How Does Zoom Make Money?

Zoom Video Communications Inc. (ZM) provides a video-first communications platform that is utilized by millions of individuals across the world for both commercial and personal communication purposes. A few years ago, nobody would have known about this company and the first name that would have popped up in anyone’s mind would have been Skype, WebEx.Zoom has left them behind to lead the pack.

In this blog, we will explore Zoom’s revenue model.

What is Zoom?

The Zoom app is a cloud-based SaaS (Software as a Service) tool that enables people and organizations to communicate remotely using text, audio, video, or a mixture of the three. For quite some time now, Zoom has been a major player in the online meeting and video conferencing business sector.

Users may have one-on-one meetings or participate in video conferences with up to 500 people. Meeting participants have the option of coordinating better with the help of tools like screen sharing.

Zoom operates on the “Freemium” business model where the basic services are free but the users may have to pay for some of the advanced features the company offers.

How does Zoom make money?

Since Zoom uses the “Freemium” business model, it makes revenue by offering premium services. Some of the premium services offered by Zoom are:

Zoom meetings

A user can connect through audio and video in a Zoom Meeting or as everyone says ‘Zoom call’. It’s also Zoom’s most prominent and commonly used service.

The Zoom BASIC version is free and comes without charge but is ad-supported (these ads also generate income for the company). The free version has features like allowing Zoom users to change their virtual background in the video call and they also have access to the Zoom chat. 

However, this has quite a few limitations on how long the meetings can last for each session. The maximum number of participants is locked at 100. An Unlimited group meeting can be held for 40 mins and one-to-one meetings have a 30-minute limit.

The Zoom PRO version adds some additional features to what is offered in the BASIC version. This costs approximately $150 for a yearly license per user. Participants can be increased to 1000 by using add-ons, can have a 30-hour group meeting, social media streaming, and Zoom cloud recording are the other features in this plan.

The Zoom BUSINESS version adds more features to the ones available in the Zoom pro version for $200. 300 participants(can be increased to 1000) in a video meeting, single sign-on, recording transcripts, domains, and company branding are the features in this plan.

The ENTERPRISE plan has features from the business version and has a basic limit of 500 participants, unlimited Zoom cloud storage, and recorded transcripts for $240.

Zoom rooms

Zoom rooms feature allows people to create special meeting rooms that have all the features to conduct an audio/video conference. A participant can share their screen, access chat, change the virtual background, etc. Zoom room licenses range from free to enterprise. An enterprise license costs $499 per year.

Zoom events and webinar

Zoom video webinar hosts up to 500 attendees and a lot of other webinar-related features like 30-hour webinar sessions, larger meeting size, CRM integration, export list of attendees and registrants, record your webinar to the cloud, and many more. A yearly license for this feature costs $690.

Zoom events include everything that zoom webinar provides and add a lot of other features for a yearly license of $890. Features include ticketing and registration, the ability to host multi-session events, analytics, live streaming, event management options, and a lot more.

Zoom phone

Zoom Phone is a cloud-based calling solution that can be purchased as an add-on to the existing Zoom service. Zoom Phone adds traditional phone capabilities directly into the Zoom application, transforming Zoom into a complete collaboration product that offers conferencing, messaging, and audio and video communication, all just in one package.

The United States and Canada metered options range from $120 to $180 for a yearly license. The global select option costs $240 for a yearly license and you can choose from a list of 40+ countries.

Zoom United

Zoom United is a service that combines all of your meetings, Zoom chat, and phone requirements for a hybrid workforce into a single subscription.

Plans range from PRO ($300), BUSINESS ($350) and ENTERPRISE ($420).

Since it combines features from Zoom phone and meeting, all the features in these plans are a combination of both the phone and meeting plans.

Zoom rental hardware

Zoom also offers hardware like phones, wifi adapters, and other equipment under its hardware rentals. The costs differ from a monthly price to an annual price ranging from $3 to $200. This is a part of Zoom trying to tap into the Hardware as a Service(HaaS) market.

Zoom Add-ons

Zoom offers add-on services to all the packages mentioned above and it adds to the features already offered in the plan for an added cost.

Zoom meetings/ zoom events have add-ons ranging from $480 to $1200 per year. This offers add-on features like Audio conferencing, participants can opt for a large meeting, Zoom cloud storage increase, premier support, and premier development support (for developers).

Zoom phone and zoom united have add-ons that range from $120 to $300. Add-ons features include; toll-free numbers, additional phone numbers, International calling add-ons, premier development support(for developers), and a Zoom phone power pack.

Zoom rooms add-ons range from $25 per month to $499 per year. Add-ons include; Conference Room Connector, Hardware as a Service(HaaS), professional services, and premier development support(for developers).

