By Ulvi Hagverdi.
Your commercial awareness dose!
Zoom Video Communications, Inc. (Zoom), with only ten offices and slightly over 2500 employees, is worth more than the total value of leading British investment Bank Barclays, American giant automaker Ford Motors, and Europe’s biggest airline Ryanair, which has in total 291,000 employees. Sounds quite absurd and incorrect, right? The statement is actually true, at least according to the global investment community in 2020.
Zoom is a communications technology company based in San Jose, California, delivering video-telephony and online chat services for teleconferencing, telecommuting, distance education, and social relations purposes. Eric Yuan, a former corporate vice president for Cisco Webex, another videoconferencing company, founded Zoom in 2011 after resigning from his role at Xebex, together with other 40 engineers.
Even though Zoom has achieved to attract a vast pool of investment from different types of investors and has reflected a steady growth, the company’s stock’s value and the number of its daily users still soared following the Covid-19 breakout. The company estimates that its revenues will increase to $1.8bn. at the end of 2020, compared to $623 million in 2019, while its share price grew almost 600% since the company’s IPO back in 2019. Nearly 200 million customers worldwide utilise the platform, compared to 10 million users in January.
Although some competitors of Zoom, such as Skype, Microsoft Teams, and Google, also recorded notable profits and growth in revenue during the Covid-19 period, due to its enormous value growth and short history, Zoom’s expansion has even been named as ‘“one of, if not the greatest quarter in enterprise software history” by some analysts. But what is the story behind such an incredible success?
First, we need to look at Eric Yuan’s (Zoom’s CEO) unprecedented approach to bringing innovation to the videoconferencing industry. As a previous employee of Webex, Eric was highly familiar with the deficiencies and incompetences of this industry. In his interviews, he always states that he wanted to launch a consumer-friendly videoconferencing tool that brought ‘happiness’ to the users, was easily accessible and speedy. These features can indeed be found at Zoom’s graphics, software and consumer service. Once the globe was hit by pandemic and humans were given stay-at-home orders, the platform turned out to be the place for happy-hours, family gatherings, social debates, from being a typical office or academic platform.
Nevertheless, such a sudden growth inevitably comes with liabilities and privacy and security concerns. As some part of the company is based in China, Taiwanese government curbed out the use of the app over security fears this year, while teachers in Singapore are banned from using Zoom following a very serious Zoom-related accident. Microsoft, Google and Tesla also prohibited the use of the platform at their corporate softwares. Even the term ‘zoombombing’ emerged after plenty of bored hackers and trolls hacked different video conferences all over the world during the quarantine period. Security analysts and reporters have reviewed the company negatively following its lack of transparency and poor encryption practices.
Particularly, the powerful privacy softwares of Microsoft Teams and Google obliged Zoom to take more stringent measures to eliminate the security and privacy concerns. Subsequently, the Chief Executive, Eric Yuan declared in his blog that the platform will not be updated with any developments for 90 days and its engineers will focus on strengthening the privacy and security arrangements of the app. In July 2020, Eric confirmed that his team has released 100 new safety features during the previously mentioned period and has addressed adequate security and privacy worries.
Overall, although there might be a drop in the number of people using Zoom to socialise once we get back to the “normal”, the changing corporate and academic practices can ensure the ongoing expansion of the company. The company’s in-depth visions aim to provide a full range of voice, video and chat services to a broader purchaser base including both businesses and consumers. For its sudden growth to be acknowledged by the bear-market theorists and short-sellers, the company arguably needs to increase its profits significantly to close its tremendous profit margin and valuation gap.
Written by Ulvi Hagverdi and edited by Stephanos Christodoulou.
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