How Does Zoom Make Money : The Ultimate Business Model

When you think of video conferencing, you probably think of Zoom. The teleconferencing platform has become synonymous with video calling since the pandemic began. But, have you ever wondered, how does Zoom make money?

Zoom caters to everyone from students to sports teams and does so at a wide range of price points with varying limits to functionality. Whether you’re a small business or an enterprise, Zoom can cater to your needs making it a highly robust solution.

Zoom is a SaaS company. SaaS stands for Software as a Service and in short, enables license holders to communicate online through one platform. You subscribe by selecting a Zoom pricing plan meaning you can then communicate with friends and colleagues through one unified platform.

Zoom’s history is actually really interesting and the company has been embroiled in no shortage of scandal, but more on that later. Zoom’s marketing and corporate culture have proven integral to the company’s success. Security, however, has proven to be the SaaS’ company’s Achilles heel.

The teleconferencing solution has an intricate process wherein it utilises a blend of upsells, freemium plans, alternative communication systems, and hardware selling to make an income. If you’d like to learn more about this process, then I suggest you read on!

Bottomline Up Front – How Does Zoom Make Money

Zoom utilises a Freemium Business Model to make money. This approach entails charging customers a fixed fee across a given timeframe. On top of that, Zoom also sells hardware products.

To draw its customers in, Zoom allows users to first try its product for free. Then to avail of a superior Zoom experience, it encourages users to become license holders and highlights the benefits and features available to you upon making that decision.

Now how much Zoom makes per license holder depends on the Zoom pricing package that person or business selects. Each plan offers more and more control over your Zoom experience, so the more functionality you’re after the higher the plan you’ll need.

Zoom offers license holders the ability to pay monthly or annually. While paying annually at a discounted rate may initially seem a less profitable venture for Zoom, the company actually stands to make more upfront and tie customers down for longer. Doing so enables Zoom to increase customer lifetime value while also preventing churn – a win-win.

Naturally, Zoom also uses add ons and upsells to drive revenue. Zoom Rooms and Workspaces are classic examples as they enable license holders to run large scale meetings using Zoom with up to 1,000 video participants. So such conferencing software isn’t for everybody and costs a meaty $499 per room.

Zoom Phone is a cloud calling solution available for around $15 per host. Zoom also provides the ability to hold webinars which, you guessed it, helps the teleconferencing company draw in even more money.

As with all companies experiencing hypergrowth, Zoom initially was losing money as recently as 2018. However, during 2019 and 2020, a global pandemic and unforeseen factors meant that the company scored profits above $600 million. The profit Zoom has accrued has also been heavily influenced by Venture Capital Funding.

See also: How Does Honey Make Money : Is It Safe?

When Zoom Started – A Brief History

Zoom Video Communications company was founded back in April 2011 out of San Jose, California. The man who co-founded Zoom, Eric Yuan, is also the CEO of the tech giant. As you can imagine, Mr Yuan is pretty well off. He’s one of the 400 richest people in the US, so he knows a thing or two about building a company to amass a fortune.

Yuan had previously worked for Cisco Systems Ltd., which is another amazing company, in an engineering capacity. However, Yuan decided to go a different way and came up with a startup named Zoom. Ten years and a net worth of roughly $100 billion later, it’s safe to say Yuan made a decent call!

Yuan’s mission was to create a video conferencing system that was effective irrespective of where people were in the world. So, he completed the obvious step of building his tools in the cloud. Yuan has had to overcome tremendous adversity to get to where he is today, and that’s no doubt shaped the man who’s guided Zoom to its meteoric rise.

Zoom’s Mission, Vision, & Company Values

Let’s take a look at what Zoom Video Communications is all about!

Zoom’s Culture of Happiness

Zoom’s culture of delivering happiness drives the company’s mission, vision and values making it fundamental to the teleconferencing provider’s success:

As stated in Zoom’s registration statement, “this culture supports our hiring and serves as a competitive advantage in attracting and retaining top talent. Our Chief Executive Officer received Glassdoor’s #1 CEO of a large company award in 2018, and we placed #2 in Glassdoor’s Best Places to Work in the large company category in 2019.”

