Business

Zoom Business Model | How Does Zoom Make Money?

When we think about video conferencing, the first thing that comes to everyone’s mind is probably ‘Skype.’ For years, Skype has served as the hub for both official and private video calls. 

However, with the existence of several applications created exclusively for video chatting or video communication over the years, the Skype app has seen a downfall in its popularity.

At the same time, the ‘Zoom‘ app has received a lot of attention lately. Zoom has become an important video communication tool for corporates to conduct regular official meetings, particularly during the lockdown era caused by the COVID-19 pandemic.

However, along with the appreciation, the Zoom application has sparked controversy too. There was news regarding the user data breach of Zoom Communications. Many countries in the world banned the usage of Zoom, though the popularity and users of Zoom kept increasing day by day. 

However, we are not here to discuss the controversy today. We’re here to discuss why Zoom App is so popular, What is Zoom Business Model and How does  Zoom makes Money, allowing it to earn a healthy profit.

What is Zoom App?

Zoom is a cloud-based conferencing platform that enables users to communicate remotely through audio, video, and chat. The biggest advantage of Zoom is the ease to use of the app and high-quality audio/video communication that keeps its user happy and satisfied at the same time. 

Zoom’s business model is based on charging companies a recurring subscription fee for various services. Additionally, Zoom earns money by promoting hardware products.

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Zoom Video Communications, Inc. (Zoom) is a San Jose, California-based communications technology corporation. It offers video conferencing and online chat services via a cloud-based peer-to-peer software network. 

You can use Zoom for telecommuting, teleconferencing, distance education, and social interactions.

The platform is free to use for video conferences of up to 100 participants and a time limit of 40 minutes.

Zoom paid subscriptions are available for longer or larger conferences with additional features. Zoom Rooms, a feature targeted toward business conferences, is available for $50–100 per month.

Learn about, How Does Honey Make Money?

What is the History of Zoom App?

Zoom Video Communication Ltd. was established in 2010 by Eric Yuan (CEO), a former executive at Cisco WebEx, a company that specializes in video and web conferencing.

Eric is a Chinese citizen by birth and decided to move to the United States from China in the mid-1990s for his career prospects.

He was denied the first time he applied for a US visa since his business card listed him as a consultant; US customs mistook Eric for a part-time contractor.

Following the first rejection, the immigration services denied Eric’s Visa seven more times, but Eric refused to submit.

“I told myself, ‘All right, fine.’ I’ll do whatever I can before you inform me that I can never return here again. Otherwise, I will continue.” were some words by Eric after his visa rejection.

He managed to reapply for two years until US authorities granted him a visa on his ninth attempt.

Yuan spent 14 years managing engineering teams before founding Zoom – first at WebEx and then at Cisco following WebEx’s acquisition by Cisco in 2007.

He started his career at WebEx as one of the company’s first software engineers in 1997.

Eric joined Webex as a founding engineer. At the time, the organization had a half-dozen staff and operated in the space of real-time collaboration.

Webex expanded rapidly and went public in 2000, riding the dot-com bubble’s exuberance wave. Cisco purchased Webex for $3.2 billion in 2007.

Eric had ascended the ranks into becoming VP of Engineering by that time.

Eric continued working on Webex, which was acquired by Cisco, until 2010, when he discovered that most Webex customers were dissatisfied with the product.

He frequently saw how disappointed Cisco’s customers were with its failure to respond to their requests and the sluggish pace of product iteration.

For example, each time a user signed into a WebEx meeting, the company’s systems had to determine which version of a product to execute (Android, iPhone, Mac, or PC), which added time to the process.

When there were many people on the line, the link becomes seriously strained, resulting in poor audio and video quality. Additionally, the apps omitted mobile-friendly features such as screen sharing.

Eric pleaded with his employers for a year to redesign the Webex, but they refused.

Yuan decided to pack his bags and set out on his own in 2011 – bringing along a team of 40 Cisco engineers to start his own venture known as Saasbee; the business soon changed its name to Zoom. 

Zoom initially struggled to attract investors. Nobody believed that Zoom could replace established giants such as Hangouts (by Google), Skype, and WebEx with any other video conferencing app.

Fortunately, Yuan’s network, which included previous WebEx CEO Subrah Iyar, and his extensive technical expertise enabled him to raise $3 million for Zoom’s seed funding round.

Zoom released its first product two years later, in 2013 (along with an announcement of a $6 million Series A round).

The product’s consistency quickly made it a market leader in the video conferencing industry. 

