Subscription plans provide revenue for the business, which generated a net profit during the previous fiscal year.
A lot of companies are competing in the video conferencing market; the most well-known service is undoubtedly Skype, which was purchased by Microsoft for $8.5 billion in 2011. Other options include Google Hangouts and independent services such as GoToMeeting, among others.
At this point, only one of those independent companies has succeeded in going public: Zoom, which raised $356.8 million in its initial public offering on Thursday and closed the day up 72 percent from its $36 IPO price, giving it a market capitalization of $18 billion, according to CNBC.
The business earns its money via the selling of memberships to its platform, which is presently provided in four different levels, each of which has a different price.
The first is its free tier, which it refers to as Basic; this one allows you to conduct meetings with up to 100 people, have an infinite number of meetings, and hold group meetings for a maximum of 40 minutes. The Pro plan, which costs $14.99 a month per host and includes features such as user administration, admin feature controls, unique personal meeting IDs, and 1GB of MP4 or M4A cloud recording, is the next rung on the ladder.
The third option, dubbed Business, is priced at $19.99 per month per host, with a minimum of 10 hosts required to qualify. It comes with specialized phone assistance, an admin dashboard, a vanity URL, the possibility of on-premise deployment, managed domains, business branding, and bespoke emails, among other features.
The most costly plan is Enterprise, which costs $19.99 a month per host with a minimum of 50 hosts and is available only to large organizations. Unlimited cloud storage, a personal customer success manager, executive business evaluations, and bundle savings on Webinars and Zoom Rooms are some of the benefits of using this service.
The three premium plans all provide the option to add up to 100 people, however, this number may be expanded for an extra fee of $1 per participant. The cost for 500 participants on the Pro plan is $64.99 per month per host, while 1,000 participants is $104.99, while the cost for Business and Enterprise plans is $69.99 or $109.99 per month per host, respectively.
Zoom generated sales of $330.5 million for the fiscal year that ended in 2019, an increase of 118 percent over the previous year’s revenue of $151.5 million. That in and of itself represented a 149 percent increase from $60.8 million in 2017. Zoom’s income has increased by more than fivefold in only two years.
The business is also profitable; after losing $3.8 million in the fiscal year that ended on December 31, 2018, it had a net income of $7.6 million in the year that ended on December 31, 2018.
According to the company’s S-1 filing with the Securities and Exchange Commission, a key component of its business strategy is converting free users into paying clients.
“With our unique approach, we are able to combine viral excitement for our platform with a multipronged go-to-market strategy that allows us to maximize efficiency. Our users’ excitement for our platform starts with their first impressions of it – it just works. As meeting participants earn money as paid hosts, and as companies of all sizes become our clients, this excitement will continue to grow “It was said.
“These viral demand streams are channeled via our sales activities into routes-to-market that are optimal for each client opportunity, which may include our direct sales force, our internet channel, resellers, and strategic partners, among other channels. Our sales strategy enables us to convert a single non-paying user into a complete corporate deployment in a short period of time.”
More than half, or 55 percent, of Zoom’s 344 customers who generated more than $100,000 in revenue during the fiscal year that concluded on January 31 of this year began with at least one free host prior to subscribing to the service. Customers like these now account for 30 percent of the company’s total revenue.
Zoom, which was founded in 2011, has received a total of $160.5 million in financing from investors such as Sequoia Capital, Emergence, Horizons Ventures, Maven Ventures, AME Cloud Ventures, Qualcomm Ventures, and GC Capital, among others.
4 ways Zoom make money
here is a more in-depth look at each premium product and how Zoom generates money from each one:
1.Meetings and chats through Zoom are becoming more popular.
This is the company’s main product, which allows users to host and participate in Zoom meetings from either a desktop computer or a mobile phone. Chats may be used to interact with the participants and to exchange text, picture, and audio files across the site via the platform’s built-in messaging system.
The question is, how does Zoom earn money from its most popular service? It is in the four distinct kinds of packages that are offered to customers who are searching for enhanced features that the solution may be found.
This is the free version of Zoom, which allows for limitless meetings with up to a maximum of 100 people for a total of forty minutes.
