It’s a great sign for a company when its brand name starts being used as a verb (e.g. Google, Uber, Venmo). It’s an even better sign when the company stock spikes more than 100% in less than two months. Of course, the current coronavirus situation and the resulting shift to working from home have played a significant role in Zoom’s recent success. However, Zoom also deserves credit for how it has positioned itself to be the videoconferencing platform for 60% of the Fortune 500 companies and over 96% of the top 200 US universities. Zoom has captured disproportionately more market share than many of its competitors with more resources, such as Skype, Microsoft Teams, Google Hangouts, and Cisco Webex. It has been able to achieve this success by focusing on building a superior product, establishing strong network effects, and leveraging network bridging.
Value Creation and Capture
Zoom’s platform strategy centers around building a reliable, easy to use, and high quality videoconferencing product. Unlike its larger competitors, Zoom focuses solely on making video-calling products with a customer-centric emphasis. As a result, Zoom is able to develop a platform that has higher video quality and fewer interruptions than its competitors. These attributes are particularly important for its early critical mass of users. When schools shifted online, Zoom had features conducive to a teaching environment (e.g. raise hand function) that differentiated it from other available products. To decrease multi-homing and add to the stickiness of the product, Zoom also incorporated safety and social media features. It added end-to-end encryption, industry-specific security measures (e.g. HIPAA compliance), and user-friendly screen sharing and team collaboration tools. To target younger users, Zoom built in a virtual background optionality and “Touch Up My Appearance” functionality that resembles Instagram filters.
Prior to the coronavirus pandemic, Zoom operated on a freemium model with free accounts limited to 40-minute calls. With the anticipated market size increase due to social distancing measures, Zoom removed the limit for free accounts, forgoing some potential profit in order to capture as much of the market as possible. The videoconferencing market has strong network effects. When more businesses and schools adopt the platform, more consumers and students will have to use the platform. There are also same-side network effects. When many people in a social group are using Zoom, the remaining non-users will be incentivized to download the platform in order to communicate with the rest of the social group. This strength of network effects has led to Zoom evolving beyond professional use: there are now social Zoom gatherings and Zoom parties being held as well.
Zoom has also been effective at leveraging network bridging and integrating with other platforms. Unlike Apple’s FaceTime, which can only be used on iOS, Zoom can be used on all operating systems – PC, Linux, iOS, and Android. It also created an app marketplace for integrations with other platforms like Slack and PayPal in order to extend the reach and convenience of Zoom.
Scalability and Sustainability
It remains to be seen if Zoom can keep its dominant position and retain users after the coronavirus pandemic passes. Its vulnerability to multi-homing, risk of disintermediation, and susceptibility to network clustering are low. One of its main challenges will be keeping users on the platform when in-person interactions become a more viable possibility again. Furthermore, Zoom will have to continue to innovate to ensure it remains the highest quality product while still being easy to use. A further consideration Zoom should focus on while it is still growing is addressing privacy concerns. Similar to companies like Facebook and Twitter, Zoom might have to consider content moderation to safeguard its platform against being used for illegal activities. It also needs to more transparently address how it will protect user data. Lastly, its continued success will hinge on finding a profitable monetization strategy.
- Zoom website. Retrieved March 23, 2020. https://zoom.us/docs/doc/Zoom_Platform_and_Company.pdf
- Zoom marketplace. Retrieved March 23, 2020. https://marketplace.zoom.us/
- Zoom blog. Retrieved March 23, 2020. https://blog.zoom.us/wordpress/2020/03/22/how-to-use-zoom-for-online-learning/