how does zoom make money

How Does Zoom Make Money? Zoom’s Business Model Explained

Clear and constant communication is the cornerstone of a healthy relationship — whether it be in the workplace, the classroom, or with your partner!

We feel that the best way to stay connected in this world where everything is becoming remote is through video conferencing or video calls because it humanizes the interaction and makes the conversation more realistic.

And when we talk about having a video conference, one cannot forget to mention Zoom!

What Is Zoom?

Zoom is a cloud-based video conferencing tool for hosting virtual one-on-one or group meetings easily.

It supports a ton of communication mediums, including webinars, live Zoom chat, video and audio conferencing, screen sharing, and online meeting recordings.

It is an app that runs on Linux, Windows, macOS, iOS, Android, and Chrome OS. It also has a Zoom Chrome extension and Zoom Firefox add-on — making it a suitable app to use.

Zoom has some extraordinary features that make it a popular choice among businesses and students for routine communication. The top 3 are listed below:

  1. Third-party integrations — You can easily integrate it with 3rd party apps to further simplify your daily communications.
  2. Virtual backgrounds — Worried about a messy background? No worries, Zoom has you covered on this as well. It provides an option where a Zoom participant can use a backdrop to add a virtual background or blur their current background.
  3. Transcript of the audio — Your calls may occasionally be interrupted due to various reasons when you work remotely from your home. With audio transcripts, it’s just easier to keep track of what’s being said in a video meeting.

How Does Zoom Make Money?

Zoom makes money from a wide range of sources – including meetings, chats, conference room, phones, the marketplace, add-ons, rental hardware, and zoom united.

That is a reasonably large list of possible revenue sources, right? And for this Zoom surely lifts the trophy for having the finest and broadest revenue model!

Since the start of the pandemic, Zoom has been breaking all revenue records and charts, thanks to the innovative Zoom business model / revenue model, which has been fiercely challenging its competitors.

Now to answer: How does Zoom make money? Let’s dive deeper into each of the components of its business model:

Zoom Meetings & Chats

When using the free version, a Zoom user can host Zoom meetings/Zoom events including 100 meeting participants without having to pay a dime. However, there is one significant caveat: meetings involving more than two people cannot last longer than 40 minutes.

Apart from the time constraint, there’s also a restriction on the number of participants — which has a ceiling limit of 100 attendees.

Although the Zoom basic free plan might appear to be a good idea, team meetings, client meetings, and business meetings can all go on for a longer duration. And it won’t look good to send a new link or to start a Zoom meeting over, right?

Same with the number of participants, if you want to host a Zoom video webinar, a lecture, or a podcast, the number of participants can definitely cross the 100-limit mark and it can have a large meeting attendees count.

Specifically for these reasons, Zoom offers a variety of premium subscription options to give your account more add-ons.

Here’s a quick view of the plans it offers:

The Zoom enterprise plan is customizable according to the team size and features one wants to go for. For being an enterprise customer, a user can directly contact their sales team and take the idea on the pricing.

Rooms And Workspaces

In this hybrid work model, Zoom Rooms and Workspaces are the new way to conduct meetings. Zoom describes these rooms as “the modern workspaces” for hybrid teams!

These rooms are designed to conduct video meetings using equipment like a smartphone, tablet, computer, microphone, camera, and more, giving business people around the globe a seamless experience.

It is a fantastic platform that magically combines audio, wireless content sharing, and Zoom video communications into one, making it an ideal go-to platform for hybrid workplaces for conducting business meetings.

But how does Zoom make money off it?

There is a 30-day free trial period for the Zoom Room free plan, after which you’ll need to purchase a premium subscription.

You can purchase up to 49 Zoom Rooms licenses for the price of $49 per month, or $499 per year when billed annually.

Here’s a quick view of the plans:

Listed below are a few significant advantages of Zoom Rooms:

  • Supports 720p HD video & audio
  • Can add up to 1,000 attendees, or 10,000 Zoom webinar attendees
  • Supports up to 10 room controllers

Zoom Phone

Zoom hasn’t left any service untapped and has leveraged the direct phone calling system as well. It launched its Zoom Phone service back in the year 2019.

Zoom Phone is a cloud-based phone system that includes features like intelligent call routing, automated attendants, voicemails, dialing personas, Zoom call recording, and many others.

Zoom Phone has a more moderately priced option for businesses to choose from, with monthly fees ranging from $10 to $20.

Zoom recently reached 4 Million Zoom Phone users in just 3.5 years of its launch, demonstrating just how well-liked and well-accepted it is by businesses worldwide.

Zoom United

Another all-inclusive service offered by Zoom is called Zoom United, which combines all of the meetings, chat, and calling needs of a hybrid team into a single, reliable package.

So how does it differ from Zoom Pro specifically?

You could say that Zoom United is a step up from Zoom Pro because it gives professionals access to meetings, chat, and business phone services all in one place.

Zoom United charges are fairly simply:

  • Annual fees for packages that include video meetings, chat, and phone is $250.
  • Annual fees for the business tier package are $300.

Zoom Rental Hardware

Zoom has established itself as the pioneer in not only the software world but also the hardware sector. In addition to the virtual world, Zoom has successfully established itself in the real world as well.

For a top-notch communications experience, including phones and meeting rooms, Zoom offers Hardware-as-a-Service, offering a wide range of solutions.

