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Zoom “nailed it” when it when it comes to being in the right place at the right time. With the COVID-19 pandemic, it has paid off in a big way to be in the video conferencing business.
As they say, timing is everything!
In this article, I will share how Zoom makes money despite being a free service, and talk more about the platform’s staggering success in 2020.
Let’s get into it.
What is Zoom?
If you’re doing your research, you might have heard of a platform called Zoom before. Either way, let’s take a step back and talk about what Zoom is.
Zoom is a cloud-based video app that became a global hit during the COVID-19 pandemic. The service, which is compatible with most devices (including Linux, Mac, Android, Windows, and iOS), allows people to communicate through video, audio, or both. You can also record your sessions.
Even though many Fortune 500 companies were already using the app, it wasn’t until the pandemic came along that Zoom gained traction on a global scale.
Because people could no longer go to work during quarantines, they had to rely on Zoom to conduct their business affairs, particularly business meetings.
Who Started Zoom?
The Zoom app is the brainchild of Eric Yuan, who previously worked for WebEX. When Cisco acquired WebEx in 2007, Yuan stuck around.
But he often disagreed with the company’s way of doing things. As far as he was concerned, they had failed to listen to their customers.
When Yuan left Cisco in 2011, 40 engineers followed him. During those early days, his company was called ‘Saasbee,’ though he eventually changed it to ‘Zoom.’
His attempts to secure funding were initially met with frustration because competitors like Google and Skype enamored investors.
But the entrepreneur’s connections eventually landed him the backing he needed to get Zoom off the ground. The first product the company produced immediately outperformed other video conferencing services.
They started attracting participants in the thousands, tens of thousands, and then millions, growing over the years until their IPO in 2019. The pandemic made Zoom a global hit once people realized that they could use the app to conduct business.
Security issues have marred the app’s success in the past, but they did not slow the service down. People have continued to join Zoom’s platform at an unprecedented pace.
How Does Zoom Work?
The app is relatively straightforward in the way it operates:
1) First, the app allows people to communicate, not just with other individuals but in groups. You can host one-on-one meetings or group video conferences.
2) Before you can proceed with the service, you must review their prices to identify the plan you want. They have Basic, Pro, Business, and Enterprise plans. Each plan’s features, such as the number of hosts, the length of meetings, and the special features, will vary.
3) Once you choose a plan, you can download the Zoom app from the company’s official website. You can participate in meetings without opening a Zoom account. However, it is more convenient to sign up, especially if you intend to make frequent use of the app.
4) Once Zoom is installed, you can host and participate in meetings. You can also invite people to meetings.
5) Even though many people use Zoom to speak via video, it has a chat function that allows you to exchange messages during meetings privately. You can also record your sessions, share screens, virtually raise your hand, and more.
How Does Zoom Make Money?
Because Zoom is free, most people have no idea how the platform makes money. Many people use the service for free. Anyone can use Zoom to conduct meetings with other people without paying.
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You can use either video formats, audio formats, or both.
However, while Zoom appreciates free users, it focuses its advertising efforts on attracting paid users. Free users can communicate with individuals or in groups. But, the features they can access are limited.
For example, you can only invite 100 attendees to your meetings with a free account. And those meetings can only last 40 minutes. A paid plan lifts these restrictions.
With a paid plan, you can talk for longer with larger groups, record sessions, secure unlimited cloud storage, and so much more.
It is through paid users that Zoom makes money.
Although paid users are not the company’s only source of revenue. For example, the platform also has customers that pay $49 per month for Zoom room licenses.
When it comes to the hardware, you are free to use any brand you want. However, some businesses have found that it is easier to use Zoom’s certified suppliers and service providers, and Zoom is compensated when enterprises do so.
If you are not interested in conference rooms, Zoom also has a cloud-calling service that allows users to make phone calls. For as low as $15 per month, users enjoy advanced phone features like voicemail, call recording, integrations, and call management.
Because some industries are determined to continue with business activities despite COVID-19 restrictions, the company has refined its web conferencing services, which permit an impressive 10,000 participants to attend zoom webinars. Hosting participants in the thousands is neither free nor cheap.
For its high-level business plans, companies need to pay for a webinar license. Even though the platform offers free personal meetings, Zoom has no shortage of revenue sources. Many free users have become paid users because they have grown to appreciate the convenience of Zoom’s services and outgrown the free plan.
How Much Does Zoom Make in Revenue Per Year?
Despite its relatively humble beginnings, Zoom had become a billion-dollar company whose valuation almost reached $16 billion in 2019, when they finally went public. Their fortunes rose in the aftermath of the pandemic.
Some industry experts were shocked when they learned that Zoom had gone from 10 million participants per day in 2019 to 300 million less than a year later. The fact that schools around the world are starting to use their services has only accelerated growth.
With daily downloads of 2.13 million in March 2020, Zoom’s revenue went from $121.5 million in 2018 to $622.7 million in 2020.
