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How Does Zoom Make Money and What Is Their Business Model?

Zoom is an online conference tool that many people use for personal interactions and business.

So, many people don’t see how zoom makes money and the business model of the platform.

In this post, you will discover that it is a profitable business with multiple pricing plans.

Table of Contents

What Is Zoom?

what is Zoom

Zoom includes many features that allow us to contact other people.

We can contact each other through chat, video, and audio.

While there are many similar online tools, Zoom has a top user experience that wins the competition.

The business model is focused on recurring subscriptions. It has different pricing plans that the user can renew once per year.

It also promotes hardware products that help people to use their service.

Zoom was founded in 2011 and became an instant success because it offered a superior product compared to other alternatives in the market.

Today it is a global brand name with users from many countries.

How Does Zoom Work

Zoom is a cloud-based software for individuals and businesses that want to create meetings online.

Of course, businesses have to use business pricing plans.

The options of interaction are the ones mentioned above in every case.

You can use chat, video, and audio.

You can create one to one meetings or meetings with many participants.

Users have the option to invite up to 500 participants with the right pricing plan.

There are screen sharing options that help you organize the meetings and share details with all the users.

You can access Zoom Meetings through your desktop or mobile.

access Zoom Meetings (1)

It allows you to share files through the chat that is an extension to the Meeting product.

Room and Workspaces allow businesses to activate their hardware like cameras and microphones.

It is created for large organizations that require meetings with many members from different places.

Zoom suggests hardware from specific companies.

You can integrate any type of hardware from them without any problems.

If you want to host webinars, you can use Zoom Video Webinars.

It is a tool that helps to create large webinars with video, audio, and screen sharing options.

Lastly, Zoom Phones has many phone features like voicemails, call recording, automated attendants, and many more.

You can integrate third-party apps that businesses use to organize their work, like Slack and Trello.

All these features and hardware that you need for the platform are available worldwide, and many businesses already use them.

The History Of Zoom

Eric Yuan created Zoom in 2011.
Eric Yuan

He is a former executive at the video and web conferencing company Cisco WebEx.

Yuan spent 14 years leading engineering teams before creating Zoom.

He joined WebEx in 1997 and was one of the company’s first software engineers after his 9th visa application got approved.

His experience at Cisco helped him to see some problems with the company.

Many customers got frustrated with some issues that the company could not solve for them.

When people logged in to the WebEx conference, the system would slow down because it could try to figure out which version of the product should run.

It could be even worse when there were many people in the line.

The result was low quality on audio and video because the system couldn’t run properly.

These days almost all the conference tools lacked on features and applications that you can find on Zoom.

So, Yuan decided to start his own company in 2011.

However, he was not alone because 40 engineers of Cisco followed him.

The first name of the company was Saasbee but changed to Zoom after a while.

The problem for Zoom these early days was the lack of investors.

It had tough competition from big brands like Skype.

Skype logo

However, he managed to raise $3 million dollars that were critical for the creation of the platform and the first product.

He got investments because of the credibility of his network, which included former WebEx CEO Subrah Iyar.

Then, the first product was ready in 2013.

The quality of the first product was better than most competitors in the market.

So, it was successful right away.

It could support all the hardware platforms and could host up to 40 people at the same time.

The price was lower than most competitors without reducing the quality of the product.

In a short time, over 1000 businesses used Zoom and hosted over 140,000 meetings.

In May 2013, Zoom reached one million participants.

It was an impressive achievement only a few months after the launch.

Over the years, Zoom kept adding new features and getting more participants.

More businesses use conferencing tools than a few years ago, and Zoom is one of their top options.

This success created some problems for the company as well.

Many people questioned the platform’s security, and the US government advised their administrative workers to avoid the platform.

Zoom responded by upgrading the security features and acquiring the platform Keybase.

These issues did not prevent the growth of the company.

How Does Zoom Make Money

Zoom has many features and products for businesses and individuals.

However, it uses a freemium model.

It means that the customers can use a limited version of the platform for free.

It allows us to host meetings of up to 100 people and 40 minutes duration for free.

Those who need larger meetings and duration can upgrade their membership.

The freemium model attracts potential customers and lets them learn the platform before using a paid pricing plan.

Zoom Meetings and Chats

This is one of Zoom’s main products that allows users to use the video call or the chat over the application.

Users can log in to the application through their desktop or mobile phone.

The free version of the product includes the 100 people and 40-minute limit, as mentioned above.

If you want to upgrade it, you must pay $14.99 per month or $12.49 per month if billed annually.

Zoom Rooms and Workspaces

It allows businesses to run video meetings.

Customers can use their existing software if it integrates with the app or can buy hardware from specific providers suggested by Zoom.

This service’s subscription fee is at $49 per month for each installed conference room or $41.58 when installed annually.

The company has created the Professional Services unit that makes sure the installation of conference rooms works properly.

Zoom has partnered up with hardware providers for their customers.

The company earns a percentage on each sale to keep suggesting these providers

Zoom Phone

It is a feature for people that need to make quick calls for personal reasons or business.

Zoom Phone is available without the video features.

Customers can create a VoIP call with tools that are available in the Meetings product.

The Zoom Phone features include the following:

  • Call transfer
  • Call forwarding
  • Voicemail
  • Call recording
  • Call blocking
  • and many more

Zoom Phone costs $14.99 per month for every host.

Like every other plan, you have a discount if billed annually that costs $12.48.

Zoom Video Webinars

Zoom Video Webinars​

It is a web conferencing tool that allows broadcasting up to 10,000 view-only attendees.

The webinar starts with 100 participants that you can scale them to 10,000 if you upgrade your license.

If you host the webinar, you can share the video, audio, and screen with the viewers.

The view-only attendees can ask questions on the chat and engage with your webinar.

The registration for each webinar can be both optional or mandatory.

You can change these options based on the type of your organization. Webinars can take place once or host them multiple times.

Zoom Video Webinars has many pricing options.

It starts at $14.99 if you have 100 attendees.

The price increases if you want more attendees.

The most expensive package allows up to 10,000 attendees.

Lastly, Zoom offers special packages to organizations in the healthcare, education, finance, and government industries.

Valuation and Revenue

Zoom has raised $146 million in venture capital funding.

Investors include Horizons Ventures, Emergence Capital, Sequoia Capital, and others.

Zoom announced in April 2019 that it raised $356.8 million in its IPO.

It also entered on the Nasdaq stock exchange under the ticker symbol ZM.

Many of Zoom’s counterparts that went public in 2019 did it while still losing money.

However, Zoom was profitable and earned $7.58 million in net income for the year 2018.

The company posted revenues of $622.7 million, up 88% year-over-year in 2019.

Net income increased to $21.7 million.

The value of Zoom is around $47 million.

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Conclusion

Zoom makes money with recurring subscription fees and a freemium model.

This business model is quite popular in online tools.

It brings a larger audience to the app that wants to test the features for free.

When they like the conference tools or any of the features, they may upgrade to premium members.

A big number of people will keep using the free version of Zoom.

It is not a problem for Zoom because they help with brand awareness and attract more potential customers.

Disclosure: When you purchase a service or a product through our links, we sometimes earn a commission.