Zoom Business Model – How does Zoom work & make money?

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zoom business model

Learn the insights of Zoom Business Model


Zoom has gained insane popularity across the world, especially at times when the world is practicing social distancing caused by global pandemic. With most of the people working from home, its user base has risen exponentially. Once popular among businesses, it’s now being used even for social chats and casual hookups.

What is Zoom?

Zoom is a cloud-based remote video conferencing tool that allows users to interact with each other through video, audio, chat, and also the combination of the three. It was founded in 2011 by Eric Yuan, a former executive at the video and web conferencing company Cisco WebEx.

With Zoom, it’s possible for users to conduct video conferences or hold one-on-one meetings with a cap of 500 participants. During the meeting, people can also share their screen. This feature allows for the easy flow of information in the form of notes, presentations, etc.

Two main products of Zoom are – Zoom Meetings (& Chat) and Zoom Rooms & Workspace.

Zoom Meetings is the company’s flagship product and the webinars or video conferences are hosted using this product.

Chat is an extension of Zoom Meetings where users can chat, create groups or share files.

Zoom Rooms are specifically meant for conference rooms systems in large organizations where there is a need to hold meetings across different offices. It allows businesses to hold virtual meetings using hardware like a computer, camera, microphone, tablet, etc.

Zoom is essentially a SaaS (software as a service) application allowing businesses and individuals to connect and interact virtually.

Zoom Business Model

Zoom operates on the freemium business model.  It has 4 different subscription plans for its customers which we shall discuss later in this article. Let’s now look at each of the components of the zoom business model.

Value Proposition

Zoom offers a number of products, each differing slightly in the offered value to its customers. But zoom as a company has mainly two value propositions to offer – high performance and accessibility. A wide range of product offerings and their compatibility with Windows, Linux, Mac, iOS, Android, etc. makes it highly accessible to the users.

Its ability to handle a large number of participants without losing video or audio quality, ease of use, reliability, and instant sharing feature makes it stand out among competitors in terms of the performance.

Customer segments

Zoom has a number of customer segments to whom it offers its products. These segments can be broadly categorized as follows:

  1. Enterprises of all sizes (healthcare service providers, financial service providers, education, etc.)
  2. Individuals

Customer relationships

Zoom’s customers have a limited direct relationship with its employees.

Customers are served through the following routes:

  1. Self-service – Customers can use self-help resources such as answers to frequently asked questions and online training for their queries.
  2.  Personal assistance through email or phone.

Channels

The main channel through which it reaches its customers is the website. Customers make their account on zoom by signing up. It also promotes its products through conferences, social media, demonstrations, etc.

Key Activities

Zoom’s main activities include software design & development, updating, and maintaining its platform for providing uninterrupted services to its customers.

Key Resources

Human resources are the main resource of Zoom. Its engineering staff design and maintain its software, promotional activities are taken care of by the sales team and customer support is provided to the users by the customer service team.

Key partners

Technology Partners – Zoom has tied with many firms with a purpose to pair the offerings of these firms with its own products. In this way, complementary benefits are achievable.  Its Zoom Hardware Certification Program allows many partners to get their products certified to work with Zoom. Few of the partners are Aser, Asus, AISense, InFocus, Logitech, Dell, Phoenix Audio Technologies, YeaLink, etc.

Referral Partners – Under its Zoom Referral Partner Program, the company invites partners that include consultants with experience in video collaboration, IT resellers and system integrators to recommend/ refer the Zoom Services to their respective customers. Referrals that convert into purchase result in a commission for the partners.

Reseller Partners – In order to expand, the company partners with firms to promote & sell its products to the customers of those firms. Such reseller partners engage their customers to deliver them Zoom solutions.

Reseller partners are system integrators and value-added resellers with experience in communications services & SaaS. Through a partnership with Zoom, they get benefits such as increased customer base, co-selling opportunities with Zoom, market updates, portfolio-enhancement with the addition of Zoom’s solution to their own offerings, and value addition to their installed hardware solutions through integrations.

Cost Structure

Sales/marketing is possibly one of the biggest cost drivers. Employees’ payouts, data centers, maintenance, administration, and customer support are the other areas that involve major expenses.

 Revenue Streams – How does Zoom make money?

This is one of the most interesting components of the Zoom business model as the company provides most of its services for free.

