December 10, 2023


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What analysts expect from Zoom in 2021 after its wild 2020

  • 2020 turned Zoom into a household name and an essential tool to keep businesses, schools, and social lives active during the pandemic. 
  • While it’s inevitable that Zoom’s growth with slow in 2021, analysts told Business Insider that they believe that it can still maintain solid development overall. 
  • Zoom can continue to grow within large companies if it can get customers hooked on its other products, like its cloud phone service, and also has a big opportunity in consumer usage, analysts said. 
  • Visit Business Insider’s homepage for more stories.

2020 was Zoom’s year. 

Once a video conferencing tool used mainly by tech workers, it has evolved into a household name and essential platform during the pandemic for keeping businesses, schools, and social events in action. 

And the company has reaped the rewards. Its stock has increased more than five-fold this year so far and its revenue popped an unprecedented 367{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} from a year prior in Q3. That was after 355{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} and 169{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} revenue growth in the quarters before. 

While the company’s stock plummeted 20{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} on news of Pfizer’s COVID-19 vaccine and 7{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} on news of Moderna’s, analysts told Business Insider that they still expect Zoom to fare well even after people around the world become immune to the coronavirus. 

Zoom’s wild rate of growth will inevitably slow in 2021, but they expect that demand overall will continue to grow if the company’s roadmap takes advantage of both new, hybrid work needs and opportunities for consumer usage.  

Here’s what analysts expect for Zoom in 2021 and beyond:

Hybrid work could play out in Zoom’s favor 

Many companies have already indicated that they won’t require employees to come back to offices full time next year or even after the pandemic ends and Zoom will likely play a key role in enabling that, said D.A. Davidson analyst Rishi Jaluria. 

“The only way you can have a distributed workforce and a hybrid work environment is through Zoom,” Jaluria said. “It is a very critical part of allowing that to happen.”

Small customers, with between one and ten users, will likely stop using Zoom once vaccines are widely available because they’ll be able to make-do with a free or cheap tool, Credit Suisse analyst Brad Zelnick wrote in a note to clients earlier in December. However, there’s actually an opportunity for Zoom to grow its revenue from its larger, enterprise customers, theorizes RBC analyst Alex Zukin.

Once offices reopen and establish a new normal, Zoom can upsell them on other products in addition to video conferencing. As companies reconfigure phone systems and conference rooms to fit new hybrid office needs, Zoom can potentially sell its cloud phone service and its conference room products to existing video customers, according to Zukin. 

“I definitely think that’s gonna make them very sticky,” he said.

The opportunity for those products — Zoom Phone and Zoom Rooms — may not be straightforward, though. Zoom isn’t known for its cloud phone service so it could be hard to convince customers to choose it over a more established competitor, said Nucleus Research analyst Trevor White. 

If Zoom wants to ramp up its phone product quickly, White thinks that the best route might be acquiring a more established voice communications provider, like RingCentral.

“If they went out and acquired somebody and could give themselves a big injection of a customer base for their phone service,” White said, “It would really kind of establish themselves as an actual voice vendor.” 

It’s unclear if Zoom is on the hunt for acquisitions. It made its first-ever purchase earlier this year when it bought secure messaging and file sharing service Keybase to improve its privacy and security. However, White is not the only one who thinks Zoom may eye acquisitions to spur growth.

“We believe Zoom’s unmatched share gains and market pull-forward will force the company to more urgently think about its growth ambitions, especially in 2022 as incremental video conferencing gains will be harder, and thus the company’s growth will rely on Zoom Phone or other new products (both internally developed and acquired),” RBC analysts wrote in a note to clients in December. 

Zoom could acquire Smartsheet and Dropbox to create a “collaboration titan,” RBC analysts predicted, to compete more directly with Microsoft Teams. 

For its part, Microsoft is only increasing its competitiveness and is “laser-focused on Zoom,” said RBC’s Zukin. However, he sees Zoom CEO Eric Yuan competing the same way he always has: By focusing on the product and offering better prices and more flexibility. 

