Zoom at 10: Where Does It Go From Here?

In late June, Zoom CEO Eric Yuan posted on Facebook that the company had just turned 10 years old. This got me thinking about the remarkable run Zoom has had, going from a startup to a company worth $113 billion in market cap with a run rate of $4 billion in revenue in a decade. The most amazing part of Zoom’s success is that the market was saturated with several established vendors, which typically spells doom for startups.

The fundamental premise of my research has always been that market share can be gained when markets transition. Without a shift in the industry, buyers typically don’t change their chosen vendors. As an example, if Cisco had set out to build a traditional PBX in the 90s, it likely would have failed given the number of large incumbents. Instead, it rode the VoIP wave, caught the incumbents asleep at the wheel, and became the industry leader.

When Zoom was founded, the online collaboration space included several heavyweights such as Cisco, GoToMeeting (owned by Citrix at the time), and Microsoft. How could Zoom possibly compete? Fellow Real-Time, Recorded host Dave Michels and I have discussed this several times, and both of us thought Yuan was crazy to try and build a better mousetrap when it seemed the current crop of products were fine. If Yuan had come to us and asked our opinion on whether he should start Zoom, we likely would have said no.

Yuan had a vision of building a video product that was so simple that anyone could use it — from knowledge workers to kids to grandparents, and that’s what he did. 10 years later, the company has been so successful that it has become a verb as we say, “see you on Zoom” and use the terms “Zoom bombing” and “Zoom burnout,” even if they aren’t using Zoom. I even heard a rap song the other day that mentioned the company. This kind of mass association has both positives and negatives, but that’s what happens when you become the de facto standard.

The market transition Zoom caught was the rise of video becoming mainstream, which was driven by the COVID-19 pandemic. Some industry people I’ve talked to think Zoom got lucky and, had it not been for the pandemic, Zoom would be just a fraction of what it is today. That might be true, but we will never know as the pandemic did happen, and Zoom was well-positioned to take advantage of the market shift. In my opinion, I certainly don’t think Zoom would have its current market cap or revenue run rate, but I do think it would be highly successful. People have an almost emotional attachment to Zoom, and that would have created viral adoption.

Well done to Yuan and team in the company’s first ten years. Now it’s important to look ahead to what’s in store for the next decade of Zoom. The company has dominated video meetings, which sets itself up nicely as there are several adjacent markets. Here are four key areas Zoom should focus on over the next ten years:

1. Zoom as a platform — Of all the things on the horizon, this is the most important one. Every big software company has made the shift from product to platform. The ability to let third-party independent software vendors (ISVs) build apps that run on the platform or interoperate with the products puts platform vendors in a position where replacing it is a significant amount of work. Salesforce, Oracle, Microsoft, and others are all platform vendors, and that’s enabled them to maintain their place at the top of their respective heaps. Zoom has put all the pieces in place with a rich set of APIs, a third-party partner program, and has even put money $100 million in place to stimulate the ecosystem. Now, it just needs to execute on this, which takes patience and hard work.
2. Continued growth of Zoom Phone — When it comes to Zoom Phone, Zoom's progress has been so far, so good. In June, the company announced it had hit the 1.5 million mark for Phone seats sold, which is impressive given the company just launched the product in January 2019. However, its initial wave of success can be attributed to pent-up demand from the most emphatic Zoom buyers. Looking ahead, competition will get stiffer as it starts to butt heads with companies like RingCentral. Despite all the rhetoric surrounding the “phone being dead,” calling is alive and kicking, and Zoom needs to grow into the 10’s of millions of seats.
3. Contact center — Contact center as a service represents an over $50 billion total addressable market that’s growing and Zoom’s biggest needle-moving opportunity. To date, the company has been mum on what it might be doing here, but on Zoom’s last earnings call, Yuan hinted that we might see something on its upcoming Zoomtopia event. Will we see Zoom come out with a Five9 killer then? Certainly not, but I think they will announce a light customer care tool with basic contact center capabilities., which will be the building block of its long-term strategy in this area.
4. Acquisitions — Yuan is known as someone that likes to build and not buy. While it has made several small acquisitions, they were technology tuck-ins that brought some talent into the company. Given its market cap, it could and will eventually need to do something bigger. The contact center space could be an area where it could make a bigger acquisition to get some technology. Names like Ujet or Uniphore would make some sense. It could also take out a company like Fuze if it can get a good deal for install base and convert those users to the Zoom platform. As it gets bigger, the law of large numbers will limit what it can do organically, and it will need to start thinking M&A.

To Yuan and the rest of the Zoom team, I would like to offer a most hearty congratulations on a fantastic first 10 years. The work gets harder from here, but Zoom has been great at listening to customers and using their feedback to fuel product strategy. As long as this doesn’t change, that gives Zoom a running start at its next decade.