Zoom makes money by offering a variety of subscription plans to its users and charging a monthly subscription fee for accessing its services through the platform. 4 different subscription plans offered by Zoom are as follows:

Basic: Free        

Pro: $14.99 

Business: $19.99

Enterprise: $19.99

Image Source: Zoom

Basic:

Basic plan is free for the user Following are the features of the basic plan:

  • Permission to host up to 100 participants in a single video conference (meeting)
  • Unlimited one to one meetings
  • Limitation to use group video call for a maximum of 40 minutes. After a time gap of 10 minutes, the same participants can make another video group call.
  • An unlimited number of meetings with no trial period.
  • Few additional features like simultaneous screen share by participants, virtual background, recording, etc.

Pro:

Pro plan is priced at S14.99 per month per host. Under this plan, you can purchase up to 9 hosts. It provides all benefits of the basic plan and added benefits like:

  • meeting duration limit of 24 hours
  • 1GB of MP4 cloud recording
  • ability to add more than 100 and up to 1000 participants for an additional fee
  • Admin features control
  • Few more features

Business:

The current pricing of the business plan is $19.99 per month per host. This plan is specially designed for small & medium businesses. All pro features are available with this plan with the following additional features:

  • Ability to add 300 participants under the standard offer and up to 1000 participants for an additional fee.
  • Dedicated phone support
  • Admin dashboard
  • Freedom to create their own customized URL (yourcompany.zoom.us)
  • Provision for single sign-on which allows you to login using your company credentials.
  • Custom email templates
Image Source: Zoom

Enterprise:

The company offers this plan for $19.99 per month per host and is meant for large enterprises. You can also purchase an option for 100 hosts for $1,999 per month. For buying this plan, you need to contact the sales team of Zoom. Along with all the features of the business plan, it provides the following more features:

  • Ability to host 500 participants in a single video meeting
  • Unlimited cloud storage
  • Executive business reviews
  • The dedicated customer success manager
  • Discounts on other offerings such as zoom rooms and webinars

Optional Add-On plans:

For its Pro and business plan, Zoom provides optional add-ons in addition to the standard offer under these plans.

Basic (free) plan users have to upgrade their plan to have access to the add-on features.

These add-ons, though mentioned under the pro and business plan, are provided at an extra price and not included in the standard price offers. User has to pay a certain price for each additional add-on.

For instance, the price for Zoom rooms starts at $49 / month, for Zoom video webinars at $40 per month per host and for Zoom phone (an app for video, voice, messaging, voicemail, conferencing, and meeting), start at $10 per month per user.

Image Source: Zoom

Industry Specific Plans:

There are certain industries like education, financial services, government, and healthcare for which Zoom provides services that are tailored for their specific needs.

Why Zoom became a success?

Let’s evaluate Zoom as a startup putting all the points step-wise that justifies Zoom’s success:

Capturing the right problem

Zoom captured the intense need of people to communicate during the pandemic and also collaborate to keep the professional work going. The problem of non-availability of much needed free or cost-effective collaboration and communication tool was identified by Zoom.

Even before the ‘work from home’ became the new normal, Zoom was gaining popularity in the business sector; though the exponential growth was seen after the pandemic.

The problem being solved by Zoom is big (widespread across the world), intense & recurring (due to the present pandemic & digitization) with no alternative solution at par with Zoom.

Here it’s important to emphasize that the problem is so big (very large market size with millions of users across the world) and the market is growing at such a pace that even a very small percentage of users who opt for paid services is enough for the company to help generate revenue and cover its expenses.

Offering the needed solution

The solution offered by Zoom exactly fits with the needs of its respective customer segments.  Almost all the features needed by general users or individuals are free. Paid plans are also designed as per the specific needs of startups with small teams, businesses, and larger enterprises.

Zoom provides much better overall experience to its customers than its competitors.

Unfair Advantage

Founder – Yuan, the founder of Zoom has led the engineering team for 14 years; first at WebEx and later at Cisco after it acquired WebEx in 2007.

He was one of the first software engineers at WebEx when he joined the company in 1997. WebEx is also a video conferencing solution providing company. With a vast experience in the relevant field, he had a deeper understanding of the problem that customers faced. For instance, with every login into a WebEx conference, its system would have to classify the product version first (iPhone, Mac, Android, or PC) prior to execution, which slowed the process. The screen sharing feature in mobile phones was missing in the WebEx application.

Likewise, he closely observed the dissatisfaction of the customers due to the multiple problems they faced while using the WebEx products.

His deep technical experience and expertise combined with that of the Cisco engineers who joined him proved to be an unfair advantage in building an unbeatable solution.

Market – Market of remote collaboration is growing at a phenomenal rate with almost every user jumping to Zoom’s platform for its conferencing, webinars, or meeting-related needs.


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