Zoom’s Marketing Strategy

Zoom’s marketing strategy was constructed with the customer in mind. The company places a huge emphasis on customer experience (CX) to ensure it remains ahead of its competitors. However, that requires a tremendous amount of customer data. Something which tends to annoy a lot of people as we’ll discuss shortly.

Zoom’s Freemium Approach Makes Perfect Sense

A freemium business model also enables Zoom to acquire new customers using word of mouth (WOM). WOM marketing is incredibly effective as it entails having happy customers share their satisfaction with a product with people who trust them. For example, a school teacher tells another teacher about how great Zoom is for online learning, resulting in the school buying the software.

A Freemium approach negates the risk that potential customers won’t like Zoom. Think of it as a no strings attached transaction that places the customer in control in terms of avoiding buying what they dislike. Then, flip the whole thing on its head to realise Zoom is getting its product out there for free. Eventually, these free users will buy a plan, making this strategy lucrative.

Create an Awesome Product Using Data-Driven Techniques

Zoom, therefore, needs an incredible product. Something that’s better than Cisco’s WebEx, Microsoft Teams, and so on. That’s what Zoom co-founder Eric Yuan has always prioritised. Do what everyone else does except do it better.

Improving an offering constantly above that of its competition requires planning, implementation, analysis, and improvement. These concepts are inherently linked to data, and it’s no surprise that Zoom relies heavily upon customer experiences to stay ahead of the pack.

This requires plenty of customer feedback as well as the reviewing of customer meetings to identify improvements.

Building Brand Equity Targeting Early Adapters

The creation of a super product, WOM marketing, and a laser focus on highlighting the efficacy of Zoom’s product means one thing – early adopters. These are the people who begin purchasing a product after innovators. Some early adopters are highly respected as they possess “thought leadership” or expert status.

If you can get thought leaders recommending your product at such an influential stage of the product lifecycle, you’re onto a winner. Zoom, therefore, doesn’t need to worry about putting in a massive amount of time prospecting and building target personas.

Zoom also utilised billboard advertising to increase brand awareness in Silicon Valley. The strategic placement of a billboard on route 101 worked wonders for Zoom’s brand exposure to tech companies. On top of the billboards, Zoom began sponsoring a basketball team back in 2016. The logic being that it’ll give the brand a much larger reach.

A Successful Hypergrowth Company

Zoom’s marketing has enabled it to become an ultra-successful hypergrowth company, although the teleconferencing solution was aided in no small part by the global lockdown. Drift.com highlights that back in 2013 Zoom had a mere 3 million users, which is laughable because as of March 2020 that figure increased to 200 million and is likely even higher now at the time of writing.

How Zoom Meetings Work

Zoom meetings are incredibly straightforward. You simply log in to Zoom’s mobile or web-based app and set up your meeting. This functionality is installed before you begin using Zoom.

A droplist on the Zoom website allows you to host a meeting with “video on”, “video off”, or “screen share only”. This shortcut is incredibly handy when you’re in a rush to get a Zoom meeting up and running.

You’ll be brought to a popup menu and asked to log in and or organise your audio preferences before the meeting commences. Granted, this approach doesn’t offer you the type of control when planning Zoom meetings that you no doubt crave.

That’s why you’ll find most people work using Zoom by pre-scheduling meetings ahead of time. Doing so makes it easier to keep people in the loop and ensure that no one misses their Zoom meeting.

Also, the Zoom app boasts some great features. Namely, you can mute participants upon entry, reassign hosts, screen share, use a raise hand feature, apply Zoom background images, and you even get a free time limit.

Zoom Security

It’s fair to say that Zoom has had its fair share of security breaches and, well, some of them have been funny but others downright terrifying. Zooms security issues are well documented by a blog known as Tom’s Guide. He posts every update and blooper to befall Zoom, which makes keeping up with its problems a breeze. It’s worth checking out.

When it comes to Zoom security the company has a list of best practices to follow to prevent any infamous Zoom bombings (this event has to do with someone joining your meeting uninvited and can be rather unpleasant). ZDNet has a great article detailing how to protect your Zoom meetings from these so-called invaders.

