, Google’s Hangouts, Cisco leading the market share, and other multiple startups already on ground. The idea of video-conferencing for Yuan “would require flawless execution to win,” said one investor who did not invest in Zoom.
When Zoom launched, it had several key differences from the crowd.
Its lightweight Web client could figure out almost instantly what kind of device you were using, meaning Zoom did not use different versions for Mac or PC.
It also presented a software layer that shielded any bugs that usually follow updates from web browsers like Chrome, Firefox or Safari.
Zoom could do business even at 40% data loss, so it would still work on a very slow internet connection.
And at $9.99 per host per month ($14.99 today), it undercut its rivals. Zoom customer service chief Jim Mercer was then working at competitor GoToMeeting when a colleague opened a Zoom account to see what the hype was about. “One click, we were in, and there were 25 feeds of participants at the same time,” he says. “We were like, ‘What is this voodoo? How are they doing it?’ ”
So Much Has To Depend On Trust and Goodwill At The Start-off Stage.
Leaving Cisco for Zoom, Yuan had to confront the hurdle of every startup: money! To get his first set of 30 engineers for Zoom, he had to convince his friends, including investors to write him $250,000 checks. He was able to get more — $3 million from Webex CEO, Subrah Iyar — before he could get Zoom (then Saasbee) started.
The success of the business under Yuan meant Zoom would further raise $6.5 million from Li Ka-shing’s Horizons Ventures, $30 million round from Emergence Capital in 2015 and $115 million Series D round in early 2017 by Sequoia, making the company worth $1 billion. Eric Yuan’s personality would become so influential that Zoom did not even work hard to prove that it is worth its claim. According to Zoom’s partner in Sequoia, Carl Eschenbach,
“We were going through all the due diligence, and I remember saying there have to be a thousand Eric Yuans in the world, because everyone we spoke to, they knew Eric, big or small.”
Building A Product Is One, Believing In It Is Another
Yuan surprised partners at Emergence when he turned up for his pitch event there and instantly insisted that every investor download the Zoom app and join him for a live video conference of the presentation, says partner Santi Subotovsky. This shock would come again later that year at large corporations. Eric Yuan never missed any opportunity to practice what he preaches. He makes sure every investor in the room had downloaded the Zoom App before proceeding, whenever he raised money from venture capital investors.
“Customers have always said, ‘Eric, we’ll become your very important customer, you’ve got to visit us,’” says Yuan. “I say, ‘Fine, I’m going to visit you, but let’s have a Zoom call first.’’
Don’t Celebrate Yet; Success May Just Be Temporary
After the IPO on Monday, it appears Yuan is not taking his new found billionaire status to his head.
Although, Eric Yuan shares his office with his product chief and friend Oded Gal, a fellow Webexveteran he hired away from BlueJeans Network three years ago, he is rarely there. He is either off for a new product launch, or he has taken up a temporary desk with a team he wants to focus on by sitting side-by-side with them. Yuan has mostly been with the engineers since Zoom announced a voice product in October, now called Zoom Phone. Zoom Phone is one of several major product lines Zoom has boasted of in recent months, alongside an update to its conference room bundle called Zoom Rooms. Though an increasing number of Zoom’s users log in via smartphone–one out of six today, Yuan says–many big firms still depend on hardwired conference rooms. Zoom provides the software; partners like Dell, Logitech and Polycom supply the TVs, cameras and speakers.
In the meantime, don’t expect Yuan to let his newfound billionaire status go to his head. Back in his cubicle the Monday after the IPO, he kept strolling down the Zoom Twitter account for customer testimonials to retweet. Employees, who showed up around the world for the IPO ceremony to wave to their boss over a live feed in Times Square tweeted— what else?
“You go celebrate one day, and that’s it,” Yuan says, of a mentor who told him IPO is like graduating from high school “You don’t want high school to be the peak of your performance, right?”
Charles Rapulu Udoh
Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.
Zoom’s recent IPO success shows some deep insights about going to market in a crowded space and doing so well. When Eric Yuan started the company in 2011, he might have defined the company as a provider of HD video conferencing, online business meetings, webinars, and mobile capabilities, all in one collaborative solution. But then, following Zoom’s most recent SEC s1 Filing and its first IPO, in which its shares initially priced at $36 a share closed at $62 per share and the company suddenly raised nearly $350 million through the IPO, it appears that Eric’s dream is far from over.
