The Rise of Zoom and Its Impact on Higher Education

Zoom Video Communications, Inc., started under the name Saasbee, is a company that was founded by CEO Eric Yuan in 2011 (Konrad, 2020). The company launched its video conferencing platform back in 2012. At that time, there were already existing applications such as Skype, WebEx and BlueJeans. It seemed that the market was already saturated, but Yuan took the risk of leaving his job at WebEx to start his new company. When the first version of the application was released in 2012, only 15 people could be on a video call at once. Zoom became a public company listed on the Nasdaq stock market in 2019 and had a stock market value of $15.9 billion (Novet, 2019). During its first day of trading, its initial price offering (IPO) was $36 a share. However, there had been so much speculation on its profitability that it was trading up to more than 70% of its IPO (Novet, 2019). It soon became obvious that Zoom was going to attract more and more investors and that its customer base was going to grow. It increased in popularity as years went on and by December 2019, it had around 10 million daily meeting participants (Evans, 2020). In April 2020, this number jumped to over 300 million daily meeting participants. 

Today, its market cap is estimated to be $159 billion (Macrotrends, 2020). In addition, Zoom’s “revenue for the quarter ending July 31, 2020 was $0.664B, a 355.01% increase year-over-year and the revenue for the twelve months ending July 31, 2020 was $1.347B, a 190.37% increase year-over-year” (Macrotrends, 2020).

In the context of higher education, the pandemic has caused sudden changes and professors, some of whom never taught online, had to find creative, engaging, and reliable ways to conduct classes. In web conferencing, many companies provide their services, so one might wonder how Zoom became so popular in spite of the preexisting competition. With Google Hangouts, Microsoft Teams, Cisco WebEx, GoToWebinar and several other available technologies, Zoom still managed to hold 36% of the market share (Datanyze, 2020), making it the most used platform for video and audio conferencing. One of the reasons for this is Zoom’s technology which guarantees that its servers aren’t maxed out. In a time where people started to resort more and more to audio and video conferencing for communication, Zoom made sure to “put resources in bolstering its capabilities during this high usage time” (CNBC, 2020). Its cloud-based platform uses Amazon Web Services and Microsoft Azure servers (Levy, 2020). When there is a huge spike in meetings, Zoom’s servers can access more space to accommodate that spike. While Zoom can make its users benefit from this technology, its competitors, such as Microsoft Teams, use code written over a decade ago and try to make it fit into a new cloud environment, which isn’t too optimal (CNBC, 2020). This more recent technology makes Zoom more reliable which in turn provides it an important advantage in the market.

In addition to this, the company’s CEO Eric Yuan and CFO Kelly Steckelberg have both worked at Cisco WebEx in the past. Yuan is a former vice president of engineering for Cisco Webex (Huddleston, 2019) and Steckelberg has held various positions in finance in that same company (Gallagher, 2019). They both have gained a very good understanding of the web conferencing market over the years and were able to contribute their extensive knowledge of the industry and business strategies to the company.

Moreover, one of Zoom’s advantages is that it is easy to use and navigate. Joining a Zoom call is made simple, since having an account isn’t required. The company offers free 40-minute meetings to those on their basic plan, which many consider a good deal. Zoom also has a very user-friendly and intuitive interface that has drawn many users to it (Montgomery, 2019). Furthermore, unlike its competitors, such as Cisco WebEx, that require users “to support a wide range of hardware or an onerous communications infrastructure” (Montgomery, 2019), Zoom is much simpler to manage and is accessible from any device. This has reduced “the amount of on-premises management” users need to do. This simplified model has allowed for a “frictionless user experience” and also meant that an IT team isn’t even required to properly “roll out and manage Zoom” (Torman, 2020) (Montgomery, 2019). Additionally, some features such as screen sharing and breakout rooms have been very useful and contributed to making the application more popular among students and instructors. 

Despite its growing popularity, college students by far prefer their in-person learning experience. Many professors have struggled to properly convey course material, and students have struggled to understand it. The challenges faced by both learners and instructors have ranged from technical issues to more complex ones. Students have faced challenges including a lack of motivation along with a “lack of interaction with other students,” an “inability to effectively learn in an online format, and distracting home environments,” and a “lack of access to suitable study spaces,” which all contribute to make learning more taxing for them (Daugherty, 2020).

Moreover, an important point that was raised by college students has been the cost of an education through Zoom. Many consider it high for the service that is being provided. In addition, most of the facilities and resources that were required to conduct in-person classes are no longer available, nor are they needed in a digital environment. With the world experiencing “its deepest recession since World War II” (Siamlek, 2020), in the context of this economic downturn where people struggle to afford basic necessities and healthcare and the U.S. unemployment rate has reached 14.7%, questioning the cost of an online education is more than legitimate.

Despite the overall positive customer experience, Zoom has received criticism, especially regarding its security and privacy policies. For instance, “Zoombombing” or “Zoom raiding” has been a major issue schools had to deal with as intruders hijacked and disrupted classes by joining Zoom meetings to troll, display obscene or shocking images, or make various noises. Throughout the year, the company has made several improvements such as enabling a meeting password feature, developing better end-to-end encryption, and has taken various other steps to prevent similar incidents from happening (Wagenseil, 2020). The company was also accused of selling and not protecting users’ data, but has since worked to improve its security practices and fix issues faced by users to better their experience.

Although Zoom had been growing before the coronavirus outbreak, it is undeniable that this situation has helped the company’s growth reach new heights. Therefore, it is important to think about how it will perform once the pandemic is more contained. It is fair to anticipate a significant decrease in the number of users, and this brings about uncertainty for the future. However, the company’s CEO thinks that many customers may keep using it based on their positive experience (CNBC, 2020).

This uncertainty matters to investors who are thinking about whether or not to buy, hold, or sell their shares. Many analysts gave Zoom a consensus rating of Hold, while others recommended to Buy, and very few recommended to Sell shares. The current price of a Zoom stock is $511, and, according to data from the Wall Street Journal and CNN Business, some analysts offer a prediction of “a median target of $483 with a high estimate of $735 and a low estimate of $315 for the next 12 months”. Some others even estimate that the price of a Zoom stock could go up to $1274 according to Wallet Investor. 

Although it is unclear what the future of the company will look like, it is certain that it has played a significant role in facilitating social interactions during the coronavirus pandemic. Its performance on the stock market has been impressive and may continue to be. In my opinion, the Zoom stock may not drastically drop in the near future. Zoom has made a name for itself especially over the past few months and many of its customers may keep using it in the long term. I anticipate that over time, its number of users will drop. However, because people appreciate the product and have gotten used to it, this drop may not be very significant. Hence, it may not put the company in a critical position.

As the world continues to change, our demand for web conferencing technologies and various other factors will inform our opinion on how the company will do in the long run. For now, its future looks promising, and investors seem to remain confident about making profits with the shares they have acquired. 

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