How Does Zoom Make Money?

In the past years, many apps and platforms were introduced for video calling and some of them gave Skype a hard time.

The platform which has been giving Skype a run for its money and may have played a big role in the diminishing popularity of Skype is ‘Zooming’. Zoom attracted the attention of a huge number of users from around the world.

Zoom gained popularity in a short period and when the ban on Covid-19 began and businesses began to hold their online meetings it emerged as an app that eventually replaced ‘Skype’ as the official video platform for businesses and individuals.

Now, Zoom has become an essential tool for organizations to hold their day-to-day official meetings.

The Beginning of Zoom

In 2011, CEO of Zoom Eric Yuan decided to enter the video conferencing market, at which time the market already had big giants like Ms Teams owned by Microsoft, Google Hangouts & WebEx owned by Cisco.

Eric Yuan was VP of Engineering at WebEx at the time he decided to branch out and work on his project.

It’s no doubt that Covid-19 played a big role in Zoom’s popularity in an unpredictable manner, which might have even amazed Eric himself, but Zoom had a successful start even before the virus situation.

In the start, when Eric branched out on his own, giants like Skype, Google Hangouts & WebEx already dominated the market. At this point, every investor was doubtful about funding Eric’s new project.

Luckily, Sarah Iyer – the former WebEx CEO, believed in Eric and gave him an initial investment of $3 million. In 2013, the first version of Zoom was launched. The main difference between Zoom and its competitors, like Skype, was the video-first approach of Zoom. Whereas, the already available competition first went with audio and afterward shifted to video.

By May of 2013, Zoom had reached 1 million participants, connecting more than 400,000 meetings & 3500 businesses.

Zoom distinguished itself by a variety of practices on existing platforms that allowed it to gain greater recognition.

Zoom video conferences had a user-friendly interface allowing users to easily set up video calls and it was supported by all devices, including desktop and mobile phones, both Android and iOS.

Zoom could cope with data loss of up to 40%, which enabled it to work with a weak internet connection too. On top of all of this, Zoom offered a $9.99 per host plan ($14.99 now), making it more affordable as compared to others in the competition.

Since its birth, Zoom showed promise on the charts and kept on integrating new features for users to use. Zoom went public in April of 2019, at a share price of $36, and the company was valued at $9.2 Billion.

Let’s talk about how Zoom makes money and have a look at the Zoom business model.

How Does Zoom Make Money?

You may wonder that if Zoom’s basic plan is free for users then how does Zoom make money? To put it another way, Zoom operates on a corporate model known as the “Premium Business Model“. It can be explained as a model where users are provided free limited services to attract and hook them & convert them into paying subscribers by offering them upgraded services.

To a normal user, Zoom might seem to be just another video conferencing app, but Zoom offers more than just that.

Under Zoom’s business model, if users require some premium features or simply need a greater capacity (in terms of users and time) then they would have to subscribe to premium plans.

Let’s take a look at how these premium features offered by Zoom enable it to earn from users.

1. Subscription Plans

The majority of Zoom’s revenue comes from subscription services that provide consumers with various features. Zoom offers 4 different subscription plans for its users, each with special premium features, and enables users to choose from optional programs as well.

Subscription plans:

• Basic
• Pro
• Business
• Enterprise

• Zoom Basic

Zoom’s Basic plan is free for all to use, allowing up to 100 participants in a single meeting (video conference), no limit on 1 to 1 meeting, online support, and provides additional features on video calls, group collaborations, and web.

Talking about limitations, this plan only has one limitation which is the duration of the group video call. The limited duration of the group video call is 40 minutes. Allowing the users to make the next group call with the same participants after 10 minutes of cool-down time. This is why, for personal use, Zoom’s Basic plan is generally chosen.

• Zoom Pro

Zoom’s Pro plan costs $14 every month and offers all the features of the Basic plan along with premium gains like – the duration of group video calls increased to 24 hours instead of the 40 minutes of the basic plan, enabling users to host more than 100 participants for a settled fee, and much more.

• Zoom Business

Priced at $19.99 monthly the Business plan requires your team to consist of a minimum of 10 people. As the name of this plan indicates, this plan is intended for use of small to medium business entities.