Zoom Pro is the most appropriate solution for the requirements of a small company. It allows for limitless group meetings, with each license allowing for 1 GB of recording space and social media broadcasting. It costs $149.90 per year or $14.99 per month for a single license.
Zoom Business is a service designed for small and medium-sized companies. Meetings with up to 300 participants, corporate branding, cloud-based transcripts, and customized email templates to send to invitees are just a few of the perks available. There is a minimum of 10 hosts required and the cost is $199.90 per year or $19.99 per month per license.
Zoom United Business– This version of Zoom United Pro contains all of the features of Zoom United Pro. In addition, users get access to unlimited calling capabilities inside the United States and Canada, and they may organize meetings with a maximum of 300 people.
Zoom Enterprise is designed for large-scale businesses. A corporate URL, hybrid cloud service, and REST API are just a few of the advantages, which allow for easy integration of video meetings into web-based apps and web-based tools. It costs $19.99 per month per license, with a minimum of 50 hosts required.
All three premium options provide the option of increasing the number of participants beyond the amount specified for a little extra charge. On the Pro plan, five hundred more participants are available for an additional $64.99/month/host, while 1,000 additional participants are available for $104.99. Similarly, the Business and Enterprise plans have a monthly fee of $69.99 or $109.99 per host, respectively.
2.Zoom Rooms and Workspaces are available.
Zoom Rooms is a software-based conferencing solution that allows businesses to have video meetings with a high degree of convenience and flexibility. It is possible for customers to continue using their current hardware supplier or to buy straight from Zoom-certified hardware vendors. On top of that, Zoom offers installation assistance for such products.
A beginning membership cost of $499/year/room, which allows for a total of 49 such rooms, or a monthly fee of $49/installed conference room is charged as a starting fee. Each sale results in Zoom receiving an extra commission from the hardware suppliers; this kind of agreement is beneficial to both parties since the hardware vendor is rewarded with exposure to a huge number of consumers in return.
3.Zoom Phone (also known as Zoom 1).
This is an add-on to the current Zoom services, and it is a cloud-based calling solution that allows a user to make a fast conversation without the need for a video connection. Among other things, texting, voicemail, call recording, AI-based call routing, and encrypted HD audio for crystal clear conversations are available as optional extra services. This service is available for an extra $14.99 per month per host.
4.Zoom Video Webinars are another option.
Users may organize webinars with up to 10,000 attendees, and they can include interactive elements like chats and polls to make them more engaging. In contrast to Zoom meetings, Webinars only allow view-only guests, allowing the host to maintain complete control over the event and to unmute any participants he or she wishes at any time. This service is available for $14.99 per month up to $64,900 per year for a single license. The cost may vary based on the number of people that attend the event.
Recent developments in Zoom’s connection with PayPal enable webinar hosts to charge a registration fee for their sessions. They will get the login information for the webinar once they have completed the purchase process. This is accomplished via the use of the Zoom my money function. Setting up a PayPal business account and setting it to work with a Zoom account is also a straightforward process.
The Zoom app also functions as an in-app marketplace in addition to these sources of revenue. Slack, Trello, and Hubspot are some examples of third-party apps that may be added to enhance the overall user experience.
How does Zoom work?
Individuals and organizations may communicate remotely with one another via the use of Zoom, a cloud-based SaaS (software as a service) tool. A key component of the software as a service model is the vendor hosting and maintaining the servers, code, infrastructure, and databases on behalf of the client organization.
Customers are simply needed to pay a monthly or annual membership fee in exchange for the services they get from the company. This version of the paradigm represents a considerable improvement over the on-premise delivery methods that were in use in the 1990s and early 2000s. According to surveys, SaaS-based apps will account for more than 80 percent of all applications in the near future.
With Zoom, hosting, scheduling, and attending a group meeting or a one-on-one meeting are all very easy tasks. Zoom is available as a mobile application as well as a desktop application for Windows and macOS. Zoom is now available as an extension for the popular web browsers Firefox and Google Chrome.
The ability to provide high-quality video and audio output with little friction give us a competitive advantage over our competitors. Organizations on a large scale utilize the seamless platform to hold business meetings on a worldwide scale, with hundreds of people in attendance.