Why is Zoom Successful?
Even though Zoom was a success before the pandemic, its success grew because it is so convenient. You don’t have to pay to use it. And even with the limitations, you can still hold as many meetings as you want for free.
Free plans can cater to up to 100 participants. Yes, they only last for up to 40 minutes. But even when a conference call ends, you can start another one.
So long as Zoom is free and easy to use, people have no reason to look elsewhere for video conferencing apps. On the backend, Zoom does convert free users to paid plans, which increases the company’s revenue. Also, large business clients do demand more services, which are costly.
Is Zoom Really Free?
Yes, Zoom is free. You can hold as many meetings as you want without paying anything. However, you cannot record those sessions, and when hosting meetings with up to 100 participants, they cannot exceed 40 minutes.
Zoom Competitors
Zoom is quite big. However, it has plenty of competitors that have taken advantage of the app’s privacy concerns to poach some of its customers while capitalizing on the rise in video conferencing demand. These competitors include:
1) Skype
Skype was the king of video conferencing apps before Zoom came along. Even though Zoom dominates the market, plenty of people have remained loyal to Skype.
Microsoft has responded to Zoom by creating ‘Skype Meet Now,’ a more convenient version of their service that people can use to communicate without opening a Skype account.
Like Zoom, Skype has a free package that allows its users to hold as many meetings as they want without paying a cent.
2) Cisco WebEx Meetings
You won’t find the average individual talking about this service. However, many Fortune 500 companies love Cisco WebEx. It allows users to communicate via video and audio and also to share content. You can schedule and join meetings.
The service can be accessed using any computer or mobile device imaginable. Also, it is very secure. You don’t have to worry about security issues with WebEx.
3) Google Meet
Google Meet (formerly known as Hangouts Meet) is Google’s video conferencing platform and free for up to 100 participants and a 1-hour meeting length. For added features, you’ll need to join the premium plans, much like Zoom.
Businesses use the app to stay in touch with their teams regardless of their location. Like its rivals, the app is quick and easy. Users can also sign up for a free personal account.
Even though Google has other communication tools, this one is still quite popular in some circles because businesses can use it with Google’s suite of products. It has a few limitations, but if all you want is to talk-face to-face with another person, it is more than sufficient.
4) GoToMeeting
GoToMeeting is a flexible tool that allows millions of people around the world to collaborate. Like Zoom, it offers video conferencing and screen sharing. It is also convenient.
It only takes a few steps to communicate face-to-face with people in other countries. However, some people have argued that it is more expensive than other platforms.
5) Mikogo
Mikogo is unique among Zoom’s competitors because it is browser-based. In other words, you don’t have to download the service. You can start using Mikogo by visiting their website and signing up.
Like other services, it allows video and audio communications between individuals and teams. You can access its functions via iOS and Android devices. Like Zoom, it has a free plan with limited features and functions.
Conclusion
The Zoom app is Web technology at its finest. Not only is the app convenient, but it was a savior for many businesses during the COVID-19 pandemic.
With many companies being forced to work from home, virtual work has grown dramatically. As a result, companies like Zoom have profited and made more money during this time than any period in company history.
Zoom makes money from paid business customers and has seen rapid growth due to its business model. By giving value for free to users, the company became a household name.
Then when the pandemic hit, and business clients turned to Zoom for greater bandwidth needs and resources to conduct virtual meetings, the company’s revenue exploded.
The pandemic has changed the way many industries do business as we know it. I firmly believe that even post-pandemic, some companies will never do away with virtual meetings. Platforms like Zoom are here to stay.
Zoom FAQs
Why is Zoom successful?
Even though Zoom was a success before the pandemic, its success grew because it is so convenient. You don't have to pay to use it. And even with the limitations, you can still hold as many meetings as you want for free. So long as Zoom is free and easy to use, people have no reason to look elsewhere for video conferencing apps. On the backend, Zoom does convert free users to paid plans, which increases the company's revenue. Also, large business clients do demand more services, which are costly.
Is Zoom really free?
Yes, Zoom is free. You can hold as many meetings as you want without paying anything. However, you cannot record those sessions, and when hosting meetings with up to 100 participants, they cannot exceed 40 minutes.
How does Zoom app make money?
While Zoom appreciates free users, it focuses its advertising efforts on attracting paid users. Free users can communicate with individuals or in groups. But, the features they can access are limited. With a paid plan, you can talk for longer with larger groups, record sessions, secure unlimited cloud storage, and so much more.
Is Zoom better than Skype?
The answer to this question is, it depends. If you're looking to host more than 50 participants, Zoom has a platform that supports thousands of participants for business video conferences. If you prefer a platform that's easy to use and you need international calling, then might find that Skype is a better fit. If you need advanced features such as recording transcripts, end-to-end encryption, virtual backgrounds and the like, then Zoom offers more robust solutions in this area.