Video conferencing adoption is booming. According to Frost & Sullivan research, the overall video and web conferencing market is on a high growth trajectory and is forecast to grow from $8.5 billion in 2017 to $11.0 billion by 2023. It’s no wonder then, that many tech giants are battling to win customers in this fast-growing space.
Users today are selecting technologies that offer simple hassle-free experiences. They refuse to give in to a maze of clunky applications at work. From its early days, Zoom adopted the notion of making video communications simple and frictionless as its mission. And that unwavering focus has paid off. The company has seen exponential growth and its brand has become synonymous with cloud video conferencing.
Zoom continues to deliver impressive growth that far outpaces its competition. In 2018, it is on track to deliver 45 billion annualized meeting minutes (compared to 20B last year). Zoom’s customer base includes 58% of the Fortune 500. The company has seen triple-digit YoY user and revenue growth and 110% growth in employee headcount over the last year. At Zoomtopia, Zoom’s annual user and partner event, held in San Jose last week it became increasingly evident how and why Zoom became one of the fastest growing businesses in video conferencing.
UX is Just Common Sense, Right?
Well, not really. It has been several years now since the epic battle began with hard-to-use and complex video conferencing. Most video meetings not only start late but often leave users frustrated and IT teams strained. As a result, audio-only communication has become the de-facto mode for virtual meetings. Frost & Sullivan estimates that over 94% of all virtual meetings today are audio-only. Zoom is changing this.
The cloud, mobile, and AI revolution has changed user expectations. Users are now accustomed to great UX in their personal communications and will accept no less at work. The consumerization of video has led to an exploding demand for hassle-free video conferencing that empowers users to connect from any device with a click of a button. Zoom understands the burgeoning UX movement and makes video communications at work as simple (and possibly even as much fun) as consumer apps.
At Zoomtopia, IT executives for the University of Notre Dame put it aptly, “People had fear around video conferencing. Make it simple, make it present everywhere, and make it fun….. Zoom usage took over our legacy solutions in just three months”. A line up of marquee customers including Walmart, Zendesk, Zapier and Notre Dame spoke at Zoomtopia about standardizing on Zoom because it “simply works”. With a CSAT score of 97 and NPS score of 72, Zoom’s focus on customer happiness is paying off.
Trust as the Foundation of Success
Besides eliminating the traditional distinction between in-person and virtual meetings in a cost effective way, the true value of video conferencing lies in adding the human touch to build the trust that’s critical to any successful business. Zoom CEO Eric Yuan said in his keynote at Zoomtopia, “Without the eye contact and without the engagement, one cannot build the same level of trust. Video communications builds a culture of trust. At Zoom we strive to build a culture where we trust our employees, our customers, and our partners”. Zoom has become attuned to the nuances of the users, building a fast growing and loyal base that has historically not been well served by incumbents. Yuan leads by example and has been passionately outward-directed to customers and employees. This year, he earned the top spot on Glassdoor’s annual Employees’ Choice Awards for CEOs, beating the likes of Mark Zuckerberg and Marc Benioff.
Expanding Array of Choices for Customers
Zoom’s portfolio of cloud services unifies video conferencing, online meetings, messaging, digital signage and a software-based conference room solution into one platform. This single platform approach offers a simple and consistent user experience across desktops, executive offices, open spaces, huddle rooms, large conference rooms and mobile devices. Zoom’s early success in desktop and mobile collaboration is now being matched by its unprecedented growth in meeting rooms. The company has seen a 278% growth in Zoom Room sales, Zoom’s all-in-one software-based room system. Moreover, Zoom Rooms have a solid 43% attach rate for customers that have over 1000 employees.
Zoom takes a carefully measured approach to product development. The Zoom team obsesses over usability and does not add bells and whistles to make its product bloated and complex. Rather, it carefully evaluates users’ new feature requests to ensure they add value and do not compromise the UX.
At Zoomtopia, Zoom announced Zoom Voice, its cloud-based PBX and soft phone capabilities which will be integrated into the Zoom service. Zoom Voice completes Zoom’s end-to-end communications and collaboration portfolio for users who want a single solution for calling, messaging and meetings. However, Zoom will need to tread carefully with Zoom Voice, which can directly compete with offerings from its UCaaS partners like RingCentral.
Zoom understands the critical role AI will play in all aspects of business to make meetings smarter, intuitive and eventually predictive. The company launched Machine Learning-based recording transcripts feature in early 2018. Last week, it launched its improved virtual background feature, which enables users to display an image of their choice as their background during a video call, ensuring a distraction-free experience without a physical green screen. In addition, Zoom has added an audio signature that would embed users’ credentials into their unique audio tracks, a feature aimed at helping IT teams track audio data leaks back to an individual user.
Growing Technology Partner Ecosystem
Zoom’s success is in large part due to its strategy of partnering with the best technology partners in the industry rather than competing with them. By integrating its audio, video and web collaboration capabilities with a broad spectrum of best-of-breed communication devices (e.g., Logitech, Polycom, Yealink, among others), and many third party software providers, Zoom has firmly established itself in many large customer organizations.
Last week, Zoom launched its App Marketplace, a one-stop shop for third-party apps that leverage Zoom’s APIs and software development kit. Zoom has also announced strategic partnerships with Atlassian and Dropbox. This involves financial investments from Atlassian and Dropbox in the co-development of embedded workflows. The Zoom and Dropbox integrated experience provides instant, real-time video communications within content storage and sharing. Similarly, with the Zoom and Atlassian Jira Ops integrated workflow, users can start a Zoom meeting directly from a Jira Ops ticket when an incident occurs. A log of the meeting, including its recording and transcription can be appended to the ticket. This integrated experience will provide instant video communications in the Jira Ops system, allowing IT and software teams to work together to quickly respond to and resolve incidents.
A Well-Oiled Marketing Machine
“If you build, they will come” does not necessarily work in intensely competitive markets. In the cut throat tech industry, it’s not easy to establish brand awareness that matches that of the incumbents that have dominated the industry for decades. Zoom knows this and is not afraid to splurge when it comes to spending marketing dollars on building a global brand.
Zoom has achieved this feat with innovative marketing that has generated solid brand awareness and customer mind share. The company’s billboard ads can be seen splashed across major highways, airports and train stations directly addressing the need to reduce travel with easy and compelling video meetings. In 2016, Zoom signed a three-year deal with the NBA team Golden State Warriors. In exchange for its technology, Zoom receives branding exposure with its logo on the scoreboard and on digital signage at Warriors home games. With its creative marketing, not only has Zoom accelerated its sales but has also gained brand recognition that very few companies can achieve.
Conclusion
Zoom’s success factors are many. However, like any other business going through hyper growth, the company’s future is not without challenges. The strategy and tactics that work in the early stages of a new company must evolve significantly as the business scales up. The most prominent challenge being the ability to keep up with the rapid growth in a highly competitive market. With growth, comes the additional challenge of maintaining the company culture among employees and the ecosystem – the very culture that’s foundational to Zoom’s growth. In addition, Zoom would need to fight for long-term staying power given the reach of its closest competitors, Cisco and Microsoft that have the wherewithal to dominate with end-to-end product software portfolios and economies of scale. Last but not the least, Zoom’s lack of a global distribution channel network is a strong contrast to Cisco and Microsoft. While, Zoom has been focused on building strong technology partnerships, it has yet to lay out a comprehensive distribution strategy for its channel partner program. The company primarily relies on direct sales today. Zoom must build a large global channel partner network and it must do so quickly, in order to continue growing its reach and market penetration.
