Thursday, July 25, 2024

How Does Zoom Make Money? Zoom Business Model Explained

Virtual meeting has become the new normal! All thanks to the pandemic!

Did you know?

“58% of the Fortune 500 organizations are utilizing Zoom”

If you check in google for the keyword “Best video conferencing software” then you can see zoom will be on top of the list on any article out there.

You can check the below image where g2 website has given the list of the best ones. That’s how popular it has become.

How Does Zoom Make Money

Almost everybody around the world who has internet access would have heard of zoom at least by now because of the Covid19 pandemic.

During the pandemic Zoom has become surprisingly very popular may it be in schools, universities, workspaces, with friends and family, and everywhere.

As zoom has become increasingly so popular especially in the recent year or so, you might definitely want to know how does zoom even make money and what is the reason behind the popularity of their success?

So in this blog post, let’s take a look into how zoom makes their money, their business model, the success story of zoom, and what lessons aspiring entrepreneurs can learn from Zoom.

Zoom is a video conferencing service provider headquartered in California, USA. Zoom helps you to virtually meet with people all around the world.

Zoom has been growing at a very good rate and specifically in 2020 because of Covid19, Zoom had a huge growth rate as everything became to take place online.

Eric Yuan who is basically from China founded Zoom in 2011 and he is been the CEO of the company since then.

Zoom first named it as Saasbee. Hmm, quite an ugly name isn’t it? Thanks to them, they changed it very soon.

You can check this Reddit thread where people discuss why zoom has become the market leader in video conferencing. 

Zoom Success story

zoom success story

Eric Yuan got the idea of this business when he was in college in the 1980s. He had to spend almost 10hrs on the train to meet his girlfriend and it was very discomforting him. 

He wanted to find a solution for this. So he applied for American Visa but he was rejected 9 times because he was unable to speak proper English. But he never gave up and kept applying and finally, the visa was granted to him.

He landed a job in 1997 as a software developer in the US in a company known as Webex and within few years because of his hard work and dedication he had become the vice president of Engineering. 

FYI, Webex is a solution provider for video conferencing.

But the problem Eric faced here is that he didn’t really like their service. He realized that customers weren’t happy with the Webex service and there were a lot of complaints from the customers.

So he left his high-paying job and started his own company which is now known as Zoom Video Communications.

The success of Zoom began when Eric began understanding the problems faced by the customers and made Zoom easily accessable to the customers.

Eric was quick in analyzing the customers’ problems which has led to the success of Zoom.

Zoom even went public 2 years before in the year 2019 and you can check the below tweet from Zoom itself:

How Does Zoom Make Money

The business model of Zoom is the freemium business model wherein the company will provide the service for free with limited features and then turn them into paying customers by making them opt for the paid plans.

Zoom makes money majorly from zoom meetings, zoom phone, zoom webinars, zoom rooms and zoom united. Let’s look into each one in detail and how zoom generates income from each of these features.

Zoom Meetings

Zoom meeting consists of 4 subscription models which are Free/Basic, Pro, Business and Enterprise.

Free or Basic: As I have already told, Zoom works on the Freemium model. But the free plan always comes with limitations. 

In the free version, you can host up to 100 participants and the group meeting will have a time limitation of 40 minutes. This is actually great and is suitable for family meetings or just a one-to-one video conversation. 

But this time cap of 40 minutes wouldn’t work if you are in a business because the meetings would generally last for more than an hour or so and also if you want to add more participants you won’t be able to do that with a free version.

So for this very reason, Zoom has paid plans where you get advanced features and that is how zoom makes money. Let’s take a little glance at their paid plans.

Pro plan: This will cost you $14.99 per month per license and is great for small teams and the group meetings can last up to 30 hours and also you get 1 GB of cloud recording per license.

A license is required for the person who hosts the meeting. You can purchase up to 9 licenses with the pro plan. Another person cannot host the meeting simultaneously with a single license.

Business plan: This will cost you $19.99 per month per license and this is best for small and medium-sized businesses. Here you can host up to 300 participants, record transcripts, and can do company branding and more. It supports up to 99 licenses.

