When you want to do a video conferencing, the first name that comes to mind is Skype. However, over the past years, with the development in video calling facility, some other apps have gained attention. One of them is Zoom.
Zoom gains popularity for online meetings or video conferences worldwide. From small to larger enterprises, along with private individuals, prefer Zoom, the cloud-based software as a video-calling app.
Former Cisco Executive Eric Yuan founded Zoom in 2011 in San Joss, California. But the market was already populated by Microsoft’s Skype, Google Hangouts and Webex by Cisco. So, how did Zoom stand up in such competitions?
In particular, Zoom took the competitive advantage of the demand for work from home in the pandemic situation of COVID-19. This cloud-based conferencing tool provides frictionless and high-quality audio and video chat for free up to 100 attendees for 40 minutes.
Are you curious about how does Zoom make money? The answer lies in its “freemium business model”. Zoom makes money through reoccurring subscription fees on its products in addition promotion of hardware products. While other apps primarily focus on audio than video, Zoom gives video priority for smooth interaction. Let’s get into details about the business model that earns revenue for the app, Zoom.
The Inspiring Story of Zoom
The history of Zoom is quite impressive. Eric Yuan came to the US in 1997 from China after his visa getting rejected for the 8th time. He joined WebEx, a web and video conferencing application, as one of the first twenty software engineers. In 2007, Cisco acquired WebEx, and eventually, Eric became VP of Engineering.
Eric noticed that customers were unhappy with their product. Whenever users logged into the WebEx conference, the system had to identify the users’ product version, i.e., PC, Andriod, Mac, or iPhone. Thus, it slowed down the process. Also, if many people logged into the same conference, the connection got too poor to operate. Consequently, it gave poor audio and video quality. Moreover, it didn’t have a screen sharing feature for mobile users.
To fix the problem, Eric proposed his new video conferencing idea to the company but got rejected. So, he decided to make his own company to create a new version of smartphone-friendly video technology. He left Cisco, followed by 40 Cisco engineers.
Primarily, Eric started the company as Saasbee. However, he struggled to convince Venture Capital firms to invest initially. As there were strong competitors in the market like Skype, Google and Cisco, the firm denied investing in Saasbee. Luckily, former WebEx CEO Subrah Iya trusted Eric and his in-depth knowledge in technology and gave $3 million in seed funding. After a year, Eric renamed his company Zoom Video Communications, Inc.
Initially, Zoom launched a beta version, which allowed only 15 people to attend the video conference. But Zoom faced difficulties due to its substandard technology, difficult interfaces and aging, complicated proprietary architectures and expensive deployment.
However, Zoom improvised its video calling features. In 2013, Zoom launched its first product and raised $6 million Series A round. It allowed 25 people to join the conference at the same time. Zoom is different from other video calling apps for its vast interoperability with various devices, third-party applications and operating systems. Zoom can easily be set up to the desktop and mobile or tablet and now allows 100 participants for free. By March 2020, Zoom had 200 million daily users.
How Does Zoom Work?
Zoom is a cloud-based Saas application for virtual interaction. You can use Zoom as a mobile app or desktop app for Windows and macOS. Additionally, Zoom is available as an Outlook plugin, as well as Firefox and Chrome extensions.
It’s efficiently easy to host, attend or schedule a one-to-one or group meeting with Zoom. Moreover, Zoom provides you a screen sharing feature and invites others to join, record the session, start or stop any video, turn on off-mic, live chat and change your screen name. Even you can broadcast Facebook live and create polls with Zoom.
Significantly Zoom is more famous for large-scale organizations to conduct business meetings worldwide with thousands of participants at the same time. Zoom meetings & Chat, along with Zoom rooms and Workspaces, are the core reasons for its popularity. However, there are other products and applications like Zoom phone, Zoom Webinars, and App marketplace.
How to Host a Zoom Meeting?
You may follow the steps to host a meeting in Zoom.
- Download and install the Zoom app from the Google Play Store or Apple Store.
- Open the app on your device and click on Sign Up Free if you haven’t done yet.
- If you don’t have the app, then go to zoom.us and select Host a meeting to start the installation.
- If you have the app installed, then Sign in using your email id and password or your Google or Facebook account.
- Press the downward arrow.
- Select Start with video > New meeting.
- Similarly, you can join a meeting by clicking Join a meeting.
How Does Zoom Make Money?
As already stated, Zoom offers businesses and private users free video meetings and chat. Its freemium business plan allows 100 users to join at a time meetings for 40 minutes only.
However, Zoom’s premium package benefits users with more participants, timings and advanced features. It allows you to host group meetings with up to 10,000 participants at a time.
Let’s see how does Zoom make money through its premium offerings and other services.
1. Zoom Meetings and Chats
You can host or attend Zoom Meetings on desktop, browser or mobile. Chat is the extended product used to interact, create groups, share text and image/audio files over Zoom.
As a consumer, you can access Zoom Meetings as a free or paid service. There are four types of packages.
- Zoom Basic: It’s for a personal meeting. This free version allows unlimited one-to-one meetings of up to100 participants for 40 minutes.
