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Business Model of Video Conferencing Company Zoom | How Does Zoom Make Money?

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How does Zoom make Money

The Zoom video conferencing platform is a cloud-based conferencing tool that allows its users to interact virtually with each other. Their services are available on every device including android, IOS phones, computers, laptops, etc. The company’s highest-selling point /advantage is centered around how the platform is extremely easy to use compared to its competitors. That too while providing high-quality audio/video output.

The platform makes money by charging subscription fees, advertising, hardware sales along with investing in other startups. The company has opted for a freemium business model for its platform. It was founded by the former Cisco executive in 2011 and the platform was an instant success because of its product’s superiority. The company’s IPO reached its highest peak in 2019. The cloud-based conferencing tool that was launched back in 2011 is now valued at $47 billion.

What is Zoom?

Zoom is a cloud-based conferencing platform that allows private individuals as well as businesses to virtually interact with each other. They can opt to communicate via text, video, audio, or a combination of the three whichever is suitable for them. It allows its users to conduct one-on-one meetings and video conferences with up to 500 participants they have features like screen sharing which helps the meeting participants distribute information and have better coordination.

This is one of the most commonly used features used while conducting online workshops, classes, and business meetings. Zoom was adopted worldwide and powered by its two core products which are the Zoom Meetings and the Chat feature along with the Zoom Rooms and the Workspaces.

These Zoom Meetings are incredibly convenient and can be attended and held via web browsers, desktop as well as mobile applications. The Chat tool works as an extension to the Meeting product where the meeting participants/users can interact through a chat box window with each other, share files, or create groups just like Whatsapp, Facebook messenger, or any other messaging platform.

Rooms and Workspaces, on the other hand, allow businesses to utilize hardware such as a computer, tablet, camera, microphone, and more to hold virtual meetings. The product was made specifically made keeping in mind the larger-scale organizations, which constantly have to organize meetings across different offices all over the world.

To make the integration with the hardware simpler, Zoom even offers its users its own set of hardware that they have developed in collaboration with some of the world’s most renowned manufacturers like the Poly X Series or DTEN ON.

The company also developed other products like:

  • Zoom Phone is a cloud phone system that comes along with advanced features. Like intelligent call routing, voicemails, automated attendants, call recording, dialing personas, and many more
  • Zoom Video Webinars is a conferencing tool that allows businesses to easily conduct large online events. Like meetings with audio, video, and screen sharing.
  • They also launched an app marketplace, where their existing users could install third-party applications. Examples like Slack, HubSpot, or Trello helps enhance the functionality of their product experience

These Zooms applications and hardware products are available all across the globe. The company has tied up with worldwide renowned businesses as customers, including Uber, TransferWise, Rakuten, and many more. Apart from visiting its website or downloading its desktop application or browser clients, Zoom can also be accessed on Android and iOS devices like phones and tablets.

Business & Revenue Insights of Zoom Company

Zoom makes its money by subscription fees, hardware sales, advertising, and investing in other startups. The platform also operates on a freemium model which allows its users to access Zoom’s products for free.

The platform charges its users to avail of advanced features, like being able to host up to 500 participants, record calls, etc. Zoom now has also started monetizing its freemium users by using ads. Let us now take a closer look at Zoom’s revenue streams:

Subscription Fees

A vast majority of the revenue that Zoom has generated is from charging various subscription fees in exchange for access to its different products and features. Its flagship product is the Meetings platform which allows teams, individuals, and businesses to communicate online using its audio, video, and text features either one-on-one or as conferences.
Other than its standard free Basic plan, Zoom also offers various paid versions like Pro, Business, and Enterprise.

All these products are aimed to target a different set of audiences and, depending on the price they pay, it allows them to host different numbers of participants, obtain recording transcripts, or even host conferences according to the specific firm’s native branding.

Zoom can then cross-sell by offering ancillary services Like more cloud storage and premium support. Once the user has paid the additional charge levied on it.

Monetization

Similarly, Zoom also monetizes the other software products developed by them, like the Zoom Rooms or Zoom Events & Webinar. To avail of these products, users can opt for monthly or yearly software licensing fees. In addition to that Zoom also offers dedicated plans and products for several industries including the education and healthcare sector. By customizing and tailoring its service for every specific customer segment, Zoom has vastly increased the possibility of selling into that customer type.