Zoom’s business model
User membership fees for the many goods on offer are at the heart of their business model, which is based on recurring subscription fees. It is possible to use the freemium model by providing limited services to attract consumers and convert them into paying customers in return for more advanced services. Zoom also earns money through promoting certain hardware items, which it does on a commission basis.
One of the most significant benefits of such a company strategy is that the revenue can be anticipated with reasonable accuracy. Customers have a low likelihood of canceling their subscriptions. A fixed monthly or annual charge imposed on users is straightforward to understand. There are no hidden fees, and because of this openness, it is simpler for businesses to convert free users into paying clients. The retention of consumers, on the other hand, is a continuous source of concern. Companies must discover innovative methods to add value to their consumers’ experiences. This may prove to be very capital demanding for companies that are just getting their feet wet in a competitive market area like the pharmaceutical industry.
Things to Learn From Zoom
After deciding to start his adventure in 2011, Eric Yuan got a great deal of criticism, with many of his colleagues advising him that he was making a “poor choice” since there were already established competitors in the industry, such as Skype. He, on the other hand, saw beyond the restrictions and chose to work on his dream project, providing his target audience with precisely what they needed to succeed. Today, Zoom has more users than Skype, which is a significant increase.
As a result, entrepreneurs and companies all around the globe have been inspired by the Zoom platform. Taking notes on the firm’s business plan and concentrating only on “How Does Zoom Make Money?” may help you generate some income; but, it is the little lessons that you can learn from the company that will help you differentiate yourself from your rivals.
Let’s take a look at the three lessons we may take away from the business.
1.Problems that the target market is experiencing
Despite the fact that Skype is an excellent communication tool, the user interface (UI) of the program is rather complex. Furthermore, in order to participate in or host a meeting, one must first establish a Skype account. As a result, Zoom recognized these problems and developed a product that addressed them head-on, including one-click membership and an outstanding user experience.
2.A product that has the potential to sell itself.
Eric Yuan was working on creating a product that will sell itself in the future. He concentrated on the product’s characteristics and developed a dependable application that his clients would like to use. Furthermore, they focused on a certain set of people – Early Adopters.
Essentially, this is a group of individuals who are interested enough in your product to test it and spread the word about it, assuming they like it. Therefore, instead of spending a lot of money on marketing, concentrate on the features and functioning of your product first and foremost.
Consider the following: Do you believe Zoom would be where it is now if it had not offered the free version of Zoom Meetings?
Everyone is interested in learning How Zoom Makes Money, but only a small number of people are interested in learning about the free service, which is the most significant part of the revenue strategy at Zoom. To be clear, Zoom only began to make money when consumers became aware of the free service it provided them.
Upon realizing that they could get access to more sophisticated features by upgrading, consumers started to subscribe to different models, as described in the preceding section. Consequently, do not be afraid to provide complementary services. It’s possible that your product may become the next popular application!
Is Zoom Safe to Use?
Despite its widespread appeal, Zoom has been accused of many privacy violations as well as security fraud. According to the complaint, a large number of Zoom accounts, as well as email ids and pictures, were sold on the black market. Users often login into Zoom using their Facebook account, which makes it easier for cybercriminals to get access to their personal information.
Even Zoom gathers information on its users and transmits it to LinkedIn, which uses the information to provide a sales prospecting tool called LinkedIn Sales Navigator. According to the complaint, Zoom does this action without the consent of its users.
Hackers may take over a user’s account by installing malware on the computer, which they do with the help of Zoom software. They participate in ongoing meetings and covertly listen in on audio calls, which is referred to as Zoombooming.
Users of Zoom were not able to communicate with one another without end-to-end encryption until 2020. Because of this, they have access to all of the video and audio data. In order to address this problem, Zoom began offering end-to-end encryption for premium customers at the end of May 2020 but only for a limited time. However, beginning in October 2020, this functionality will be available to both paid and non-paid Zoom customers in order to improve security.
Zoom, on the other hand, is still working on its privacy problems. Many people have still claimed to receive scam/fraud calls, having participants at the meeting, or having their personal information sold to other parties. It is necessary to update the functionality in order to guarantee that how does Zoom generates money operates safely.