Video conferences can be hosted on any hardware device (desktop, smartphone, or tablet) and can simultaneously accommodate 40 participants.

Due to Zoom’s considerably lower cost, consumers flocked to the platform immediately. Soon after its launch, the company grew to a customer base of over 1,000 companies that hosted 140,000 meetings. 

By May 2013, Zoom had surpassed the elusive 1 million users mark.

Zoom has quietly added a growing range of features and customers to its website over the years from its launch.

The company’s continued growth resulted in its initial public offering (IPO) in April 2019. 

Zoom shocked many investors at the time because it was already profitable. This was in stark contrast to its technology peers, such as Uber, Lyft, and Pinterest, which continued to lose money at an alarming pace.

Zoom has risen to global popularity in recent COVID times when many businesses use it to hold meetings and coordinate their work processes. With its meteoric rise to global renown, the organization faced criticism for its handling of security issues.

Numerous instances of uninvited individuals attending current meetings have been registered, a phenomenon dubbed Zoombombing. For example, a Holocaust memorial was recently attacked and defaced with images of Hitler.

Numerous government departments, including the United States of America and Germany, have urged their administrative staff to stop using Zoom.

Additionally, it was alleged that over 500,000 Zoom accounts were being offered on the dark web and hacker forums.

In response to these incidents, the organization enhanced its security features and acquired messaging tool Keybase. Despite these setbacks, the company has been on a roll, almost tripling its stock value.

How Does Zoom Work?

Zoom is a cloud-based software as a service framework that helps you communicate with your team virtually. Zoom is available as a smartphone application and a desktop application for Windows and macOS. Additionally, Zoom is available as an Outlook plugin and browser extensions for Firefox and Chrome.

Zoom makes it incredibly simple to host, attend, or schedule one-on-one or community meetings. Additionally, Zoom includes a screen sharing function that allows you to invite others to enter the session, record it, start or stop any video, switch on or off the off-mic, live chat, and change your screen name. 

Additionally, Zoom allows you to broadcast live on Facebook and build polls.

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Significantly, Zoom is more well-known for enabling large-scale organizations to hold simultaneous business meetings with thousands of participants worldwide.

Zoom meetings and chat and Zoom rooms and Workspaces are the primary reasons for the company’s success. There are, however, additional products and applications available, including the Zoom phone, Zoom Webinars, and App marketplace.

A major difference between Zoom and other video conferencing applications, such as Skype, was that Zoom was founded on a video-first philosophy. The existing apps developed audio first and then adapted to video, resulting in cost increases.

How Does Zoom Make Money?

As previously mentioned, Zoom provides a diverse range of products aimed at both individual customers and businesses use.

The business model of Zoom is freemium, ensuring that consumers can use the company’s Meetings and Chat product for free. This enables users to hold group meetings with up to 100 participants for up to 40 minutes without any charge.

You must purchase a premium subscription of Zoom you need additional advanced features, or simply a larger capacity (in terms of users and time) is required. 

The freemium model enables potential consumers to familiarize themselves with the items, which increases Zoom’s visibility through word-of-mouth.

Basically, Zoom makes money through these services offered by the Zoom Corporations:

  • Zoom Meetings & Chats
  • Zoom Video Webinars
  • Zoom Phone
  • Zoom Rooms & Workspaces

Checkout, How McDonald’s Makes Money?

Zoom Meetings & Chats

Zoom Meetings and Chats is the company’s flagship product, enabling users to initiate a video conference or chat directly inside the application.

Zoom Meetings enables users to communicate via audio and video. Additionally, it is Zoom’s most frequently used and influential service.

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Zoom meetings include Zoom chat, which enables users to share text, pictures, audio, and video files.

Users can access the application through various channels, including Zoom’s desktop app,  mobile applications, and browser extensions.

Although the basic plan is free, it comes with limitations such as a 40-minute time limit and a maximum of 100 members for group meetings.

Zoom provides Pro, Corporate, and Enterprise plans for small teams, small and medium-sized firms, and large companies, with features tailored to the customer’s size and needs.

Zoom Video Webinars

Zoom Video Webinars is a video conferencing service that enables users to broadcast Zoom meetings to an unlimited number of view-only participants.

Webinars begin with a capacity of 100 attendees and scale up to 10,000 attendees depending on the license purchased.

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Zoom webinars are interactive by including features such as chat, voting, and virtual hand-raising.