Other than that, most of these customers/users, like universities, are not very likely to replace Zoom and suffer technical issues that the change would provoke due to the sluggishness that comes with being an academic institution.
Therefore as a result, once Zoom managed to engrain itself into such organizations or larger enterprises. It is unlikely to be replaced because of the complexity it involves.

This helps Zoom in turn to better forecast its future revenue, which Zoom can then use to buy other companies to extend its product suite and/or invest in various startups that show potential.

Hardware Sales

Next in line with its software products, Zoom also offers several hardware items that can help enhance the experience of its software suite. To be more precise, Zoom offers dozens of different tablets, telephones, speakers, whiteboards, and many more such devices.

These hardware products or rather devices are offered in cooperation with other renowned hardware manufacturers. Examples like DTEN, Neat., Yealink, and more. Customers can then proceed to pay a monthly subscription fee for every hardware device. It could be completely up to them which they think they need to be sourced with.

The installation, as well as maintenance of the devices/hardware products, are managed by the manufacturers. In turn, Zoom pays them by sharing a pre-decided amount/percentage from the revenue generated.

Also, read: How does Discord Make Money?

Advertising

Another, in progress and a very small stream of revenue, is the advertising section. It’s the ads that Zoom shows after a meeting commences. This strategy was introduced and implemented for the first time in November 2021. These ads are only presented to the Basic Freemium users that do not pay any subscription fees to use the product.

This is also another tactic zoom uses to monetize the users that don’t pay for its product subscriptions. Users usually get frustrated by ads. endING up buying the subscription to avoid getting ads.

Just like how it usually is with any form of online advertising, Zoom too is most likely being compensated on a per-impression basis. This means that every time a user sees a particular advertisement, Zoom will generate a certain amount of revenue. With the platform having more than tens of millions of users active at any given point this can make a significant amount of revenue for the company.

Investments

Back in April 2021, Zoom unveiled a fund with which it would invest into startups that show great potential and build on top of its ecosystem. Throughout the year 2021, Zoom invested in more than 20 startups by using its $100 million-strong Zoom Apps Fund. Zoom then generates money from the fund whenever it sells the shares. Ones they had invested in for a greater price than what they were originally purchased for.

It is important to note that the liquidation of the shares only occurs once multiple years have passed as Zoom can only sell its shares during the second funding round when the existing investors get to cash out, a sale or IPO.

Apart from the aim of making money from those startup investments, Zoom also aims to enhance the ecosystem around their products which will be an advantage for them in a long run.

This will allow Zoom to get a whole new set of audiences and clients. Which might originally approach from the startups’ Zoom funds. In addition to that, the more integrations Zoom will possess, the more attractive it will help make its products.

Up to that extent, Zoom has also stepped into the app marketplace industry and introduced its app marketplace. It allows the other software companies to integrate themselves into Zoom’s product suite. Even though Zoom does not monetize its app marketplace currently, it could do so shortly. Maybe by charging a listing fee or by taking a percentage cut or pre-decided amount from every sale.

You can even check out other entertainment platforms’ revenue business models such as How does Netflix Make Money on our pages.

Zoom’s Valuation, Funding & Revenue

According to Crunchbase which is a platform that helps find business information about both public and private companies. Zoom has successfully raised a whopping total of $276 million in the eight rounds of venture funding. Its notable investors include Horizon Ventures, Sequoia Capital, Emergence Capital, and many more.

Zoom then proceeded to raise another $356.8 million in its IPO. It was announced back in April 2019. At the same time, public investors valued Zoom at $9.2 billion. Ever since then, the valuation has risen and it now stands at over $47 billion.

Even for the fiscal year 2020, Zoom had recorded total revenue of $2.65 billion. A huge growth up from $623 million that it made in the year prior. Its profits surged to nearly $1 billion. It rose significantly from the $101.3 million it posted back in 2019.

Conclusion

I hope this article helped clear your queries about how the Zoom cloud-based conferencing platform earns its revenue. Stay tuned to our site to avail latest updates on revenue models of various companies. You might be interested in learning about How to Make Money as a Student as well.

Neha Bansal is a Delhi based engineering graduate and has done her Post Graduation in Human Resource Management. She has a deep interest in startups, business & technology.

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