Zoom Video Communications, Inc. is a video communication platform provider. Its customer base spans a range of industry categories. Its major products include Zoom Meetings, Zoom Phone, Zoom Chat, Zoom Rooms, etc. The company offers services worldwide except in certain restricted countries or regions. The company generates revenue from subscriptions to its communications platform. Subscription revenue is driven primarily by the number of paid hosts as well as purchases of additional products.
Investment Overview
Freemium strategy for customer base expansion. Customers acquired through word-of-mouth normally become free users of Zoom first and then upgrade to a paid Zoom Meeting plan. The freemium (free + premium) strategy brought explosive growth under the work-from-home arrangement during the pandemic. As a result, we have seen the company achieve five quarters of hyper growth ranging from 169% to 369% y-o-y since the first quarter of 2020.
Invested in unified communications platform for longer term growth. The company endeavours to provide enterprises with a platform that is more valuable than the sum of its parts, and in turn will keep them coming back year after year. The multi-product platform now includes chat, phone, video conferencing, whiteboard, a contact centre, events, and more. The speed of traction of Zoom Phone is encouraging, which demonstrates the potential for the company to become a popular platform over time.
Booming video conferencing demand during the pandemic but future growth is gloomy. Zoom has enjoyed the fastest growth in revenue compared to its peers in the past five years with video conferencing demand booming since the outbreak of the pandemic. However, with heavy competition in the communications and collaboration industry, the growth expectation is getting more sluggish in a post-pandemic era. We saw single-digit y-o-y revenue growth in the second quarter of 2022.
Lower video conferencing demand after the pandemic. Zoom is a key beneficiary of the booming video conferencing demand during the pandemic. The potential resumption of face-to-face meetings may lower video conferencing demand.
Intensifying competition. Zoom participates in a highly competitive environment globally, with a wide range of competitors. Intensified competition could create downward pressure on its product pricing and margins.
The uncertainty surrounding revenue growth is likely to continue due to concerns about demand in the post-pandemic era. Will be careful in investing in this at the moment.
DYODD
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
Ok