They have 2 major offerings:

  • Phone hardware offerings:  Here, the user must first purchase a Zoom Phone license before using this service. This includes a wide range of cutting-edge phone gadgets that will enhance the overall Zoom Phone experience.

    They offer a variety of products (about 26 different items), ranging from a simple and direct desk phone to a camera-enabled touch-screen device.  Zoom Phone hardware has a price range that starts at $3.66 and goes all the way up to $50 per month!
  • Room hardware offerings: The user must first purchase a separate Zoom Room license in this case, after which they can opt for the Room hardware service to upgrade their Zoom Room experience. Here they have 9-10 highly productive devices to choose from having a pricing structure ranging from $25 to $259 per month.

Zoom Add-ons

Who doesn’t enjoy add-ons? And Zoom doesn’t leave this corner untapped either. The Zoom app provides a whole host of add-ons that one can add to their existing accounts.

Depending on the add-on one chooses, the price can range from $10 to $500.

Some of these add-ons are also available in the Zoom Marketplace, a go-to place for enhancing Zoom’s usability and experience. (More about this later in the blog!)

Zoom Contact Center

This is a relatively new service that Zoom has added to its revenue stream to kick in some more profits!

The Zoom contact center is a cloud-based contact center application that is entirely focused on creating a buttery-smooth user and customer experience.

There are some interesting offerings at the Zoom contact center. It acts as a central hub for all customer communications, both inbound and outbound, and is compatible with mobile phones, desk phones, and softphones.

This eliminates the discomfort and concerns that come with a physical contact center’s pricey hardware and software solutions.

Now, regarding the pricing structure — the starting price for one agent per month is approximately $70, and a usage-based pricing option is also available.

Zoom Marketplace

Last but not the least, comes Zoom Marketplace which was first introduced in 2018 — offering a platform for developers to build and showcase their apps.

The Zoom marketplace currently has over 2000+ apps to add an extra layer of ease and functionality to the whole Zoom platform.

This marketplace has a wide variety of apps that cover everything a user might need, from scheduling to recording to performance monitoring and everything in between.

But how does Zoom monetize it? Zoom doesn’t currently monetize its marketplace, but due to its structure and working of it, it surely holds a lot of potential to do so in the future:

For instance, charging a listing fee for an app or deducting a service fee from each sale can definitely be a few tactics for driving more revenue.

Zoom Funding, Valuation & Revenue

Zoom received funding in 8 rounds over the course of the previous 11 years, amounting to $276 million with Sequoia Capital, Qualcomm Ventures, and Horizons Ventures being the top 3 investors.

Source: Crunchbase

It received its first round of funding in 2010, pocketing $500K in the pre-seed round. Zoom has steadily climbed up the funding graph, amassing $145.5 million in the following 6 funding rounds over an eight-year period.

Moving forward to 2021, it received its most recent round of funding on November 4, 2021, raising an astounding $130 million —  a staggering 25,900% increase over its initial funding round.

Zoom’s smooth upward trend graph is also seen in its valuation.

A company that had initially been doubted for its ability to compete with behemoths like Skype, Google Meet, Microsoft Teams, Google Workspace, and Google Hangout, had a stellar $100 billion valuation during the pandemic, a 383% increase on its value in January 2020!

Source: Business of Apps

The pandemic wrecked a lot of businesses, households, and agencies but it wasn’t the case with Zoom. Everything moving to the virtual world, including workplaces, colleges, and schools, came as a blessing in disguise that greatly increased Zoom’s earnings.

Throughout 2020 and 2021, Zoom’s revenue soared (thanks to its varied revenue model). By January 2021, Zoom’s revenue had increased by more than 300%, amounting to $2.65 billion from just $623 million the previous year.

Zoom’s revenue increased by another 55% to $4.10 billion by January 31, 2022.

By the end of January 2023, the business anticipates collecting a revenue of $4.53 billion to $4.55 billion!

Here’s a quick overview of the same:

Source: Statista

Opted by more than half of Fortune 500 companies, Zoom is definitely not here to stop!

A Short History Of Zoom

Zoom was started back in the year 2011, by a 41-year-old entrepreneur, Eric Yuan under the name Saasbee, Inc, headquartered in San Jose, California.

Eric Yuan was born and raised in China and later relocated to the United States to advance his career.

This multibillionaire Chinese-American businessman began his career at Cisco Webex as a corporate vice president.

Later, he left his position there and started working on Saasbee with a group of 40 engineers, dedicating all of his time and effort to it.

After a year, influenced by the children’s book “Zoom City”, the company’s name was then changed to Zoom! (that’s how Zoom got its name)

In 2012, Zoom signed Stanford University as its first client, ushering in a triumphant beginning for the app.

The millions-club was graced by Zoom in the year after in 2013 when it reached a record-breaking 1 million users.

In the following two years, these numbers astronomically increased by 10x and 40x, reaching 40 million users by the end of 2015!

Reportedly, Zoom has an average of 300 million daily active users today!

Zoom entered the IPO market in 2019 — exactly 8 years after it was founded — which marked Zoom’s successful entry into the investment world.

Ever since then, Zoom stock prices have been on the rise, currently, priced at $82.62!

Right now, Zoom has cemented its position at the top with its consistently rising revenue over the past two years — which increased by 319% in 2020 and 53% in 2021.

These graphs, charts, and numbers paint a clear picture of Zoom’s capabilities. It is unquestionably ready to shatter more records, set new video communication benchmarks, and savagely compete with some of the biggest businesses in the world!

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