How Does Zoom Work: Business and Revenue Model Explained

How Does Zoom Work: Business and Revenue Model Explained

3847 Views | 8 min | May 26, 2020
how does zoom work

The blend of coronavirus, social distancing, and remote working is the talk of the town. And you know who is giving fire to these talks? Obviously, mobile apps! 

While there is no doubt in saying that the usage of almost all types of apps has increased in these days of quarantine, the limelight stealers are Video Chat AppsBy turning social distancing into distant socializing – these apps are making big bucks with every passing day. The unbelievable growth of apps like Zoom is proof. 

According to a report by Sensortower, Zoom registered almost 131 million new installs in the month of April which is almost 60X growth when compared to April 2019. 

How Does Zoom Work

With these astonishing stats, the app also became the most-downloaded non-game app globally for the month of April 2020 leaving big giants like TikTok and Facebook behind. Now, the question arises, how? A number of entrepreneurs who want to replicate the success of apps like Zoom want to know “How Does Zoom Work and Earn Money?”

In this blog, we will find answers to all such questions by analyzing Zoom Business Model. So, let’s get started.

Zoom Stats and Facts: Funding and Major Milestones

  • Founded/launched: 2011/2013
  • Headquarters: San Jose, California
  • Founder and CEO: Eric Yuan 
  • Total Funding Amount: $146M
  • Valuation at IPO: $9.2B
  • Number of Investors: 17
  • Zoom Business Model Type: Freemium
Zoom Success Timeline and Funding

The Inspiring Success Story Behind Zoom

Before we answer How Does Zoom Work – let’s put some spotlight on how the app came into existence.

While getting extensive popularity and coming to run profitably enough over the last few years, Zoom actually entered the space of famous apps during the coronavirus pandemic. And, because of its amazing value propositions, this video conferencing solution is the talk of the town today.

The story behind it is inspiring because it was founded by a man whose visa was rejected by the US not just once, but repeatedly 8 times. Yes, Eric Yuan – the founder of Zoom is basically from China and was a part of WebEx, before the company was acquired by Cisco in 2007. 

When Yuan decided to enter an already crowded space of video conferencing – his friends called him insane because he was trying to make a space in the market that was already occupied by big giants like Microsoft and Google with their amazing products.

But, Yuan was confident enough to make it big in the video chat app market. He believed that he could build a product more enjoyable than even Skype with his strong industry insights and experience.

Well, it would not be wrong to say today that his confidence paid off. The software he launched in 2013 registered 1 million users within a few months, 10 million users a year later, and around 40 million after the two years of its launch. Over all these years, Zoom’s focus was just on developing its product better with advanced features and as per the feedback of the users.

zoom inspiring success story

At that time as well – the Zoom’s revenue was generated using its premium features over its free offering. By 2017, Zoom had become a unicorn and this continued success reached a climax in Zoom’s IPO 2019. The company impressed several investors in it by revealing the fact that it is already operating on a profit. And the rest is history.

The company truly took off in March of the year 2020. Yuan expressed in a blog post that through the period of that month, Zoom was getting 200 Million daily users on its app. The next month, this figure reached 300 million which is surely an incredible success.

Or, we would say it was an opportunity well used at the right time. Let’s now check out How Does Zoom Work and continues its operations.

video chat app

How Does Zoom Work: Zoom Business Model Explained

Zoom is a video conferencing application, designed for business use. The product basically has a mass-market business model with no noteworthy differentiation between customer segments. 

It targets businesses of all sizes and industries that seek video conferencing solutions and has established a strong brand as a result of its incredible performance. It serves more than 300,000 organizations, including prominent users, like Arista, SolarCity, and UCLA. 

Here is How Does Zoom Work and maintain its position in the market:

Zoom Business Model Canvas

1) The users can utilize Zoom Video Conferencing Solution on a number of platforms like iOS, Android, Mac, PC, and Linux.

2) The communication over the application can happen through chat, video, audio, or a mix of all the three which is actually the software’s value proposition. It is a one-stop solution for all types of needs for collaboration as it allows every mode of communication – may it be chatting, video conferencing, group meetings or simply calling.

3) The answer to How Does Zoom Work is by using the Freemium Business Model. It offers 4 different membership plans, one out of which is a free plan. The solution’s free plan is all that a regular user needs as it lets you have video conferences of as long as 40 minutes and with up to 100 members. 

4) But, that doesn’t mean you can say that Zoom is a free-to-use app. You have to pay a fee to use its special features, for example, – the ability to add 100+ members,  increased meeting hours, and integration with other services. 

5) As mentioned above, Zoom offers four pricing plans to let its users enjoy these special features and they are called Zoom Pro, Zoom Business, Zoom Enterprise, and Zoom Rooms. You can get details about its pricing here

6) Zoom’s core features involve one-on-one meetings, group video conferences, and screen sharing where users can meet one-on-one or in large groups and share their screen to see what others are doing. Its global adoption is however fueled by its two main products i.e Zoom Meeting and Chats. 

7) Users can attend Zoom Meetings using an internet browser, or mobile apps and desktop. The Chat comes as an extension to its Meeting product where users can connect through a chat with one another, share documents, or make groups. 

8) Zoom Rooms and Zoom Workspaces are also its products but the paid ones that allow organizations to use hardware such as a tablet, computer, microphone, camera, and some more to plan virtual meetings. These solutions are specifically meant for larger-scale businesses that need to work and collaborate across various offices.