- Zoom Pro: It’s suitable for small teams, costing $149.90/year/license or $14.99/month/license. It provides up to 100 participants, unlimited group meetings, 1 GB recording per license and social media streaming.
- Zoom Business: It’s suitable for small and medium businesses, costing $199.90/year/license or $19.99/month/license. It provides to host up to 300 participants, single sign-on, manage domains and company branding. Additionally, it offers cloud recording transcripts and branded email templates to send invites.
- Zoom United Business: This plan includes all the features of Zoom United Pro. You can avail of unlimited calling facilities within US and Canada. It hosts meetings of up to 300 participants.
- Zoom Enterprise: It includes the features of business and more.
2. Zoom Rooms and Workspaces
When it comes to large team meetings, Zoom Rooms and Workspaces is the best option. Zoom Rooms is a software-based conferencing system allowing businesses to run video utilizing hardware like a mobile, tablet, computer, microphone, camera and more.
However, you need an additional subscription to use Zoom Rooms. With the subscription fee of $499/year/room, you can have up to 49 rooms.
Furthermore, Zoom provides installation support for Zoom Rooms. If consumers have conference rooms setup from the existing vendors, it’s easy to start Zoom meetings using the Zoom conference room connector. If not, then purchase necessary tools from Zoom’s hardware partners DTEN or Aver.
It is an effective way of how does Zoom make money. As Zoom earns a percentage from the providers for each hardware sale, in return, Zoom promotes their products and services.
3. Zoom Phone
The cloud-calling solution with Zoom phone enables you to have a quick call without video. The subscription fee is $14.99/month for every host.
Once you become familiar with Zoom Phone, use these additional features to enhance your experience.
- Messaging
- Voicemails
- Call recording or blocking
- AI-based call routing
- Auto-attendants and IVR tools to redirect calls
- Secure HD audio to ensure clear conversations.
4. Zoom Video Webinars
Although Zoom Meetings and Webniars provide similar features and functionality, they have some differences.
In Zoom Meetings, participants can share screen, turn on their audio or video and see other attendees. In contrast, Zoom Video Webinars allow view-only attendees. That means the host controls their view. The participants can interact with the host via Q&A, Chat or answering polling questions.
Further, in Zoom Webinars host can unmute any attendee if he likes.
Webinar license is started at $14.99/month up to $64,900.00 /year/license. It allows up to 10,000 participants starting with 100. Depending on the license purchased, the number of participants can attend a video webinar in Zoom.
Furthermore, Zoom acts as an app marketplace to make money. The existing customers can install their-party applications like Slack, HubSpot or Trello to enhance the product experience.
However, Zoom also offers packages for various industries like healthcare, education, finance and Government sectors.
How Much Revenue Zoom Earn Through Funding?
By now, you have an idea of how does Zoom make money. But there is another way by which Zoom earns a valuable profit. Zoom raised $146 million through six-round of Venture Capital Funding. Zoom’s top investors are the National Science Foundation and the Corporation of Public Broadcasting along with Horizon Ventures, Emergence Capital, Ame Cloud Ventures, etc.
So, is Zoom Profitable? The revenue model for Zoom is rapidly growing every year. Although the company ran in loss initially and even lost money in 2018, it made record money in 2019 and 2020. Zoom made a profit of up to $622.7 million in 2019. The amount has been raised to $663.5 million by 2020.
Is Zoom Safe to Use?
Although it has vast popularity, Zoom has been reported for many privacy issues and security fraud. The lawsuit claim that many Zoom accounts, as well as email id and photos, were sold on the dark web. As users often sign in to Zoom using Facebook id, hackers can easily access their private information.
Even Zoom collects its users’ data and sends to LinkedIn as a sales prospecting service, known as LinkedIn Sales Navigator. The lawsuit claimed that Zoom does this without permission from users.
Sometimes, hackers take over the user’s account by installing malware on the computer using Zoom software. They attend on-going meetings and secretly listen to audio calls, known as Zoombooming.
Before 2020, Zoom didn’t provide end-to-end encryption to its users. As a result, they can access all the video/audio files. To solve this issue, by the end of May 2020, Zoom offered end-to-end encryption for paid users only. But from October 2020, this feature is given to both paid and non-paid Zoom users for better security.
However, Zoom is still working on its privacy issues. Many users still have reported scam/fraud calls/ participants during the meeting or selling their personal information. To ensure how does Zoom make money to work securely, it needs to upgrade the feature.
Summary
During COVID-19 in 2020, Zoom has gained more popularity in the video conference platform. This video-first cloud system went on viral due to the high demand for work from home. The founder Eric Yuan set its bar of success through product development, strategic and engineering direction.
One can enjoy high quality of audio and video streaming using Zoom. Its premium packages as well as other services makes Zoom a real money-making app.
Zoom now has 300 million daily participants and 148.8 million users. Starting with 40 engineers only now, Zoom has 2854 employees with a record revenue increase of 88% in 2020. This sustainable business model provides customer satisfaction with easy communication and collaboration. Hence increment in profit.