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How Does Zoom Make Money? Zoom Freeterprise Business Model In A Nutshell

Zoom is a video communication platform, which mission is to “make video communications frictionless.” Leveraging on the viral growth from its freemium model, Zoom then uses its direct sales force to identify the opportunity and channel those in B2B and enterprise accounts. 

Zoom culture in a nutshell

As pointed out on its financial prospectus Zoom culture is about “delivering happiness” which drives its mission, vision, and values.

How does Zoom interpret its “delivering happiness” seemingly empty motto?

Zoom Mission Statement

Our mission is to make video communications frictionless

Indeed, this aspect is critical. Zoom has been able to grow so quickly thanks to its freemium model where it managed to attract a large number of users and convert them in paying customers. Zoom has been able also to distinguish itself for its ease of use and setup, which helped it trigger viral growth

Understanding its mission is critical to understand what Zoom prioritizes in developing its products, not only from the engineering standpoint but also from the sales and marketing standpoint. Thus, the word “frictionless” isn’t just a concept, but a mindset that pervades the whole organization.

Zoom Vision Statement

Our vision is to empower people to accomplish more through video communications

Video communication is at the core of what Zoom does. However, its vision is to “empower people.” As a new form of working is on the rise (especially remote working) people need more and more ways to communicate via video. Zoom surfed that way to build a successful company very quickly.

Zoom Values

We care for our community, our customers, our company, our teammates and ourselves

Understanding the values of the organization helps us understand who are the key partners in the Zoom business model.

This is also shown in the way Zoom communicates its product:

We provide a video-first communications platform that delivers happiness and fundamentally changes how people interact.

And its ambition of what the product can achieve:

We believe that rich and reliable communications lead to interactions that build greater empathy and trust. We strive to live up to the trust our customers place in us by delivering a communications solution that “just works.” Our goal is to make Zoom meetings better than in-person meetings.

As you might notice Zoom audacious goal is to make “Zoom meetings better than in-person meetings.”

This kind of focus leads the product development and it helps Zoom employees to focus on a single, audacious goal.

The challenge is that of allowing organizations to still build a culture even though those are primarily made of employees working remotely. Therefore, more than just a product, Zoom is promoting a movement or a way of thinking.

This is a critical step to understand, as this kind of vision also helps your own customer to better understand the value of the product.

Indeed, as highlighted by Zoom on its financial prospectus:

A technology customer with approximately 1,000 employees has been able to grow and maintain its culture even with anall-remoteemployee base by running all of its meetings on Zoom.

What makes Zoom different?

While many other digital businesses are launching their own video chat applications, some of the factors that helped Zoom gain traction werE:

  • Both Free and Premium, Reliable, high-quality communications
  • Easy to use
  • Easy to deploy and manage

Zoom Competitive Strengths

  • Video-first cloud architecture
  • A recognized market leader
  • Viral demand
  • Multipronged go-to-market strategy where the company leverages on its freemium to build a continuous flow of paying customers 

How does Zoom make money?

Zoom primarily makes money via its Meetings platform. Around that Zoom has developed a suite of products and features “designed to give users a frictionless communications experience.

Users are comprised of two categories:

  • Hosts who organize video meetings
  • And the individual attendees who participate in those video meetings

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Zoom products (source: Zoom 10K, 2020)

Zoom enjoys thousands of customers of all sizes across industry verticals and geographies. As of January 2020, Zoom recorded over $622 million in revenues, over $500 million in gross profit, and over $12 million in net income. 

As the company scaled its revenues it also scaled its sales and marketing expenses in an attempt to enable its sales force to convert the continuous streams of accounts using Zoom for free as paying customers.

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How Zoom scaled its revenues from 2017 to 2020 (source: Zoom 10K)

The multipronged go-to-market strategy

Zoom defines its sales model as a “multipronged go-to-market strategy for optimal efficiency.” It starts with “viral enthusiasm” triggered by users as they join the platform for free.

The good experience is channeled by sales efforts to identify customers opportunities, such to transform a non-paying user into an enterprise customer.

For instance, as pointed out by Zoom in its 2019, 10K “back in 2019, 55% of the 344 customers that contributed more than $100,000 of revenue started with at least one free host prior to subscribing.”

Therefore, the sales model combines the viral demand generation from the free Zoom Meeting plan with direct sales looking for potential customer opportunities.

The Zoom direct sales force includes:

  • field sales
  • inside sales

Those are organized by customer employee count and vertical.

Zoom’s Freeterprise model unveiled

I like to call the Zoom model, a freeterprise, as the company has been able to scale its revenues, by leveraging on a free product (usually working pretty well in the B2C space) yet to acquire B2B/Enterprise customers.

Thus, the freeterprise works as a powerful way to transform free professional single accounts, in enterprise accounts. To do so the company has to use a sort of barbell strategy, where the free product offering a great experience works as a seamless entry-point.

Yet, on the other hand, the highly specialized sales person (usually a field sales) build a strong relationship to bring in the whole enterprise account onboard!

Of course, this leads the organization to skew its resources toward building an army of qualified salespeople to handle the volume of leads generated by the free offering (in 2019 Zoom spent 54% of its revenues primarily in salespeople headcounts).

Other resources:

Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here

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