The Business strategy has all of the functionality of the Pro plan and a slew of new ones. The Business plan allows the users to host video meetings with up to 300 participants by default, exclusive phone support, custom emails, logins, URLs, domains, and an admin console.

• Zoom Enterprise

Zoom’s Enterprise package begins at $19.99 a month and requires that the staff have at least 50 members. The Company strategy, as its name suggests, is aimed at large-scale corporate organizations and companies.

Zoom’s Enterprise strategy includes all of the elements seen in the Marketing Plan, as well as some additional additions tailored to bigger teams, companies, and organizations.

At the default settings, it requires users to host up to 500 people, has unlimited cloud storage, different promotions and incentives on other Zoom deals, analytics, monitoring apps, and exclusive support personnel.

2. Add-Ons

Zoom is offering a lot of features that a normal user might expect from a video conferencing platform without any charge, but it does require users to pay for various add-ons which enable the users to use features such as video webinars, excess cloud recording storage, and many more.

Although, the free users are not able to use or access the add-ons. It requires the free users to upgrade to Pro or higher plan to be enabled to access and use the add-ons. The add-ons are not included in any of the subscription packages offered by Zoom; instead, users are required to pay a monthly subscription fee according to the add-ons they wish to access.

Zoom is offering numerous add-ons with monthly subscriptions, though these add-ons are usually utilized by big businesses and startups to make it easy for them to collaborate and be productive.

3. Zoom Rooms & Workspaces

Zoom charges a rate of $49 a month per room. It enables the users to make dedicated Rooms that help hold conferences.Zoom rooms enable users (mostly large companies) to hold Zoom virtual meetings without any interruptions.

Organizations will have to pay for the number of rooms they desire to connect via Zoom rooms. For instance, to connect 10 rooms on Zoom, the organization will have to pay $490 per month.

4. Zoom Phone

Zoom also offers a cloud-based calling solution as an add-on along with the existing Zoom services. Zoom Phone allows users to utilize conventional phone features within the Zoom application, which presents Zoom as a complete product for collaboration that provides voice calls, conferencing, video conferencing, and messaging altogether.

Zoom phone subscriptions start at $10 a month for a single user, it brings along capabilities such as intelligent call routing, auto-attendant & call recording among many more.

5. Zoom Video Webinars

Zoom Video Webinars is another service that Zoom is providing its subscribers. With Zoom Video Webinar users can host up to 10,000 participants in online web conferences.

To allow participants to interact, Zoom allows users to use features like chat, polling & virtual hand-raising.

Zoom Webinar subscription rates vary according to the number of participants and hosts. Subscription plans start from $40/month for 100 participants and 1 host & go up to as high as $6490/month for 10000 participants & 1 host.

Zoom is providing specialized plans for the education industry, healthcare industry & the government.

How Much Money Zoom has Made?

	First Quarter Fiscal Year 2021	Second Quarter Fiscal Year 2021
Revenue	$328.2 million, up 169 percent year over year.	$ 663.5 million, an increase of 355% year on year
Revenue from Operations and Operating Margin	GAAP Income  $1.6 million equating to $23.4 million in the first quarter of the fiscal year 2020     Non GAAP Income $54.6 million, up from $8.2 million in the first quarter of the fiscal year 2020	GAAP Income $ 188.1 million, compared to $ 2.3 million in the second quarter of the 2020 financial year     Non GAAP Income  $ 277.0 million, up from $ 20.7 million in the second quarter of the 2020 financial year
Net Revenue and Profit per Portion	$ 27.0 million, or $ 0.09 per share   As compared to $ 0.2 million, or $ 0.00 per share in the first quarter of the financial year 2020	$ 185.7 million, or $ 0.63 per share   As compared to $ 5.5 million, or $ 0.02 per share in the second quarter of the financial year 2020

Words of Worth

Zoom is a popular service that may only grow over time. With so many businesses making video conferencing an integral part of their day-to-day operations, companies like Zoom should see their profits and their subscriptions grow in the coming years.

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ZOOM out..!!