Zoom Video Communications Inc. navigates life after the pandemic by acting as if it hadn’t happened the past two years.
With the world closing in 2020, its corporate videoconferencing app has become a name, delivering quarterly triple-digit growth in part by attracting millions of regular people and small businesses. Zoom seems destined to be a consumer tech titanium.
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But while executives have been poetic about facilitating graduation parties and family dinners, they didn’t intend it to be a destination for everyday people and they didn’t maintain momentum. Additionally, corporate customers have deeper pockets and don’t make bad press by zooming in on each other or pretending privacy settings.
“When the pandemic crisis hit us, we weren’t ready,” founder and chief executive officer Eric Yuan said in an interview in March, comparing the experience of jumping from a high school basketball team to the NBA. After two years of trying to monetize demand from consumers, many of whom stay on free 40 -minute calls, Yuan is ready to take Zoom back to its source: a business software provider. Investors are not convinced he can do it.
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Quarterly revenue rose 54% to US $ 1bil (RM4.40bil) in July, but growth slowed to 12% in the period ended in April. And Microsoft Corp., the world’s largest software maker, is Zoom’s main competitor. The stock, which jumped six times to a high of US $ 568.34 (RM2,506.10) in October 2020, is now hovering near pre-pandemic levels and down 6.3% to US $ 104.78 (RM462.03) in June 30 in New York, the biggest intraday decline in two weeks.
The question is whether focusing on the corporate market can revive growth, especially as a harsh economic environment could spur cost-cutting, said Matthew Niknam, an analyst at Deutsche Bank. “The bear case is that anyone who needs Zoom already has it,” he said.
That’s certainly true for day-to-day users and small businesses, who make up nearly half of Zoom’s sales-a level that is now expected to remain unchanged. “You’re not going to sell more products to consumers,” said Meta Marshall, an analyst at Morgan Stanley.
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But Yuan is confident in his approach. Ever been a basketball fan, he said real success takes time, citing the careers of National Basketball Association stars LeBron James and the late Kobe Bryant as players who didn’t win their first championships until in the years after they started in the league.
Part of Zoom’s plan is to sell more videoconferencing licenses. But more important is the company’s expanding line of collaboration tools to include phones, repetitive chat a la Salesforce Inc’s Slack, customer contact centers, digital whiteboards and even physical setups. of the conference room. Earlier this month, the company released a new service bundle – Zoom One – to highlight its expanded tools and strategies.
“We’re not the only meeting company where everyone knows us,” chief finance officer Kelly Steckelberg said in an interview, adding that the business’s customers are driving almost all of the growth expected. Zoom’s reputation for easy-to-use software has driven the success of its other services, Steckelberg said, and its leading non-video product, Zoom Phone, has sold three million user licenses.
In fact, public recognition of Zoom after the pandemic is “truly surprising” and should help drive business in the future, said Vanitha Swaminathan, director of the University of Pittsburgh’s Katz Center for Branding. “The fact that people say‘ I will Zoom with you ’is evidence that the brand has become deeply embedded,” he said.
The capacity of artificial intelligence will be a major difference for Zoom’s new services, Yuan said. Earlier this year, the company released a tool for salespeople who mine video calls for sentiment data to help close deals, though Microsoft announced a similar feature. Zoom also spoke about learning beyond emotional analysis, a controversial science that has reaped anger from activists concerned with bias.
Customer contact-center services are another part of the enthusiastic investment, despite competition from companies such as ServiceNow Inc., Twilio Inc., and Genesys Cloud Services Inc. years due to falling component prices, it bought a smaller startup, Solvvy, to strengthen its AI communication capabilities. Even though the products are outside Zoom’s core collaboration portfolio, many of the company’s customers still use on-premise contact centers, making it a great expansion target, Yuan said.
Zoom isn’t the only pandemic darling suffering from an identity crisis. Companies like Shopify Inc, Peloton Interactive Inc and Netflix Inc that are at the top of the locked-down world have been battered by falling shares and have had to adjust their strategy, price and expectations.
One issue these stay-at-home stocks face is what happens as offices fill up. Zoom isn’t worried-Steckelberg said that even financial firms that return to the office five days a week don’t cancel licenses and many new services are available for the office.
As for bad economic sentiment, Steckelberg wouldn’t say there’s no impact, but enterprise demand remains strong, and Zoom doesn’t plan to eliminate jobs.
But if the recession hits, corporations could cut back on redundant software products. The typical business has four paid videoconferencing services, according to research firm IDC. Steckelberg said Microsoft Teams – Zoom’s biggest competitor – is often seen as free because it’s included with other services, but added that Zoom is competitively priced and many customers are willing to pay more.
An October survey by the corporate chief information officer from Morgan Stanley found that Teams slightly surpassed Zoom as the primary videoconferencing system used by companies. IDC estimates that Zoom’s market share is almost equal to Teams while Cisco System Inc.’s Webex, another leading competitor, has slipped.
Customers leaving Webex are one of the main sources of new corporate business, says Tyler Radke, an analyst at Citigroup Inc. Earlier in the pandemic, most of these businesses were signing up for Zoom. Now, they seem to be almost entirely choosing Microsoft Teams, he said.
For its part, Cisco said it leads the enterprise segment in revenue, citing a report by Synergy Research Group. Jeetu Patel, Cisco’s executive vice president for collaboration and security, said Zoom didn’t maintain its advantage during the pandemic, and Webex sees Teams as real competition. “It’s like a basketball game – things can change in seconds.”
While Microsoft’s rise is a concern, videoconferencing is ultimately large enough to support many providers, and the recognition of the Zoom name should provide a buffer, says Marshall, of Morgan Stanley. “CIOs often say they still maintain the same systems.”
Yuan said the competition was a motivator, citing Zoom’s steps to hire more than 4,000 new employees, improve internal processes and lay a clear formula for growth. He added that after two years of responding to relentless requests, it was finally time to focus on the company’s long -term plan.
How did Yuan describe the mindset for the future? “Work better and evolve to make sure you’re a very good player at the NBA level-that’s exactly what we do.” – Bloomberg