Zoom Shows Big Ambitions to Grow Beyond the Enterprise

Zoom is doubling down on platform capabilities, which could unlock a wave of creative development -- and help keep competitors like Microsoft at bay.
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Zoom is rapidly evolving into something more than just a work-chat app.

The tech firm rolled out a number of new offerings this month aimed at expanding its capabilities as both a videoconferencing service and a universal communications app. Zoom's  (ZM) - Get Report executives also teased what features may be coming next -- and revealed how it’ll keep an edge on its key competitor in videoconferencing, Microsoft  (MSFT) - Get Report.

“I think its a two horse race, quite frankly,” said RBC Capital Markets analyst Alex Zukin, as Zoom and Microsoft compete to quickly spin up new video capabilities.

Earlier this week, Zoom rolled out Zoom for Home, a $599 videoconferencing system intended for more complex remote-work setups. The system also integrates with third-party videoconferencing appliances, supports content-sharing, whiteboarding and a number of other features. Just days earlier, Zoom released a subscription offering called Hardware as a Service, which allows for easier integration of Zoom Rooms and Zoom Phone, its cloud-calling product.

In a press conference this week, Zoom CEO Eric Yuan said it’s “doubl[ing] down on our platform capabilities to make sure third parties can build applications.” By building out its SDK and API, the company is angling for developers to build new applications for all kinds of creative purposes.

“Not only can they collapse communication into their platform -- phone, chat -- they can also expand their platform and embed into other use cases at the API level,” Zukin added. “I think Zoom is very well positioned to do that.”

Yuan and Zoom’s product chief, Oded Gal, are drawing inspiration from the arts. When asked about creative uses of Zoom that are influencing the company’s feature development, the executives mentioned a London theater troupe that staged a live production using virtual backgrounds, as well as live concerts performed over Zoom.

Analysts see opportunities for Zoom to monetize some of the extracurricular use cases that have emerged from COVID-19, such as fitness classes and cooking demos. Its dual appeal for both business and personal use make it stand out from competitors like Microsoft Teams, Apple's  (AAPL) - Get Report Facetime or other video calling applications.

“[Zoom] is the only one that can bridge those two things in a low-friction way,” Zukin added. “We’re in the inception of markets, in my opinion...and when I look at Zoom and its potential, it transcends consumer and enterprise, small business and enterprise.”

With COVID-19 driving a spike in growth, Zoom reported 169% growth in revenue in the April quarter, a major acceleration from the 78% growth seen in the prior quarter. It nearly doubled its full-year guidance to a range of $1.775 billion to $1.8 billion.

Yuan said that Zoom’s priority is balancing its “frictionless” user appeal with security and privacy concerns. So far, security concerns that emerged earlier this spring don’t seem to have slowed Zoom’s roll by much, nor its stock price. Shares are up 18% since its first quarter earnings release in early June, and more than 250% year to date.

Currently, Wall Street analysts are expecting Zoom to report $488 million in revenue for the quarter ending in July.