How Zoom Makes Money? Revenue & Business Model Explained

What is the very first name that comes to your mind when you think of video conferencing? 

Well, Skype might be for the starters, but Zoom has been leading the video conferencing industry for more than half-a-decade. 

Skype lost its charm over time but Zoom’s growth is dramatically rapid, especially during the Covid-19 pandemic situation. 

Zoom has been the epicenter of business communication and video conferencing in the lockdown period around the world. 

Also, they managed to get themselves into a controversy as well regarding the stolen data of customers sold on the web, and much more. 

Well, having said that, focusing on the best part of retrospective and analyzing How Zoom managed to grow their business. 

How do they make money? And where they started from. This can be helpful for small businesses and entrepreneurs to grow their businesses as well.  

So, let’s dig into the journey of Zoom and their business and revenue model as well. 

What is Zoom? 

The Zoom video application is a video communication technology brand that helps businesses and organizations communicate with their team remotely. 

It is an easy and reliable cloud communication platform utilized for video, content, and voice sharing across multiple device platforms. 

The peer-to-peer software company is headquartered in San Jose, California. 

It is primarily used for teleconferencing, telecommunication, social interactions, and education. 

The application is free to use for video conferences that can include participants upto 100 under 40-minute time duration. 

To have access to utilize longer conference time duration or include more participants, you have to go with their paid plans. 

The paid plans start from costing around $15-20 per month. These plans offer you a wide range of premium features. 

How Zoom Works? 

Zoom is a cloud-based SaaS video conferencing and meetings application that allows people as well as businesses to interact with each other virtually. 

The communication mode Zoom offers isn’t just video but also chats, video, and even the combination of all three. 

Users are allowed to go for one-and-one video chat or meetings or they can also conduct meetings through video conferences involving upto 500 participants. 

The application also offers screen sharing options to participants allowing them to share more accurate information and coordinate even better with others. 

Image Source: Tom’s Guide

Zoom Meetings & Chat and Zoom Rooms & Workspaces are the two major core products of Zoom that bring most of the revenue to them. 

One can attend a Zoom meeting as well as organize using a desktop application,  mobile application, and web browser also. 

It also offers a chat feature as an extension to its meeting product which further helps the meeting organizer to interact with others. 

Also, they can share files, create groups and allow other participants to chat with each other as well. 

Image Source: UC Today

Zoom Rooms and Workspaces is more of a business product that uses multiple hardware accessories and peripherals such as computer, microphone, camera, tablet and more to organize Zoom virtual meetings. 

This Zoom product is highly focussed towards selling to the large-scale enterprises that require to organize meetings across various offices. 

Zoom also offers their own set of hardware to make this integration with hardware easier for the users. 

They have collaborated with other manufacturers such as DTEN ON and Poly Xseries where they also get their commission on sale percentage. 

How Zoom Started? 

Eric Yuan, the CEO of Zoom, founded the company in 2011 who used to be a former executive at the video and web conferencing company Cisco WebEx. 

Image Source: BBC

Before starting Zoom,  Eric Yuan had a long experience of 14 years in leading team of engineers, earlier at WebEx. 

After the acquisition of WebEx in 2007 by Cisco, he continued where he has joined WebEx in 1997 as amongst the very first software engineers of the company. 

Yuan noticed the customer’s frustration at the company where they weren’t able to fulfil customer demands. 

One of the examples being in the slowing down of their conference process. Where every time a user logs in , they have to specify the version of product they are using to connect. 

Too many people using the WebEx conference made the audio and video quality low. And there were too many restrictions and no feature such as screen-sharing. 

Yuan was first to notice the problem, he started his own venture in 2011 where he took a team of 40 Cisco engineers with him in doing so. 

Image Source: Vator News 

Earlier they started the company called Saasbee, however further branded into Zoom as we know today. 

The company has faced a lot of problems in attracting inventory since no one believed that Zoom or any new company can dethrone existing communication giants such as Hangout (Google), Skype, and WebEx. 

Fortunately, the Former CEO of WebEx Subrah Iyar including other people in his network provided Yan credibility enough to raise $3 million for Zoom. 

Image Source: FYI

In 2013, almost after two years, Zoom launched its first product. 

It was a quality product highly noticeable for users leading towards becoming a video conference giant by themselves. 

Their initial product has the ability to include upto 40 participants and organized on multiple hardware platforms such as desktop, laptop, mobile etc. 

Since Zoom also priced themselves significantly cheaper than the competition with a dominant quality aspect, customers flooded their doors already. 

Just after the launch, they gained more than 1,000 business as their customer base hosted more than 140,000 meetings. 

Zoom has kept improving their product and number of features as well on taking customer/businesses feedback and research. 