Enterprise: This will cost you the same as the business plan which is $19.99. Here you can host up to 500 participants, get unlimited cloud storage, and all those features which are included in the business plan, It can support up to 149 licenses.

Zoom meetings is one of the major sources of revenue for Zoom.

Zoom Phone

Zoom phone is a cloud-based phone system where you can make and receive calls directly with the help of zoom. Zoom phone has 3 plans.

It provides USA and Canada numbers with metered calling and it costs $10 per month.

Another one costs $15 per month with Unlimited calling within USA and Canada.

One more zoom phone plan which costs $20 per month gets you Unlimited domestic calling in 40+ countries and territories.

Zoom Webinar

Zoom webinar is one more way through which zoom tends to makes money. The prices vary based on the number of attendees. 

For 100 attendees it will cost $40 per month per license and there are many plans based on the number of attendees. 

For 10K attendees, it will cost $6,490 per month. If anybody purchases this, then it will be a huge source of revenue for zoom.

Zoom Rooms

With zoom rooms, you can join a conference meeting with a tap of a button and it provides you unlimited digital signages and scheduling displays, and more. 

It has a free 30-day trial to use zoom rooms. The zoom room license will cost you $49 per month per room.

Zoom United

With zoom united you can manage meetings, phone and chat all in a single place. It has 3 plans i.e pro, business, and enterprise. 

You can check more about the zoom products and their pricing on their official website.

Add on plans

Zoom also provides add ons such as audio plans, large meetings, cloud storage, premier support, toll-free numbers, international calling add-ons, and many more. 

So these addons also constitute to the revenue sources of zoom.

Other Ways Through Which Zoom Makes Money

Zoom also provides specialized packages for industries in the field of education, finance, government, and healthcare industries.

Other than that Zoom provides hardware as a service for accessing the latest video communication technologies to get a world-class experience. You can get hardware solutions for zoom phones and zoom rooms.

The companies can get these hardware solutions for their employees at a fixed monthly price. These are also some of the ways through which zoom generates income.

“Zoom has raised a total of $146 million in funding over the period of its seven funding rounds. They are funded by 18 investors and have made investments in 3 organizations.” 

Lessons To Learn From The Success of Zoom

 Zoom Business Model

Always Focus on user Experience

Zoom has always given preference to user experience and improvedr their platform by giving top priority to their users. 

Skype and Webex being in the business even before Zoom wasn’t able to compete with Zoom because of lack of user experience and not listening to the users’ complaints. Even now call quality on zoom is way better than skype or Webex.

Make it Simple

If someone invites you for a call on skype, then you had to install skype, create an account and then begin the conversation. But Zoom has made it really very simple. 

With zoom, when someone invites you for a meeting you can just get into the meeting without needing to signup or download the App. It’s as simple as that and makes the process real quick.

Give it for Free

Give your services for free with limited features. Zoom offers a free basic plan for absolutely free. The free plan will help you to build an audience and the people will get to know about your product. 

It builds awareness and it spreads with other people through word of mouth which will build your credibility in the market and will eventually lead to people buying paid plans.

Rebuild What is Already There

Don’t worry about the competition and what’s already there in the market. If you are innovative and creative enough you can always go ahead of your competitors and that’s what Zoom did. 

They made a better product by researching what their competitors’ arent providing and analyzed their audience about their needs and problems and then built a better product to become the market leader!

It’s all about perfecting what already exists which leads to a huge opportunity.

Ending Thoughts

In 2020 alone, Zoom mobile app was downloaded 485 Million times! That’s incredible.

Do you think Zoom would have existed if his girlfriend had lived closer to him or if Webex had provided a better service? Definitely not. 

So it all about the problems isn’t it? One should never ignore any problems that might come across in life. Take it is a challenge and an opportunity to start a new business.

Hope you got to know the ways through which zoom makes money and how their business works. If I missed out on any other ways through which zoom makes money feel free to mention it out in the comments.

Further Read:

Bumble business model

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