Zoom Video Communications Inc has raised its annual revenue forecast by more than 30 per cent as it converts many of its vast free user base to paid subscriptions.
Zoom’s video conferencing platform received a huge boost in user numbers as lockdown began and the platform became a serious competitor to Microsoft’s Teams. One key area of success for Zoom has been managing to more than double (to 988) its number of large customers (with more than $100,000 in revenue in the past year) in the fiscal second quarter. Overall, shares of Zoom have surged almost four-fold this year.
In April and May, however, security issues were raised as research by Check Point indicated that cyber-criminals appeared to be targeting Zoom, and there was concern that Zoom did not want to offer end-to-end encryption to free users because it wanted to stay on the right side of U.S. law enforcement agencies and didn’t want its platform being used for illicit purposes by some users. In June, however, after pressure from privacy group The Electronic Frontier Foundation (EFF) and Mozilla, Zoom decided to offer end-to-end encryption to all its users, not just paying customers, thereby addressing many security concerns.
In its latest financial update, after easily beating quarterly estimates, Zoom has arrived at the 30 per cent higher annual revenue forecast. Figures show that Zoom’s revenue rose by a massive 355 per cent to $663.5m and the company’s gross profit rose to 71 per cent from 68 per cent. This is, however, still lower than 80 per cent range that Zoom was operating at before it gained huge numbers of free users during the pandemic lockdown months.
Zoom’s increased revenue forecasts are based on the fact that it has become a well-known brand that is now widely used by many businesses, it has addressed many security concerns, it has converted more large customers, and it is believed that all these factors can give it the momentum to go on converting free customers to paying customers. This is something that its 71 per cent gross profit fugue shows that it must do.
What Does This Mean For Your Business?
Zoom’s growth has been meteoric and many companies who found or fully engaged with its platform out of necessity during lockdown have become regular users who may be likely to convert, if they haven’t already done so, to paying customers. This will put Zoom in an even stronger competitive position as it tries to compete with Microsoft Teams.
For businesses, particularly smaller businesses, Zoom has proved to be a valuable a tool at a critical time and this, coupled with people now being comfortable with (and experienced at using) it could help propel Zoom to further heights and give it some staying power as a business communications service.
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