9) Along with the above mentioned four products, the company has other products as well like Zoom Phone, Zoom Video Webinars, and an App Marketplace where its users can install and use third-party apps like HubSpot, Trello or Slack to enhance the functionality.

10) All in all it is not wrong to say that its freemium business model has helped increase its adoption rate and its non-stop updates over the time made it the best in the industry and a great fit for present time needs.

Now that we know all about it –  How does zoom work, what are its features, and the Zoom business model – it is time to see how the app makes money to continue its operations and ways it use to stay profitable while serving its users in the best possible way.

Also Read: Find Out 8 Hidden Costs of Developing an Application

How Does Zoom Make Money: The Revenue Model

To be very precise – Zoom’s focus was never on generating skyrocketing revenues. 

The present state of the company may look like an overnight success – but it is not. The focus of Eric was always on making a product that can sell itself and make its users happy. In other words, we can say that the key aspect of Zoom’s growth plan has always been to let their product do most of the talking. 

To prove it, here is what its founder and CEO told Forbes in an interview:

how does zoom makes money

In spite of prevalent thinking that Zoom is an overnight success, it has consistently been in the spotlight at the correct places. The August 2018 Gartner quadrant for meeting applications put Zoom among the visionary leaders and it was positioned alongside Microsoft and Cisco, and well in front of Google and Adobe. Even in the stock market, Zoom has been a top performer.

Its revenue grew from $60M in 2017 to around $330M in 2019. However, 2020 was a different level of growth for Zoom. The only first quarter’s revenue of Zoom in 2020 was $121 million. 

what is zoom and how does it work

And what is shocking is that its only source of revenue is still its subscriptions. As mentioned above, Zoom offers 4 subscription plans for its users called Zoom Basic, Zoom Pro, Zoom Business, and Zoom Enterprise. Here is how these plans vary depending on their offerings:

Zoom Basic

The Basic plan of Zoom is free to use and it permits its users to have up to 100 members in a single meeting, unlimited 1 to 1 meeting, online customer care services, and some extra features for group meetings. The main restriction in its free plan is that the duration of group video meetings is constrained to 40 mins. 

Zoom Pro

The Pro Plan of Zoom comes at $14 per month and persists all the features provided by the free plan alongside added advantages, like, – group video call duration increased to twenty-four hours as opposed to 40 minutes, the capacity to add more than 100 members, integration with Skype for Business and a lot more other features. 

Zoom Business

The Zoom Business plan comes at $19.99 per month and needs at least ten group members in your team to function. As the name suggests, this plan is more appropriate for small or medium-sized businesses. 

Zoom Enterprise

The Zoom Enterprise plan comes at $19.99 per month and needs at least 50 members in your team. Again, as the name suggests, it is a great fit for large businesses and organizations.

That’s all about How Does Zoom Work and makes money. The application is presumably a redefiner with regards to video conferencing and making an application like Zoom won’t be simple without a doubt. To put it all together, you will need to consider a number of aspects like market research, competitor analysis, app development, new features to add, back-end development, and marketing to build an app like Zoom.

So, if you are really serious about replicating the success of Zoom – you must learn a number of things from Zoom business model and strategies they adopted to stand tall in the market. Here are a few key takeaways on which you can focus while planning to develop an app like Zoom.

3 Lessons to Learn From Zoom’s Incredible Success

1. Be User-Centric Always

Since the year 2013 to 2020 – the thing that was consistent in Zoom’s journey was its priority for its users. The team at zoom never dreamed of overnight success or fast publicity. The founder and CEO of Zoom said in an interview that keeping their existing customers happy was always the first priority of the team at Zoom – even if that forced them to slow down sometimes.

So, before you plan on replicating Zoom’s success – fit the user-centric strategy at the back of your mind.

2. Focus on Making Your Product Better

At Zoom, collecting and analyzing user’s feedback is the way using which they have been able to create a world-class product. Here is a small note by Zoom Founder that shows why they are so successful today:

We always worked on making our free product work incredibly well. We provide most of our features free and that helped us build a loyal user base. That is the reason every day there are such a huge number of users coming to our website, free users. If they find our product useful, very soon they are going to pay for the membership – Eric Yuan

3. Never Believe That There Is No Space

When Eric founded Zoom, there were a number of doubts. Wasn’t the market already targeted? How can one fight against rivals like Google and Microsoft? However, the man behind Zoom – Eric Yuan – was confident about his idea. He understood that there is a lot that can be done to make things better in this industry.

And this should be a thumb rule for every startup – either solve a big problem or solve the already solved problem in better ways. Eric chose the latter and became what he is today – the CEO of a billion-dollar company.

Wrapping Up

So that was all about How Does Zoom Work. It is a great example of how video-conferencing apps should be. With its amazing business model – the software is winning market shares and giving neck-to-neck competition to big players in the market like Sykpe. 

Well, if you too want to create an app like Zoom – you must pull your socks now. No doubt there are still a lot of ways to stand-out for new players in the market. But, the journey to follow all of them would not be an easy one. 

The benefits and returns on investment of making video conferencing apps like zoom are clear enough with such apps getting immense success. Also, their trend is not going anywhere anytime soon with the world adopting work from home policies.

So, what are you waiting for? Invest in your idea today to reap big benefits in the near future. Get in touch with our expert consultants to develop an app like zoom.

video chat app development

 

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