Image Source: Webee Now

And since, then the success for Zoom continued over a time gradually and surely with some financial hiccups too. 

But in the recent events of Covid-19 pandemic, Zoom rose dominating the worldwide video conferencing industry, however they also got some backlash regarding their security issues. 

How Zoom Makes Money?

The Zoom application offers a variety of products to their customers as well as businesses. 

Zoom works on the freemium model where customers can use Zoom meeting and video chat products for free. 

However, they have a limitation of 100 participants and 40 minutes for their group meetings. 

So, to access their premium features, Zoom offers various premium plans as mentioned before. 

This the primary revenue resource for the Zoom application to make money. On other hand, their freemium model allows more and more people to get to know their product. 

Zoom Meetings & Chats 

Zoom Meetings & Chat is the flagship product of the company which allows people to use video calls or chat on the application. 

This video chat and meeting feature can be used on multiple devices such as desktop, tablet, and mobile as well. 

When you use the free version of the Zoom, you only get 100 attendees and 40 minutes. 

There is a monthly subscription fee to surpass these restrictions for businesses. 

  • Pro (  Great for small teams):  $14.99 per month per host 
  • Business ( Small & Medium businesses): $19.99 per month per host 
  • Zoom United Business:  $30 per month per host 

Zoom Phone

Zoom Phone is a cloud-phone solution specifically designed for those users who prefer or want to have quick audio calls rather than a video call. 

It also offers an Enterprise cloud phone system with a smooth streamlined process to establish audio communication. 

Any zoom user can do a VoIP call using their same Zoom application and tools found in their ‘Zoom Meeting’ product. 

Zoom charges a monthly subscription fee of a minimum of $10 per month per user for US Canada metered connection. 

There are various monthly paid plans which further offer a revenue source for 

Zoom Rooms 

Zooms Room is another premium product offered by Zoom for ease of usability and to increase the convenience of conference video meetings. 

It allows organizations to get into a video conference meeting right away without any hassling setup process. 

It makes setting up video conferences and meetings easy and quick. It also allows wireless multi-desktop setup across different locations. 

Zoom Rooms comes with a monthly subscription fee of $49 per month per room. There is also another plan dedicated to enterprises as well. 

Customers can very well deal with their existing hardware providers such as Cisco or Polycom but Zoom also offers their preferred Zoom-certified hardware providers. 

Now, this also becomes another source of revenue for Zoom. 

This is because Zoom partners up with various manufacturers like Aver or DTEN which they recommend to their customers. 

And on every sale, Zoom gets a percentage of the purchase from these partner manufacturers. 

Zoom Key Statistics 

The very core of the Zoom Business and revenue are the individual users. The user base of Zoom has been growing exponentially, and been steady since its inception in 2013. 

According to the March 2020 reports, Zoom has added more users than all of the 2019 combined. 

The platform added over 2.2 monthly active users to its total 12 million member base where more than 200 million users participate in video calls daily. 

Here are some recent statistics to further update the existing data on Zoom demonstrating the revenue and business status of the application.

  • According to Sensor Tower, there are 94 Million iOS Zoom downloads in Q2 2020 – 1 percent of total.
  • During the Covid-19 crisis, Zoom is profoundly used by 90,000 schools in 20 different countries to teach remotely where the company lifted a 40-minutes time limitation for free meetings for Teachers.
  • 96% of top universities and colleges were using Zoom where 58% of the Fortune 500 companies were the customers of Zoom as of 2017 by Freshworks.
  • India is the biggest Zoom market with 68 Million downloads in Q2 2020 followed by United States with 41 Million as per Sensor Tower.
  • Zoom joined Pokemon Go and TikTok in Q2, 2020 as being the only application to be installed over 300 Million times in a single quarter.
  • 641 Zoom business customers were worth more than $10,000 in the 2020 financial year (2019), that is up to 86%.
  • Zoom usage and download has been increased by 67% between January and Mid-march of 2020 during the pandemic. 

Zoom Funding & Valuation 

According to the source, Crunchbase, Zoom was able to successfully raise $146 million in six rounds of venture capital funding. 

The investors for Zoom include brands such as Emergence Capital, Horizons Ventures and Sequoia Capital and many others as well. 

Then, they further raised another #356.8 million in its IPO. It was announced in the month of April 2019. 

Zoom made their debut on the Nasdaq stock exchange when their share went public in 2019 at the time of still losing money. 

The company is also already quite profitable and earned $7.58 million in the total income for fiscal year 2018. 

Zoom earned a total revenue of $622.7 million, rising to $21.7 million for 2019. The company is valued at $47 billion. 

Additional Sources