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Zoom capitalises on high demand with 169% revenue surge

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Zoom has defied fears that an explosion in activity and new users would not translate to rising revenues, boasting 169% year-on-year growth in the first quarter of 2020.

The video conferencing platform recorded revenues of $328.2 million for the quarter ending 30 April 2020, driven mainly by acquiring new customers and expanding across existing customers. Zoom previously reported in April that it gained 100 million new users within a three-week period.

The surge in demand for Zoom’s services been almost exclusively fuelled by the coronavirus pandemic, with millions of people around the world desperate to keep in touch with colleagues and loved ones while under lockdown.

Figures from Zoom’s financial results suggest the company has managed to capitalise on this growth in users, with a net income of $27 million, despite offering a solid and reliable service for non-subscribers.

“The COVID-19 crisis has driven higher demand for distributed, face-to-face interactions and collaboration using Zoom,” said founder and CEO Eric Yuan. “Use cases have grown rapidly as people integrated Zoom into their work, learning, and personal lives. 

“I am proud of our Zoom employees who dedicated themselves to support customers and the global community during this crisis. With their tremendous efforts, we were able to provide high-quality video services to new and existing customers.”

The company has also revealed a more detailed breakdown of its customer base, recording 354% year-on-year growth in the number of customers with more than ten employees to 265,400. Meanwhile, 769 customers contributed more than $100,000 in revenue, which is approximately 90% higher than in the same quarter last year.

Zoom has projected that its revenue will be between $495 million and $500 million in the next quarter, with a full fiscal year revenue of between $1.775 billion and $1.8 billion. 

The firm has announced its financial success days after pledging to improve encryption standards for paid users. End-to-end encryption will arrive for subscribers, but not free users, because of Zoom’s intentions to co-operate with law enforcement agencies. 

“Free users for sure we don’t want to give that because we also want to work together with FBI, with local law enforcement in case some people use Zoom for a bad purpose,” Yuan said, according to Bloomberg tech reporter Nico Grant.

Alex Stamos, recently hired by the company as a security consultant, elaborated that while all members will continue to benefit from 256-bit encryption after its recent implementation, end-to-end encryption will be rolled out on an opt-in basis for now. 

“We have to design the system to securely allow hosts to opt-into an E2E meeting and to carefully communicate the current security guarantees to hosts and attendees. We are looking at ways to upgrade to E2E once a meeting has started, but there will be no downgrades,” he explained on Twitter.

“So this creates a difficult balancing act for Zoom, which is trying to both improve the privacy guarantees it can provide while reducing the human impact of the abuse of its product.

“Lots of companies are facing this balancing act, but as a paid enterprise product that has to offer E2EE as an option due to legitimate product needs, Zoom has a slightly different calculus. The current decision by Zoom’s management is to offer E2EE to the business and enterprise tiers and not to the limited, self-service free tier.”

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