As the webinar’s host, you can share your computer, video, and audio. Additionally, participants can communicate with the webinar host through chat or question and answer sessions.

Webinar registration can be optional or mandatory, based on the privacy settings selected. You can also conduct a webinar once, repeatedly, or multiple times for the same session.

These webinars are often used for town hall meetings, training sessions, and marketing presentations.

The cost of a Zoom Webinar varies according to the number of attendees and the host. The plans start at $40 per month for 100 attendees and one host and go up to $6490 per month for 10,000 attendees and one host.

Additionally, you must get a webinar license if you plan to host a webinar using Zoom. The cost is determined by the number of guests hosted.

Zoom also integrates with a variety of third-party applications to enhance the user experience. These include Slack, Google Calendar, and Trello.

Finally, Zoom provides customized solutions for companies in the education, finance, healthcare, and government sectors.

For example, schools can pay 1,800 dollars a year to unlock 20 hosts and gain access to the company’s premium features.

Zoom Phone

Zoom Phone is a cloud-based phone service aimed at users who want to make short calls without using video. Users can also initiate a VoIP call using the Zoom tools included in its Meetings product.

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Zoom Phone is a cloud-based calling system available as an add-on to the existing Zoom service. It integrates conventional phone features directly into the Zoom framework, transforming Zoom into a true communication platform by combining audio, conferencing, texting, and video capabilities.

It starts at $15 per user per month and includes intelligent call routing, auto-attendant, and call recording, among others.

Additional features of Zoom Phone include the following:

  • AI-based Call control and call routing.
  • Comes with a call recording and a voicemail feature.
  • Safe high-definition audio for crystal-clear conversations.
  • Auto-attendant and interactive voice response (IVR) software to route calls to the most qualified officers.

Zoom Rooms & Workspaces

Zoom Rooms are video conferencing systems that allow businesses to conduct video meetings. Customers can choose to use their current hardware suppliers, such as Polycom and Cisco, or they can buy hardware from Zoom-certified vendors.

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The company’s Professional Services division then ensures that the conference room construction goes as smoothly as possible.

Customers are paid a monthly subscription fee of $49 per installed conference room (or $41.58 per installed conference room when billed annually).

If customers already have conference rooms configured with Polycom, Cisco, or Lifesize equipment, they can use the Zoom conference room connector to launch Zoom Meetings directly from those rooms.

If they do not already have conference rooms set up, they can buy hardware from Zoom’s hardware partners, including HP, Lenovo, and Logitech.

Almost certainly, these providers will pay Zoom a portion of each hardware sale. Zoom will ensure that their goods are promoted to the company’s consumers in exchange.

Zoom also offers installation assistance for conference rooms upon request.

How Much Revenue Zoom Earn Through Funding?

Zoom raised $146 million in venture capital funding over six rounds. The National Science Foundation and the Corporation for Public Broadcasting are among Zoom’s top investors. 

Horizon Ventures, Emergence Capital, and Ame Cloud Ventures are some other investors in Zoom Video Communications.

Zoom raised an additional $356.8 million in its April 2019 initial public offering. The company began trading on the Nasdaq under the ticker symbol ZM. 

Numerous of Zoom’s tech rivals that went public in 2019 did so while continuing to lose revenue. 

Meanwhile, Zoom was already profitable, reporting a net income of $7.58 million for the fiscal year 2018.

How Much Money Does Zoom Make?

The revenue of Zoom quadrupled in 2020 with a net income of 2.65 billion USD, where Zoom recorded a 369% rise in their income in the last quarter of 2020.

Zoom posted revenue of $328.2 million in the first quarter of 2020, up 169 percent year over year.

Additionally, the number of customers with more than ten employees increased to approximately 265,400, increasing 354 percent over the same timeframe last year.

Eric S. Yuan, Zoom’s founder, and CEO, correctly attributed Zoom’s rapid growth to the COVID-19 crisis. Zoom, on the other hand, had been rising steadily for some time before that.

Is Zoom Profitable?

Although Zoom turned a loss in 2017 and a profit in 2018, the business turned a profit in 2019 and 2020. 

Please keep in mind that the fiscal years referenced in Zoom’s financial statements below end on January 31st.

Zoom received $622 million in sales in January 2020, $500 million in gross profit, and $12 million in net profit.

What is the Business Model of Zoom?

Zoom earns money by selling subscriptions to its website, which currently comes in four levels. 

The first is its free tier, dubbed Basic; it allows for up to 100 people, an unlimited number of meetings, and a 40-minute time limit for community meetings. 

