At present there is the chance that you have made some sort of video call with family, friends or even to a school and most likely it’s been Zoom. The video conference software has taken the world by storm. But in the presence of giants like Microsoft, Skype, Teams and Google Hangouts. Why is everybody using Zoom and how did it become successful?
To find the answer we must go back a few years.
One of the most popular apps right now is Zoom. The origins of the app if you search Google using the keywords ‘Zoom and successful’. You might be surprised to see are articles praising the software that date back to when it was launched back in 2013. The reason for this praise is mostly due to Zoom’s CEO Eric Yuan. In the late 80’s Yuan migrated from China to the U.S. to work in tech. He had the vision that one day technology would allow the existence of portable easy to use video calls. As an engineer Yuan worked for ‘WebEx Communications’ and was a key player from the start in developing their video conference software.
WebEx was one of the first options for video calls in the market and at first it seemed geared for success. So much so, that Cisco acquired WebEx for $3.2. billion in 2007. During this time Eric Yuan climbed the corporate ladder to eventually become VP of Engineering. Under his guidance WebEx grew to more than 750 engineers and had an annual revenue of more than $800 million. WebEx was the most complete video conferencing tools at the time. However, its connectivity was unstable, audio and video would lag, and the installation process was frustrating for IT departments. WebEx managed to get through this because there was very little competition in the market. But things wouldn’t remain the same for long.
Eric Yuan was aware of WebEx deficiencies
In fact, Eric Yuan suggested changes, but the upper ranks didn’t want to make the changes. After dealing with a lot of on-going resistance he ended up leaving the company. His time in WebEx taught him some very valuable lessons.
He said in an interview, “Before I left Cisco I spent a lot of time talking to WebEx customers and every time I talked to them I felt very embarrassed because I did not see a single happy customer, and I tried to understand why that was”.
Eric took all these problems and aimed to create a video conference software to solve them.
Yuan recalled in an interview with Forbes that close to 40 engineers left with him to pursue that goal. Furthermore, the investors believed in it too and in 2011 he raised $3 million to start his idea. Within two years he had created the first Zoom iteration. The key element to his strategy was to create video first. Other companies like Skype had created audio first and then adjusted it to video, which proved costly. The beta testers were very happy with the Zoom product especially after fine tuning some of the issues it had at the beginning. Zoom finally launched in January 2013 and from the offset Zoom was massively successful.
Zoom claimed they had reached 1 million users with its launch by May 2013
Zoom clinched another round of funding this time for $10 million giving the company a valuation of around $25 million. This was followed by a further round of funding in late 2013 securing $6 million doubling the company’s valuation. By 2014 Zoom claimed they had 10 million users on their platform. Tech magazines like CNET highlighted that its 3-in-1 package; HD video conferencing, mobility and web meetings all for $9.99 was cheaper than other options which only provided one or two of these services. Zoom was compatible with browsers like Firefox, Chrome and Safari. It could detect devices instantly and there was no need to have versions for Mac or PC. Also, its data use was low enough that it worked well with slow or weak connections. Furthermore, Zoom had free features that other competitors like Skype charged for at the time like group video calls.
Zoom’s competitor Microsoft would eventually learn from its mistakes and make them free on Skype. But Zoom didn’t tend to users only. It had grown a wider user base and cloud meetings meant intrusive installations weren’t as frequent. Then there was a key factor which was ‘150 milliseconds.’ (150 MS is all it takes for a conversation to feel unnatural.) The Chief Product Officer Oded Gal stated that they had worked hard to ensure that those 150 milliseconds are never surpassed. He insisted that eye contact is essential for success and for happiness. Therefore, Zoom had worked hard to make this happen as easily as possible. It seemed like there was no stopping Zoom.
What do most if not all tech companies want to be?
Profitable. But very few companies are able to get there. By contrast, Zoom seemed unstoppable with all cylinders firing. People love the app and the customer service. As a result, investments came easily from 2014 to 2016. Funding increased and so did the company’s valuation. In January 2017 their Series D round of funding raised $100 million and finally Zoom had reached a $1 billion valuation. In conjunction with the billion-dollar valuation in 2017 there was solid growth in the subsequent two years.
It was now time for the company to go public. In April 2019, Zoom went public and shares went up 72% from the original $36 value and that day Zoom was valued at $16 billion. Not bad at all. Success in turbulent times. The company share price as of May 2020 is $179.
Have you noticed one thing about Zoom’s success?
It all happened before 2020. It got a lot right beforehand and for this reason should come as no surprise that Zoom was a hit when people were sent to work from home. Microsoft, Google, WebEx, GoToMeeting just to name a few didn’t provide a complete package like Zoom. Zoom gave users 40-minute meetings for up to 100 people free.
In addition, it works in slow saturated Internet and Zoom couldn’t have predicted what would happen in 2020. No one could since the entire world was taken by surprise by the situation. During these unprecedented times, searches for webinars, video conferencing tools and VPN spiked in a matter of days if not hours. People needed a tool that was ready for the job and amidst all of them there was one that stood out. Many people started diving right into Zoom to have conferences including Prime Minister Boris Johnson who held a series of Cabinet Conference Meetings via the platform.
No one knows what will happen, especially right now
Experts have highlighted some possible areas of risk for the company and one is it stock. Even if use has spiked its share value is still volatile. In late March stock traded 36 times higher than what the company had estimated for 2021. At the same time, whilst other companies are looking to cut costs and increase employee efficiency; Zoom continues to be a tempting offer in the market. The key moment for Eric Yuan’s Zoom will be turning all those sudden free users into paying loyal customers. Reports have surged that the app is facing security issues and the most recent crisis reports have come up with phishing scams impersonating zoom cloud meetings to retrieve information.
Zoom is a great example of a company that did three things right
Zoom worked hard at solving a big problem, they aimed to solve a problem that affected many people, while focusing on the customer.
By contrast, Zoom might just be a victim of its own success. That we don’t know yet…
Check back here for further updates.