Here are the reasons we think Zoom’s success story stands out.
1. Zoom is the Not The First Video Conferencing App
Before Zoom came into full operations in 2013, there are other video-conferencing app on the web-conferencing market. There is the BlueJeans which was founded in 2009; Lifesize which was founded in 2003; Adobe Connect, formerly Macromedia, which was released in 2012. CyberLink U Meeting, a Taiwanese multimedia software company, founded in 1996, even Skype among others.These companies are already players who have pitched their tents both in broad and niche industry areas.
2 Zoom Is A Simple Product
With Zoom, you can start or join a 100-person meeting with crystal-clear, face-to-face video, high quality screen sharing, and instant messaging — for free! The Award winning Zoom brings video conferencing, online meetings and group messaging into one easy-to-use application. Zoom platform offers a simple and consistent user experience across all meeting spaces whether it is on desktops, executive offices, open spaces, huddle rooms, and large conference rooms or on phones. This unified platform makes it possible for multiple use cases such as online meetings, large marketing and training webinars, business chat/instant messaging and presence, file sharing, and integration with third-party platforms to happen. Thus, Zoom’s strategy is to provide a product that can offer various similar services. Video conference is one, but meetings and webinars and others are another.
3. Freemium Helped Zoom to Spread Its Message Faster
With Zoom, Eric Yuan was out to test his product and it worked! Zoom’s video conferencing features are free for everyone to use. Pegging its 40 minutes conferencing limit is also as a result of intense research efforts. Zoom came down to the 40 minutes limits because it learned through the research that 45 minutes was the standard duration people are willing to go for in a video conference.
Even with the 40 minutes limit people have gone ahead to use their freemium model. Apart from Freemium model, Zoom has also used reward for word-of-mouth recommendation from customers to power up their customer acquisition.
In our case, we really want to get the customers to test our product. This market is extremely crowded. It’s really hard to tell customers, “You’ve got to try Zoom.” Without a freemium product, I think you’re going to lose the opportunity to let many users to test your products.
We make our freemium product work so well. We give most of our features for free and one-to-one is no limitation. That’s why almost every day there are so many users coming to our website, free users. If they like our product, very soon they are going to pay for the subscription.
This approach has resulted to:
Over 3 million people participating in a Zoom meeting in 2013 alone. The number increased to 30 million in 2014, 100 million in 2015, and over 1million participants every single day.
4. With Zoom’s Success, Horizontal Saas Has Worked.
As a SaaS program, Zoom meetings are hosted software services, meaning it permits users access to the video conference software , to use the program over the internet instead of having to host the software program on the company’s own server. The horizontal model means that a lot of other similar services, across different industries could be provided using Zoom. In this case, it is the responsibility of Zoom to maintain and update the software, as well as maintain their server to host meetings. Zoom also provides security for this process and ensure that the software is executed regularly. This reduces the cost of hosting online meetings for businesses, and makes Zoom meetings ideal for hosting small business video meetings.
Zoom also makes it possible for the host to not to worry about the technical aspects of the software, and focus instead on planning and hosting the meeting.
Zoom’s success at its first IPO shows that horizontal Saas has indeed worked. Concur, the first Saas company to go public could not go beyond the crash of 2001.
5. Zoom is Empowering other AI platforms like Fireflies.ai
With Zoom, other AI platforms are becoming integrated to the whole video conferencing experience. Fireflies.ai recently launched a conversational AI web app that transcribes meetings, highlights portions worthy of keeping in your notes, identifies call participants, and even automates assignments doled out in a meeting. The Fireflies service is integrated with a number of workplace communication apps including Slack, Skype for Business, Zoom, BlueJeans, and Google Hangouts Meet, and it can log notes in CRM systems like HubSpot and Salesforce. Fireflies can be invited to join your calendar to automatically record calls, but can also transcribe and offer insights from prerecorded audio. It is not likely that these AI platforms would want Zoom, and other similar brands to go soon. They would have to join in blowing the trumpet.
These are reasons Zoom is an unrelenting product of the future.
Charles Rapulu Udoh
Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.
