How Zoom Makes Money? Revenue & Business Model Explained

What is the very first name that comes to your mind when you think of video conferencing? 

Well, Skype might be for the starters, but Zoom has been leading the video conferencing industry for more than half a decade. 

Skype lost its charm over time, but Zoom’s growth has been dramatically rapid, especially during the Covid-19 pandemic situation. 

Zoom has been the epicenter of business communication and video conferencing during the lockdown period around the world. 

Also, they managed to get themselves into a controversy as well regarding the stolen data of customers sold on the web and much more. 

Well, having said that, focusing on the best part of the retrospective and analyzing How Zoom managed to grow its business. 

How do they make money? And where they started. This can be helpful for small businesses and entrepreneurs to grow their businesses as well.  

So, let’s dig into the journey of Zoom and its business and revenue model as well. 

What is Zoom? 

The Zoom video application is a video communication technology brand that helps businesses and organizations communicate with their team remotely. 

It is an easy and reliable cloud communication platform utilized for video, content, and voice sharing across multiple device platforms. 

The peer-to-peer software company is headquartered in San Jose, California. 

It is primarily used for teleconferencing, telecommunication, social interactions, and education. 

The application is free to use for video conferences that can include participants up to 100 under 40-minute time duration. 

To have access to utilize longer conference time duration or include more participants, you have to go with their paid plans. 

The paid plans start from costing around $15-20 per month. These plans offer you a wide range of premium features. 

How Zoom Works? 

Zoom is a cloud-based SaaS video conferencing and meetings application that allows people, as well as businesses, to interact with each other virtually. 

The communication mode Zoom offers isn’t just video but also chats, video, and even a combination of all three. 

Users are allowed to go for one-and-one video chats or meetings, or they can also conduct meetings through video conferences involving up to 500 participants. 

The application also offers screen-sharing options to participants allowing them to share more accurate information and coordinate even better with others. 

Zoom Meetings & Chat and Zoom Rooms & Workspaces are the two major core products of Zoom that bring most of the revenue to them. 

One can attend a Zoom meeting and organize using a desktop application, mobile application, and web browser. 

It also offers a chat feature as an extension to its meeting product which further helps the meeting organizer interact with others. 

Also, they can share files, create groups and allow other participants to chat with each other as well. 

Zoom Rooms and Workspaces is more of a business product that uses multiple hardware accessories and peripherals such as computers, microphones, cameras, tablets, and more to organize Zoom virtual meetings. 

This Zoom product is highly focused on selling to large-scale enterprises that require organizing meetings across various offices. 

Zoom also offers its own set of hardware to make this integration with hardware easier for the users. 

They have collaborated with other manufacturers such as DTEN ON and Poly Xseries, where they also get their commission on sale percentage. 

How Zoom Started? 

Eric Yuan, the CEO of Zoom, founded the company in 2011 and used to be a former executive at the video and web conferencing company Cisco WebEx. 

Before starting Zoom,  Eric Yuan had a long experience of, 14 years leading a team of engineers, earlier at WebEx. 

After Cisco’s acquisition of WebEx in 2007, he continued where he joined WebEx in 1997 as amongst the very first software engineers of the company. 

Yuan noticed the customer’s frustration at the company, where they weren’t able to fulfill customer demands. 

One of the examples being in the slowing down of their conference process. Where every time a user logs in, they have to specify the version of the product they are using to connect. 

Too many people using the WebEx conference made the audio and video quality low. And there were too many restrictions and no features such as screen-sharing. 

Yuan was the first to notice the problem; he started his own venture in 2011, where he took a team of 40 Cisco engineers with him in doing so. 

Earlier, they started the company called Saasbee; however further branded into Zoom as we know it today. 

The company has faced a lot of problems in attracting inventory since no one believed that Zoom or any new company could dethrone existing communication giants such as Hangout (Google), Skype, and WebEx. 

Fortunately, the Former CEO of WebEx, Surah Iyar, including other people in his network, provided Yan with enough credibility to raise $3 million for Zoom. 

In 2013, almost after two years, Zoom launched its first product. 

It was a quality product highly noticeable for users leading to becoming a video conference giant by themselves. 

Their initial product has the ability to include up to 40 participants and is organized on multiple hardware platforms such as desktop, laptop, mobile, etc. 

Since Zoom also priced itself significantly cheaper than the competition with a dominant quality aspect, customers flooded their doors already. 

Just after the launch, they gained more than 1,000 businesses as their customer base hosted more than 140,000 meetings. 

Zoom has kept improving its product and number of features as well as taking customer/business feedback and research. 

And since then, the success of Zoom has gradually continued over time, with some financial hiccups too. 