Zoom contact center has add-ons at $60 per year. Add-ons include; USA/Canada virtual service phone numbers and USA/Canada toll-free numbers.

Zoom contact center

This is a new zoom offering and currently, there is no price mentioned for this service on their website. If anyone wants to know more about it, they have to get in touch with the Zoom sales team via email. Their most recent round of investment, a Post-IPO Equity round, was completed on November 4, 2021.

Zoom marketplace

The Zoom marketplace is exactly what the name implies, this is the marketplace to find apps that interact with Zoom and improve your overall experience using the programme.

There is a huge list of different apps you can choose from CRM, analytics, business systems integration, etc.

How much money does zoom make?

Zoom revenues in 2018 were $331 million and they registered their first profitable year in 2019 with $623 million in revenue and the release of their own IPO which started at $36 and ended the first day of trading with a 78% increase.

However, 2020 saw the real rise of the company when it posted a revenue of $2.7 billion which was a steep rise from the revenue reported in 2019. This can mainly be attributed to the Covid-19 pandemic which resulted in a lot of people working from home and choosing the remote meetings route to stay in touch with colleagues. 

In 2021, the rise was again very prominent and the revenues rose to $4.09 billion. While a lot of companies were reporting losses during the pandemic, Zoom was surging ahead of the competition with its revenue generation.

Zoom reported profits of $672 million in 2020 and $1.06 billion in 2021. Most of the revenues for zoom come from the USA market where it is used the most while Asi-Pacific is the market that generates the least revenue.

The seed round of investors for zoom raised $3 million in revenue with investors shown below

Investor name

Partners

TSVC

Eugene Zhang

Subrah Iyar

Matt Ocko

Dan Scheinman

Bill Tai

Series A funding was able to raise $6 million

Investor name

Partners

Subrah Iyar

Qualcomm ventures

Sachin Deshpande

Maven Ventures

Jim Scheinman

IT-Farm

DCVC

Matt Ocko

AME Cloud ventures

Jerry Yang

Series B (early-stage venture) funding raised a further $6.5 million

Investor name

Partners

Qualcomm ventures

Sachin Deshpande

Patrick Soon-Shiong

Horizons Ventures

Bart Swanson

DCVC

Matt Ocko

AME Cloud ventures

Jerry Yang

Series C funding(late-stage venture) raised $30 Million and was carried out in 2015.

Series D funding round carried out in 2017 was able to generate a good $100 million when the pre-money valuation amounted to $900 million

The total money raised from these rounds of funding was approximately $146 million.

History of Zoom

Zoom (started as Saasbee) was established in October 2011 by Eric Yuan, who left WebEx (sometime after the Cisco acquisition) with an intention to form his own company. Zoom went on to become a “unicorn” when it was valued at $1 billion for the first time in 2017 and released its IPO in 2019 which surged to a 72% rise on the first day of trading.

In 2020, the Zoom enterprise became a member of the NASDAQ-100 stock index. They have their headquarters in San Jose, California, and are registered on the Nasdaq as ZM .

Eric Yuan was supposedly inspired by Bill Gates when he saw his speech in Japan. He tried to find his way into Silicon valley but his visa was rejected multiple times before he finally made it in 1997. He joined WebEx which was a company co-founded by Subrah Iyar and Min Zhu. Subrah would later act as an advisor and investor for Zoom when it was formed in 2011.

After WebEx was acquired by telecom giants CISCO for 3.2 billion, Eric became vice president of engineering for CISCO. He left CISCO and started his own company in 2011, which was initially named SaasBee and later renamed Zoom video communications. During the pandemic, Zoom saw a meteoric rise in its business, and a lot of companies still trust their product over others.

This increase in fame also came with a lot of controversies with privacy being the top concern for users. Zoom has been sued multiple times in a variety of cases ranging from securities fraud to breach of contract for privacy violations and making false and misleading assertions about its security and privacy policies.

 Many users have also raised concerns regarding the R&D department of Zoom, which is based out of China. Since there can be pressure from the Chinese government to release the private information of their users.

There have also been multiple issues of censorship by Zoom which received criticism. One of these cases was the Zoom meeting hosted on Holocaust memorial day that was hacked and invaded by anti-jewish groups that shared objectionable material in the meeting.

The market competitors of Zoom include Google Meet and Microsoft Teams. However, despite this stiff competition from tech conglomerates, Zoom is the market leader in the remote communication SaaS section. Zoom has several big clients Tesla, F1, WWF, Dropbox, Juniper networks, and many more. 

There seems to be no stopping Zoom and it surges ahead even as the pandemic situation seems to be improving. Keeping in mind the current focus on sustainability when many people are trying to avoid flights and travelling to countries, Zoom seems like a great option to have global meetings, while saving costs and also acting responsibly towards the environment.

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