Coronavirus pandemic has made videoconferencing upstart a household name, which means it must fix its problems quickly
By Dan Gallagher
A student takes classes at home Thursday using the Zoom app. Photo: albert gea/Reuters .
Zoom Video Communications ZM -7.05%▲ ’ greatest strength is also its greatest weakness: It is now a verb.
The coronavirus pandemic has rapidly transformed the videoconferencing upstart from popular corporate tech vendor to a household name. Everyone is Zooming now, from yoga teachers to doctors to bored teenagers. The latest sign came in an April 1 blog post from founder and Chief Executive Eric Yuan, who wrote that peak daily meeting participants have soared from 10 million at the end of December to more than 200 million as of March.
A 20-fold increase, in other words. But it hasn’t all been good news for the nine-year-old company, which is also now dealing with an unprecedented level of scrutiny.
The past couple of weeks have seen many reports from media outlets—including this one—on Zoom’s privacy policies and its ability to handle the surging load. New York’s attorney general is also now looking into the company’s privacy practices. Meanwhile so-called Zoombombing, when bad actors crash Zoom video chats to stream offensive material like pornography, also has become a common term.
Mr. Yuan’s blog post was in part an apology for the company’s shortcomings in these areas. He also told The Wall Street Journal in a subsequent interview that he “really messed up” as CEO, in terms of losing the trust of some users. The news flow has taken its toll on the company’s highflying stock. Zoom’s shares have slid 20% from their March 23 peak as of Friday’s close.
The stock can certainly afford to give back some gains. Zoom is still up 88% since the first of the year—a period during which the Dow has shed more than one-quarter of its value.
Zoom’s market capitalization is now more than one-third above Workday’s, another growing cloud software company with nearly six times the annual revenue. Zoom remains the most expensive cloud stock by a wide margin, relative to projected revenues. Granted, it is also seeing a level of mainstream adoption that any of its other cloud peers would kill for.
How that adoption translates into actual business remains to be seen. Mr. Yuan described the recent surge in traffic as “mostly consumer use cases,” which suggests many are using the free version of the service. The company is also scrambling to beef up its networks and security, suggesting that costs are going up. Mr Yuan said Zoom has enacted a “feature freeze” to focus on addressing current issues, though he did tell the Journal the company plans to bring end-to-end encryption to its service.
The competition also isn’t sitting still. RingCentral,an enterprise communications company that partners with Zoom to resell its service, announced a competing videoconferencing offering on Thursday.
But no competitors can match Zoom’s visibility at the moment. And even its basic paid plan of $15 a month is a manageable expense for most households and small businesses. A survey by Bernstein Research late last month found that 20% of respondents reported signing up for a paid Zoom account over the previous two weeks just for personal or social use.
Mr. Yuan seems to understand that the company’s runaway success also brings with it a massive obligation. If the history of technology is any guide, Zoom will stay in the vernacular long after the pandemic has ebbed and life returns to normal. But it needs to make Zoombombing a distant memory.
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