zoom-business-model

How Does Zoom Make Money? Zoom Freeterprise Business Model

Zoom is a video communication platform whose 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 opportunities and channel those as B2B and enterprise accounts, thus enabling Zoom to monetize the brands’ growth generated by its freemium. In 2022 Zoom generated over $4 billion in revenue and $1.37 billion in net profits.

 

 

Zoom culture in a nutshell

As pointed out in its financial prospectus Zoom’s 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 into 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’s audacious goal is to make “Zoom meetings better than in-person meetings.”

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

The challenge is that of allowing organizations to still build a culture even though it is primarily made of employees working remotely. Therefore, more than just a product, Zoom promotes 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.

Today, Zoom has reached an incredible scale. 

What makes Zoom different?

While many other digital businesses are launching their 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

zoom-competitors
Zoom is a video platform, which enabled remote working. As such it competes with other large tech players like Google and Microsoft for the productivity space, and other startups like Slack and Go-To-Meetings.
  • Video-first cloud architecture
  • A recognized market leader
  • Viral demand
  • A 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-revenue
Zoom passed $4 billion in revenue in 2022, compared to over $2.6 billion in revenue in 2021, and over $622 million in 2020.

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

zoom-products

Zoom products (source: Zoom 10K, 2020)

Zoom enjoys thousands of customers of all sizes across industry verticals and geographies. 

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.

Yet, over the years Zoom increased its profitability. 

zoom-revenue-per-employee
Zoom generated $604K per employee in 2022, compared to $599K in 2021, and almost $246K in 2020.

And also its efficiency!

zoom-revenue-per-employee
Zoom generated $604K per employee in 2022, compared to $599K in 2021, and almost $246K in 2020.

This is critical, as it shows that as the company scales its operations, it’s still able to maintain a certain degree of efficiency.

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

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

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 into 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 salesperson (usually field sales) builds a strong relationship to bring the whole enterprise account on board!

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 on salespeople headcounts).

Related Visual Stories

Who Owns Zoom?

who-owns-zoom
Zoom’s principal private shareholders comprise Eric S. Yuan, a Chinese-American billionaire businessman that founded Zoom. Dan Scheinman, board member and angel investor in Zoom since the start, and Santiago Subotovsky, also an early investor in Zoom. Zoom follows a freeterprise business model where free accounts are channeled into enterprise customers.

Zoom Competitors

zoom-competitors
Zoom is a video platform, which enabled remote working. As such it competes with other large tech players like Google and Microsoft for the productivity space, and other startups like Slack and Go-To-Meetings.

Zoom Business Model

zoom-business-model
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 Revenue

zoom-revenue
Zoom passed $4 billion in revenue in 2022, compared to over $2.6 billion in revenue in 2021, and over $622 million in 2020.

Zoom Profits

zoom-profits
In 2022, Zoom generated over $1.37 billion in profits, compared to over $672 million in profits in 2021. Zoom has been profitable since 2019.

Zoom Employees

zoom-employees
By January 2022, Zoom had 6,787 employees, compared to 4,422 employees in 2021.

Zoom Revenue Per Employee

zoom-revenue-per-employee
Zoom generated $604K per employee in 2022, compared to $599K in 2021, and almost $246K in 2020.

Freeterprise

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Slack Business Model

slack-business-model
Slack follows a freemium model, where a free version is offered, and users can convert in paying customers if they want more usage or advanced functionalities. Slack combines the free model with a direct sales force to acquire enterprise customers with yearly recurring revenue of over 100K. Those customers were 575 in 2019, and they accounted for 40% of its revenues. 

Dropbox Business Model

dropbox-business-model
Dropbox generated over 90% of its revenue via its self-serve channels to convert users in paying customers through in-product prompts and notifications, time-limited free trials of paid subscription plans, email campaigns, and lifecycle marketing. Dropbox generated over $2.1 billion in revenue in 2021, with an average revenue per paying user of $133, based on 16.79 million paying users.

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