Throughout 2020, Zoom has become synonymous with videoconferencing (zooming) in much of the world. Despite other well-known tools, it was the platform founded by the Chinese-American Eric Yuan, almost ten years ago, in San Jose, California, which won people’s hearts and minds. On Monday, Zoom reported its earnings for the fiscal year ending in January: revenues grew (impressive) 326% Y-o-Y, to $2.65 billion – well above the analysts’ estimates and the results of competitors such as Slack, which earned a little more than Zoom did only in the last quarter ($902.6 million).
With the vaccination against COVID-19 gaining traction, analysts doubt whether its current level will last when the pandemic is over. If the future of work is truly hybrid (partly remote, partly face-to-face) and Zoom evolves from a videoconferencing tool to a complete communication platform, and easily integrated with other solutions, the answer to that question is yes.
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It seems that Zoom’s customers are literally buying the idea. The company ended January with 467,100 corporate customers with more than ten employees (up 355,000 compared to January 2020) and 1,644 corporate customers paying for annual contracts of more than $100,000 (355 companies or 156% more than in the previous fiscal year).
Zoom’s founder sees the international market as a “catalyst” for the company’s growth in 2021
To grow in 2021, Zoom is not only looking at new features or partners, but at the opportunities outside the United States. “[The international] market is going to be the catalyst for Zoom’s growth in 2021,” Yuan said at the investor conference on Monday.
He avoids pointing one or two paths to the company’s future. Instead, he spoke of several possibilities, from expanding collaboration with partners (sometimes also competitors) to the development of new solutions, “apps within the [Zoom] app.”
Zoom’s possible next steps are, indeed, several. In September, the company partnered with DTEN in the United States to launch Zoom for Home, remote work equipment to boost the platform’s experience. In October, in a move in another direction, it launched an event marketplace, OnZoom – a comprehensive solution for paid Zoom users to create, host, and monetize events like fitness classes, concerts, stand-up or improv shows, and music lessons on the Zoom Meetings platform.
In this context, it is difficult to know what position the Latin American market occupies on the company’s roadmap – Zoom includes the results of the region in “Americas”.
In an interview with LABS, Alfredo Sestini Neto, who took over as head of Zoom in Brazil in July last year and today also responds as a leader for enterprise sales (companies with more than 1,000 employees) across Latin America, said the decision to look at the Latin American market “with affection” and “with long-term plans” happened right after the global boom brought about by COVID-19 in March last year.
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Between December 2019 and April 2020, due to social isolation measures against the novel coronavirus, Zoom saw the number of daily meeting participants jump 30 times globally, from about 10 million to over 300 million. That is also why, before forming a team, Zoom installed a data center in Brazil. The infrastructure installed in Cotia, Sao Paulo, serves the entire region. Today, the company has 19 datacenters worldwide.
“We understand that Brazil is one of the main players [markets for Zoom],” said Sestini, stressing that the company came to the country thinking differently than most organizations. “Some companies bring their commercial team first; it is the famous ‘go there, sell, and, then, we deliver the service.’ [At Zoom] the thought was to first bring the [service] that was going to be available to the region, then the knowledge [technical] area, and, later, the commercial team. Days after our arrival, we launched our cloud phone service,” said Sestini. Zoom Phone was launched in Brazil, Argentina, Chile, Colombia, Costa Rica, and Mexico on August 17th of last year.
The service, integrated into the platform’s video, chat, etc., tools, is one of the company’s key growth bets – a global addressable market of more than $23 billion by 2024, according to IDC. The company ended January with another 10,000 Zoom Phone accounts, contracted by 18 corporate clients – in the previous year, there were 2,900 accounts.
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Between the lines, it is possible to identify other signs that Latin America is really a key market for the company. According to Sestini, the sales team should grow from 12 to 22 people by the end of 2021, and at least eight engineers should be hired for the company’s so-called knowledge team. In addition, Zoom intends to open new positions for areas such as marketing and post-sales. A few days ago, former Facebook executive Nicolas Robinson Andrade was appointed as the company’s new director of government relations for Latin America – no company hires someone like that if not to prepare the ground for scaling the business, also offering its services to the region’s governments.
Zoom is actively targeting big companies from two industries
According to Sestini, although Zoom is being used by people and professionals from all segments, the company’s growth strategy in Latin America has a keen eye for large organizations and focuses on two verticals: education (the first to be worked on even by the need brought about by the COVID-19 pandemic) and financial services (which targets not only banks, but brokers, insurers and fintechs in the region).
The financial industry became a goal for Zoom’s Latin American team more recently, and will have a pilot project in Brazil starting on April 1st. “We already have several banks and insurance companies using our solution, either in its entirety or integrated with other solutions [that will benefit from this project],” explained Sestini.
The pilot project is, in practical terms, to offer a knowledge team and a customer service team specifically for the vertical. Banks and insurance companies would use Zoom internally and as a tool for external contacts, integrated with CRM platforms. “If we look at the main players, the main CRM and collaboration platforms in LatAm today, Zoom is already integrated into them,” points out Sestini.
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Winning over customers as banks would also be an important step in buttressing Zoom’s image as a safe tool. In April, Zoom was the target of a series of attacks, hacked meetings, leading to important data put at risk. Programming flaws and deficiencies in the encryption that protects communication between users were found at the time.
The platform’s user experience, which did not require users to have an account, was what attracted many of them, but it was also what caused the company’s first hurdle. When clicking on the meeting link, the user was instantly led to the application’s download – this was where one of the loopholes was, where hackers could enter and baffle the users, causing them to download something other than Zoom’s application. Other competitors, like Google‘s Meet, also worked like this, but offered a web version, which did not require downloading the application. Of course, among other factors, this is also one of the reasons that make Zoom a better-quality tool when it comes to audio and video than others.
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Acknowledging the problem, Zoom outlined a 90-day plan to correct all flaws. The company added several security steps to its platform and focused on educating customers to implement these steps. “How to set up a room, what information cannot be accessed [by other people], how to make an encrypted end-to-end call,” exemplified Sestini.
The next vertical to be actively addressed by the company in Latin America, according to Sestini, will probably be health/telemedicine.
Zoom has a $4.2 billion free cash flow: datacenters and M&A
In addition to its organic growth, Zoom is also looking (with hungry eyes) at other companies. According to Zoom’s CFO, Kelly Steckelberg, the company has a $4.2 billion free cash flow ($ 2 billion from the company’s stocks follow-on offering in January) and it will use it not only to expand its data center infrastructure, but for acquisitions focused on new technologies and talents. “We are looking at M&A; for companies that can add in talent or technology. Eric [Yuan] has a very high bar for both things, so we will see. Hopefully, we will find a great match for us.”
Worldwide, Zoom expects to end 2022’s fiscal year (which will end in January 2022) with revenues between $3.76 billion and $3.78 billion.