By Rebecca Shields
Your commercial awareness dose
There were many names we learnt in 2020; COVID-19, Pfizer and AstraZeneca, to name a few. But one of those new names was Zoom. Now firmly in the zeitgeist for one of the most infamous years in modern history, it is a far cry from Zoom’s humble beginnings. The app went from 2.2 million users at the beginning of 2020 to ending the year with more than 477 million downloads and being the fifth most popular app of the year. Having just announced they want to raise $1.5 billion through their largest stock offering to date, amid growing concerns over Zoom’s relevance in a post-COVID-19 world, how viable is this offering?
Since the invention of webcams, video calls have been common. Initially used for calls to relatives abroad, they now rule the business world, due in part, to the increased globalisation of companies. This reliance on video calls has changed over the last year as more employees have started to work from home. In 2020 in the UK around 50% of all workers in the UK did some form of work from home, 86% of those people reported to the government that it was due to the global pandemic.
Zoom Inc. utilised this shift in working conditions. They offered to the market a unique proposition. Users of Zoom could have 40-minute video chats of up to 100 people for free. None of their competitors had anything close to this. For example, Skype only allowed 20 people per call. During the beginning of the pandemic as the US announced a national state of emergency Zoom Inc. lifted the 40-minute time limit on calls for all schools, securing the education sector.
The app is not without its faults. Zoom has faced criticism for its security and privacy. Issues with hackers, “Zoombombing” and users’ credentials being exposed are all common on the app. In November 2020 Zoom announced they would be launching a new security system to eliminate these problems. Concerns over third party data sharing and issues with video encryptions have tainted the companies otherwise a meteoric success.
This success was indicated in the company’s first public offering in 2019, where they raised $447.9 million in net proceeds. In November 2020, the company recorded $772.2 million in quarterly sales, not bad for a company that was founded in 2011 and didn’t have its first IPO until April 2019. However, this changed dramatically in December 2020 when Zoom’s stock fell by almost 30% after the announcement of vaccines being approved for distribution. Inevitably this means a reduction in the use of video conferencing software as people return to office life and pre-pandemic normality returns.
The other concern for Zoom is their competitors have now caught up. Microsoft Teams and Google Hangout have both gone through revamps to be more user friendly. They have increased the number of people allowed per video call for free. Microsoft Teams has the advantage of being a part of the wider Microsoft Office service and for companies who have purchased Microsoft Office, Teams comes as a part of that package. This combined with businesses cutting costs due to the recession means Zoom is no longer a necessity.
Zoom CEO Eric Yuan does not appear to be concerned. He has stated that he believes virtual meetings will continue at a popular rate and more people will remain working from home instead of returning to their offices. Yuan has stated that he is now concentrating on enhancing Zoom experiences using AI and improving security issues. This is an optimistic outlook and one that should be expected of the CEO however Zoom’s stocks plummeting following the announcement of the Pfizer vaccine and concerns over market saturation indicate we could be witnessing the decline of Zoom.
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