How Zoom defied its critics and became the go-to video conferencing app for surviving the pandemic
- What's next for the insanely popular, death-defying video conferencing phenomenon?
What a difference a year makes. Or, more correctly, what a difference 2020 made for a handful of companies like Zoom who found themselves in exactly the right place at the right time with "almost" the right product. We'll get to the "almost" in a moment, but first, let's skip to the good parts.
Zoom is the undisputed pandemic prom queen, a member of the heady club where brands become verbs, like "Xerox" and "Hoover." For millions of users during the Covid lockdown, Zoom became the platform of choice for connecting to both work meetings and family gatherings. The company had gone public in 2019 at $36 a share, was trading at $68 last January, and is currently selling in the $340 range. Founder and CEO Eric Yuan, China-born but proud American since 2006, still owns 22 percent of the shares.
There are signs that Zoom has ambitious goals for continuing to thrive after the pandemic by diversifying its business into other parts of the corporate productivity world. Last week, the company announced plans to raise $1.5 billion that it clearly doesn't need for operating costs by selling new shares. Zoom's business produced $1 billion in revenue for the first nine months of last year and the company hasn't spent the $543 million it raised in its IPO. It had $1.8 billion in cash and securities in reserve three months ago.
So, what does Zoom plan to do with the money? Nobody is saying yet but the obvious possibilities are acquisition or further expansion into other product offerings. On January 12, the company said it has sold more than 1 million Zoom Phone seats around the world in the phone's first two years. Zoom Phone is an enterprise-focused communications platform available on the Zoom Pro tier that complements Zoom Meetings, Zoom Chat, Zoom Rooms, and Zoom Video Webinars. There are rumors that Zoom is also thinking of building its own email service.
All of which is pretty remarkable for a company whose meteoric rise in users, and a series of corresponding privacy and security disasters, "almost" sank the entire enterprise in the first three months of 2020.
How Zoom's success was "almost" fatal
Around this time last year as the winds of the global Covid-19 tsunami were just beginning to gather force, San Jose-based Zoom Video Communications was a nine-year-old, middle of the pack, cloud-based enterprise communications tech company with a mercifully easy-to-use app and several decent customers but no obvious hints of future super-stardom. Zoom was a fat minnow swimming in an ocean filled with sharks like Microsoft, Google, and Cisco along with many smaller competitors.
The trouble (and the success) began in February 2020 when CEO Yuan offered to help schools continue to educate their students remotely for free during the coronavirus pandemic. More than 90,000 schools across 20 countries took him up on the offer just as millions of other people turned to what was designed to be an enterprise app for remote meetings into a favorite gathering space for remote family gatherings and virtual cocktail hours and Zoom parties, and even virtual funerals.
As a result of its easy-to-use free app, Zoom suddenly found itself a massive hit with consumers. At the end of December last year, the maximum number of daily meeting participants, both free and paid, conducted on Zoom was approximately 10 million. By March, the company had ballooned to more than 200 million daily meeting participants, both free and paid. That kind of explosive growth creates problems not only of scale but it also surfaces new problems around security and privacy. Said Yuan at the time:
Our platform was built primarily for enterprise customers--large institutions with full IT support. These range from the world's largest financial services companies to leading telecommunications providers, government agencies, universities, healthcare organizations, and telemedicine practices. Thousands of enterprises around the world have done exhaustive security reviews of our user, network, and data center layers and confidently selected Zoom for complete deployment.
However, we did not design the product with the foresight that, in a matter of weeks, every person in the world would suddenly be working, studying, and socializing from home. We now have a much broader set of users who are utilizing our product in a myriad of unexpected ways, presenting us with challenges we did not anticipate when the platform was conceived.
One of the first and most troubling privacy issues was an outbreak of Zoombombing in early March when uninvited users crashed meetings and disrupted them by taking over screens and unleashing a torrent of porn or profanity. Zoom already had built-in tools to prevent this kind of interruptions-- such as waiting rooms, passwords, muting controls, and limiting screen sharing--but because many of the new users had never used the app before or knew much about enterprise-level apps, they were easy prey for hackers.
Rather than denying the problems as some tech companies are prone to do, Yuan quickly took responsibility and announced that the company would pause the development of new features and devote all of its engineering resources to fixing privacy and security issues. In a blog post, he said:
For the past several weeks, supporting this influx of users has been a tremendous undertaking and our sole focus. We have strived to provide you with uninterrupted service and the same user-friendly experience that has made Zoom the video-conferencing platform of choice for enterprises around the world, while also ensuring platform safety, privacy, and security. However, we recognize that we have fallen short of the community's - and our own - privacy and security expectations. For that, I am deeply sorry, and I want to share what we are doing about it.
By early April, much of the technology chattering class had written Zoom off as a lost cause. But, rumors of its demise, as Mark Twain once said of a report of his own death, turned out to be "greatly exaggerated." In retrospect, Zoom fixed most of its privacy and security problems remarkedly quickly in the face of a tremendous increase in demand and was blessed to have loyal customers who stayed with them.
It is very rare for me to have an opportunity to say "I told you so" among this august group of exceptionally good analysts and tech writers but I can't resist referring you to a piece I wrote on these pages on April 6, 2020, called It's Time to Stop Bashing Zoom. I like Eric Yuan's chances for continued growth if for no other reason than Zoom's measured and consistent response to threats both known and unexpected has earned Zoom trust - and that's a currency you have to earn every day. And I'm also glad that he decided early on to change the company's name from Saasbee to Zoom.