In my experience, however, the best way to protect your Zoom events is ensuring that you make it so that participants must be admitted via a waiting room. Codes and passwords are another super way of disabling any unwanted visitors from dropping in on your conferences. Other great tactics to note have to be preventing others from joining the meeting before you, the host, and keeping on top of updates. Reading Zoom horror stories can also help as people often state their mistakes and whatnot.

Overall, Zoom is not safe from hackers so don’t talk about anything you feel is private and confidential. But if you’re a student or just talking about general work stuff then Zoom is fine and I think worth using.

Does Zoom Collect/Steal Your Information/Data?

Yep, Zoom collects a lot of data on you and that’s used to improve your streaming experience and time spent with Zoom overall. However, that’s not much comfort for most people and probably why Zoom has received so much criticism.

You see, Zoom states in its privacy statement that it reserves the right to share your information with third-party businesses. As a Digital Marketer myself, that sounds like heaven because data-driven marketing is so effective and saves a tonne of time toward making big gains quickly.

But as a human, I find that thought deeply unsettling despite knowing how that data is being used. I guess I’d appreciate the option to say “no thanks” because it sort of feels like I’m being strong-armed into complying.

Nevertheless, Zoom can be pretty scary. For instance, Zoom meetings can be recorded and accessed by anyone who knows how to find them when uploaded to the cloud. To me, that’s pretty scary. Your private video could be watched by a hacker. On top of that, Zoom hackers can watch you through your web camera without you even knowing it – creepy!

My Opinion

I’ve been using Zoom for a long time and have written a few reviews. One thing I will say, touch wood, is that I’ve never suffered a security breach. Hopefully, I don’t eat my own words there.

I’d view these risks as similar to all aspects of life. Driving a car, receiving a vaccine, riding a bike, playing sport – there’s always a risk that something might go wrong. Don’t let it deter you because it is a great platform with super features that helped make my online learning experience much easier.

Should Zoom Be Banned?

I’m not entirely sure if Zoom should be banned, but I wouldn’t use the app if I was sharing sensitive information. That being said there’s plenty of protocols to ensure your video is secure from intruders. But nonetheless, I’m willing to play devil’s advocate.

There are many less than positive murmurs about Zoom’s standing, some fact others mere speculation, but it does make you consider whether Zoom should be banned. For instance, there’s a conspiracy that Yuan is working on behalf of the Chinese government with Zoom server’s storing data in China. The fact that Yuan transferred 40% of his shares valued at $6 billion to, as described by investors.com, “an unknown entity” doesn’t exactly help neutralise the rumour mill.

Many big names have banned Zoom in countries such as the US and India due to the potential risk of being attacked by cybercriminals. So that obviously speaks volumes about the risk Zoom poses to those transferring sensitive information using video calling.

All in all, there’s certainly ample evidence to suggest that Zoom ought to be banned. Yet Zoom’s stock continues to rise and most people use the platform, despite its vulnerabilities, with no major problems.

Having been previously slated for claiming to offer end to end encryption when indeed Zoom did not, the company has introduced the security precaution. This action was taken in large part due to the emergence of Cisco, Microsoft, and Google as major players within the market. It created points of parity between Zoom and its competitors to maintain its edge.

Frequently Asked Questions about Zoom

Is Zoom Video Conferencing Good – Is it Worth it?

Overall, Zoom’s is worth using. It’s certainly better than a lot of its competitors. Although not without its faults.

Zoom’s streaming performance, for example, is better than its rivals however the lingering security issues sour its superiority. Zoom boasts high meeting capacities with features to boot that undoubtedly place its software and hardware solutions at the top of the pile.

There’s a diverse range of plans that help Zoom make a lot of money, with many upsells such as webinars and phone systems to drive up earning even more. Zoom provides access to every single feature and tool you can think of at a reasonable price point.

It’s certainly worth adding to your shortlist.

Further Read:

• What Is SWOT Analysis?
• Datadog Competitors Analysis
• Hubspot Flywheel Explained: Everything You Need To Know

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Eoin Cunningham

Eoin Cunningham is a digital business master, specializing in Digital Marketing, e-commerce and digital tools. Armed with an MSc at the National Univerity of Ireland, Galway (NUIG), in Digital Marketing, Eoin is ready to dissect business strategy here for all of us.

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