The Pro package, which costs $14.99 per host per month, adds account management, admin feature controls, personalized personal meeting IDs, and 1GB of cloud recording in MP4 or M4A format.

The third package, Company, is $19.99 per host per month, with a minimum of ten hosts. It includes dedicated phone support, an administration dashboard, a vanity URL, the ability to install on-premise, managed domains, business branding, and personalized emails.

Enterprise is the most costly package, costing $19.99 per host per month, with a minimum of 50 hosts. Unrestricted cloud storage, a dedicated client success manager, executive market feedback, and package pricing on Webinars and Zoom Rooms are included.

What is the Pricing of Zoom?

On a laptop, browser, or mobile device, you can host or participate in Zoom Meetings. Chat is an extension of Zoom that enables users to communicate, form communities, and share text and image/audio files.

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Zoom Meetings is available as a free or paid service to consumers. Four distinct package forms exist.

Zoom Basic

This is a meeting for one-on-one communication. This free edition permits an unlimited number of 40-minute one-on-one meetings with up to 100 participants.

Zoom Pro 

Zoom Pro is a small team-friendly solution that costs $149.90 per year or $14.99 per month. It supports up to 100 members, unlimited community meetings, one gigabyte of recording space per license, and social media streaming.

Zoom Business 

Zoom Business is priced at $199.90 a year or $19.99 a month for small and medium enterprises. It enables hosting of up to 300 users, single sign-on, domain management, and corporate branding. Additionally, it provides cloud-based transcriptions of recorded sessions and customized email templates for invitations.

Zoom United Business 

This package includes all Zoom United Pro features. You can make unrestricted domestic and international calls within the United States of America and Canada. It can accommodate up to 300 attendees at meetings.

Zoom Enterprise

It combines business and personal functions.

Checkout, Revenue Model of WhatsApp!

Is Zoom Safe to Use?

Despite its widespread success, Zoom has been accused of numerous privacy violations and security fraud.

According to the complaint, several Zoom accounts and email addresses, and photographs were sold on the dark web. Since users often sign in to Zoom using their Facebook id, hackers easily access their private information.

Zoom, too, gathers user data and sends it to LinkedIn as part of its LinkedIn Sales Navigator sales prospecting program. Zoom allegedly does this without users’ permission, according to the complaint.

Occasionally, hackers hijacked a user’s account by installing malware on the device via Zoom software. They attend ongoing meetings and listen in on audio calls in secret, a practice is known as Zoombooming.

Zoom did not provide end-to-end protection to its users before 2020. As a consequence, they have complete access to all video and audio files.

To address this problem, Zoom offered end-to-end encryption for paying users only by the end of May 2020. However, beginning October 2020, this feature is available to paid and non-paid Zoom users for increased security.

Zoom, on the other hand, is also working on its privacy issues. Numerous users have continued to report scam/fraud calls/participants during meetings or sell their personal details.

Zoom upgraded its features and security as of 2021 to avoid any security breaches as per the reports. 

How to Host a Zoom Meeting?

You should follow the steps below to host a Zoom meeting using a Smartphone:

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  • You can download Zoom from the Google Play Store or the Apple App Store on your smartphone.
  • If you haven’t already, open the app on your smartphone and click on Sign Up Free.
  • If you don’t already have the app, visit zoom.us and click Host a meeting to begin the installation process.
  • If you’ve downloaded the app, sign in with your email address and password or your Google or Facebook account.
  • Press the downward arrow.
  • Select Start with a video > Click on a new meeting.
  • Similarly, by clicking Join a meeting, you may join one.

Final Thoughts about Zoom

Zoom has grown in popularity as a video conferencing tool during COVID-19 in 2020. Due to the high demand for work-from-home opportunities, this video-first cloud device went viral. Eric Yuan, the company’s founder, established the company’s success criteria through product growth, strategic and technical direction.

Zoom enables high-quality audio and video streaming. Zoom is a true money-making app due to its premium bundles and other services.

Zoom currently has 300 million daily users and 148.8 million registered users. Zoom, which began with 40 engineers, now employs 2854 people and anticipates an 88 percent sales growth in 2020. This sustainable business model enables quick contact and cooperation with customers. As a result, profit increases.

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About the author

Madhav

Hey Folks, I am Madhav! I lead a team of Marketers at Tech Startup based in Australia. In my free time, I dissect the business models of various businesses. And if there's any free time, I cook some new Dish!