Zoom can keep chasing the consumer opportunity 

In addition to a business tool, Zoom has also become a go-to for online education and consumer uses like yoga classes, conferences, and casual social gatherings. While people convened with friends and family on Zoom out of necessity this year, the firm has an opportunity to build a business around non-work digital experiences, several analysts said. 

Zoom recently announced a new online events platform, so people hosting exercise classes, music lessons, concerts, and more on Zoom can sell tickets and charge people directly from the platform. It also plans to launch an event marketplace, where people can find and sign up for public events, free and paid. The platform is available in the US now and worldwide next year. 

“It really represents a completely different narrative for the company,” Zukin said. “It’s no longer ‘how do you compete with Microsoft in unified communications?’ but rather ‘how do you enable a completely new economy?'” 

Ultimately, Zoom’s success — compared with a similar tool from Facebook and in general — is dependent on how it develops its platform and whether it can attract content and creators, Zukin said: “Consumers will go where the marketplace is most vibrant.”

Conferences, too, could end up continuing on Zoom long-term, because companies have realized they can get a lot more people engaged by offering content online, said Jaluria.

“Even when we can have big conferences again,” he said, “Everyone that’s held conferences has realized, ‘Hey, there is a lot of engagement that we’re losing out on by only doing in-person and not having a true virtual experience.’ “

Zoom investor and board member Santiago Subotovsky told Business Insider that, post-pandemic, he can see Zoom becoming the “backbone for communication, collaboration, and human connectivity with in-person interactions as a feature on top of that platform.”  

No longer supporting education users for free will pay off 

In addition to businesses and consumers, educational institutions have come to rely on Zoom for online learning. Early in the pandemic, Zoom launched an initiative to give K-12 schools free access to Zoom. This created a huge influx of users, but also one that may have been weighing on its business.

It has had to increase spending on public cloud usage from AWS and Oracle to support its user growth this year and CFO Kelly Steckelberg said on the most recent earnings call that Zoom had lower gross margins due to a higher base of free users during the quarter, including students from kindergarten through high school. 

Zoom is still lifting the 40 minute meeting time limit on free basic accounts for primary and secondary schools. It’s unclear whether any users from K-12 schools and higher education are now paying to use Zoom, but analysts don’t think it’s a significant contributor to revenue growth. 

As the pandemic passes and those schools resume in-person learning, Zoom may see its margins improve — and could even gain customers if some shift from free users to paid users. 

Zoom can make the evolution from application to platform

While 2020 was a year of tremendous growth for Zoom, it also faced a barrage of other issues including security and privacy concerns that led to criticism and internal changes, including a settlement with the Federal Trade Commission over allegations it falsely claimed to offer end-to-end encryption.

In a recent interview with Business Insider’s editor in chief Alyson Shontell, CEO Eric Yuan said that, externally, the growth looked great, but that, internally, it was a incredibly hectic for Zoom’s employees.

“During the pandemic crisis, we’ve had so many first-time consumers,” Yuan said. “We have to improve our internal process of product privacy, security, how to prioritize those features to the consumer and enterprise customers. We’ve had to evolve our business as quickly as possible.”

Without such an intense growth spurt in 2021, Zoom will have a chance to settle into its growth and work on the new opportunities created by the pandemic.

“I see this pandemic opening up many long-term opportunities across different verticals for Zoom that they will have time to figure out a revenue model for it,” RBC’s Zukin said. It comes down to how well they pursue those opportunities, Jaluria added. 

In light of the security and privacy issues Zoom faced this year, Zoom will also have to keep a close eye on any future issues and continue to respond quickly, Nucleus research’s White said. (Zoom added an end-to-end encryption option in mid-October.)

Ultimately, Zoom is on a path to transform from a “from application to platform,” Subotovsky said, with its events platform and expanded third-party apps. “I’m convinced Zoom will continue doing what it does best: innovating and making its customers and employees happy,” he said. “I also think that the new ways in which users leveraged Zoom in 2020 are here to stay.”

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