But in the recent events of the Covid-19 pandemic, Zoom rose to dominate the worldwide video conferencing industry. However, they also got some backlash regarding their security issues. 

How Zoom Makes Money?

The Zoom application offers a variety of products to their customers as well as businesses. 

Zoom works on the freemium model, where customers can use Zoom meeting and video chat products for free. 

However, they have a limitation of 100 participants and 40 minutes for their group meetings. 

So, to access their premium features, Zoom offers various premium plans as mentioned before. 

This is the primary revenue resource for the Zoom application to make money. On the other hand, their freemium model allows more and more people to get to know their product. 

Zoom Meetings & Chats 

Zoom Meetings & Chat is the company’s flagship product, which allows people to use video calls or chat on the application. 

This video chat and meet feature can be used on multiple devices, such as desktops, tablets, and mobile as well. 

When you use the free version of Zoom, you only get 100 attendees and 40 minutes. 

There is a monthly subscription fee to surpass these restrictions for businesses. 

  • Pro (  Great for small teams):  $14.99 per month per host 
  • Business ( Small & Medium businesses): $19.99 per month per host 
  • Zoom United Business:  $30 per month per host 
Zoom Chat
Source: dispatch

Zoom Phone

Zoom Phone is a cloud-phone solution specifically designed for those users who prefer or want to have quick audio calls rather than a video calls. 

It also offers an Enterprise cloud phone system with a smooth, streamlined process to establish audio communication. 

Any zoom user can do a VoIP call using the same Zoom application and tools found in their ‘Zoom Meeting product. 

Zoom charges a monthly subscription fee of a minimum of $10 per month per user for US Canada metered connection. 

There are various monthly paid plans which further offer a revenue source for 

Zoom Phone
Source: 1-to-all

Zoom Rooms 

Zooms Room is another premium product offered by Zoom for ease of usability and to increase the convenience of conference video meetings. 

It allows organizations to get into a video conference meeting right away without any hassling setup process. 

It makes setting up video conferences and meetings easy and quick. It also allows wireless multi-desktop setup across different locations. 

Zoom Rooms comes with a monthly subscription fee of $49 per month per room. There is also another plan dedicated to enterprises as well. 

Customers can very well deal with their existing hardware providers, such as Cisco or Polycom, but Zoom also offers their preferred Zoom-certified hardware providers. 

Now, this also becomes another source of revenue for Zoom. 

This is because Zoom partners with various manufacturers like Aver or DTEN, which they recommend to their customers. 

And on every sale, Zoom gets a percentage of the purchase from these partner manufacturers.

zoom rooms
Source: zoomgov

Zoom Key Statistics 

The very core of the Zoom Business and revenue are the individual users. The user base of Zoom has been growing exponentially and has been steady since its inception in 2013. 

According to the March 2020 reports, Zoom has added more users than all of 2019 combined. 

The platform added over 2.2 monthly active users to its total 12 million member base, where more than 200 million users participate in video calls daily. 

Here are some recent statistics to further update the existing data on Zoom, demonstrating the revenue and business status of the application.

  • According to Sensor Tower, there were 94 Million iOS Zoom downloads in Q2 2020 – 1 percent of the total.
  • During the Covid-19 crisis, 90,000 schools in 20 different countries profoundly used Zoom to teach remotely, where the company lifted a 40-minutes time limitation for free meetings for Teachers.
  • 96% of top universities and colleges were using Zoom, whereas 58% of the Fortune 500 companies were the customers of Zoom as of 2017 by Freshworks.
  • India is the biggest Zoom market, with 68 Million downloads in Q2 2020, followed by the United States with 41 Million as per Sensor Tower.
  • Zoom joined Pokemon Go and TikTok in Q2 2020 as being the only application to be installed over 300 Million times in a single quarter.
  • 641 Zoom business customers were worth more than $10,000 in the 2020 financial year (2019), which is up to 86%.
  • Zoom usage and download have increased by 67% between January and Mid-march of 2020 during the pandemic. 
zoom statistics 

Zoom Funding & Valuation 

According to the source, Crunchbase, Zoom successfully raised $146 million in six rounds of venture capital funding. 

The investors for Zoom include brands such as Emergence Capital, Horizons Ventures and Sequoia Capital, and many others as well. 

Then, they further raised another #356.8 million in its IPO. It was announced in the month of April 2019. 

Zoom made its debut on the Nasdaq stock exchange when its share went public in 2019 at a time of still losing money. 

The company is also already quite profitable and earned $7.58 million in total income for the fiscal year 2018. 

Zoom earned a total revenue of $622.7 million, rising to $21.7 million in 2019. The company is valued at $47 billion. 

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