Zoom stock up as latest revenue stream unveiled (ZM)
The pandemic has made Zoom Video Communications (NASDAQ: ZM) a household name. A virtual meeting place not just for remote working but also education, medicine, and even family quiz nights. No surprise, then, that Zoom stock ticked higher on news the firm is branching out and bringing its technology to businesses.
In a natural next step, Zoom will start letting other firms pay to use its technology in their own products. This would mean that businesses and institutions could still have meetings using the company’s technology but without the Zoom brand.
A Wall Street Journal article broke the news, citing an interview with Zoom chief technology officer Brendan Ittelson. He explained that Zoom was on a growth mission, “expanding the menu” to meet more business needs.
Those businesses will be able to pay for calls by the minute, with a free allowance of 10,000 minutes – a similar tactic to the 40-minute limit for the free version of Zoom.
Ittelson explained that Zoom’s customers have requested a way to integrate their own tools more with Zoom’s videoconferencing.
The company’s new offering will break from the current model, which mostly depends on app user calls. This positions the company to keep pushing forward, attracting ever more customers seeking Zoom’s now-familiar videoconferencing technology for their businesses.
Zoom stock jumped 5.4% on Tuesday following the Monday announcement.
An astounding year
Since the pandemic began, Zoom has connected everyone from students to their teachers to workers with their colleagues. Zoom stock skyrocketed to around $350 dollars at the start of 2021, from less than $70 when 2020 began.
At a time of great market and political turmoil, the company’s revenue jumped a staggering 326% to $2.7 billion in financial 2021 with net income of $671.5 million versus $21.7 million the year before.
Zoom made its way into the legal system, not just with the now infamous lawyer cat but also in more substantial ways, with Florida’s largest law firm, Cole, Scott & Kissane, standardising on Zoom for legal proceedings. This enabled Florida’s first ever virtual trial by Jury to take place.
The firm also launched OnZoom for online events like exercise classes, comedy shows, and art lessons. It even began offering Zoom Hardware as a Service, helping customers gain access to the hardware needed to make Zoom Rooms and Zoom Phone more accessible.
In 2020, the firm announced plans to expand its presence in Singapore, opening a new research and development (“R&D”) centre and expanding its co-located data centre in Singapore as well.
This was on top of plans for two new R&D centres in the US – plus existing R&D centres in the US, China, and India. Zoom also expanded its India presence with a new technology centre in Bangalore.
Finally, the company also made its Zoom Phone cloud service available in more than 40 countries and territories, providing domestic calling plus local telephone service to countries like Argentina, Brazil, Greece, and Norway.
Zoom was not the only company to thrive amid restrictive pandemic conditions. As lockdowns forced restaurants to close doors to customers, food delivery platforms like Just Eat Takeaway.com (LON: JET | AMS: TKWY), and GrubHub (NYSE: GRUB) benefitted from a growing market.
Just Eat’s annual revenue multiplied to €2.0 billion in 2020 from €416 million and GrubHub’s was 38% higher at $1.8 billion.
UK platform Deliveroo’s revenue shot up to 64% £4.1 billion in 2020. The company planning a London float very soon, intending to raise £1 billion. It is expected to have a £7.5 billion valuation when it lists.
Not only that, but streaming service Netflix (NASDAQ: NFLX) also performed exceptionally well, with shares up 57% from the start of 2020 to the beginning of 2021. With everyone stuck indoors watching television, the company’s annual 2020 revenue rose 24% to $25.0 billion.
Meanwhile, Amazon.com(NASDAQ: AMZN) benefitted on two fronts, with shares up 70% year-on-year at the start of 2021. The Amazon Prime Video service benefitted from increased interest in streaming, as Netflix did. Meanwhile, its e-commerce business got a boost as more people chose to shop online – either because stores were closed, or from fears of Covid exposure.
These combined to take Amazon’s annual revenue up 38% to $386.1 billion from $280.5 billion.
As with Zoom, these companies made the most of their circumstances. And, like Zoom, they offered substitutes for in-person activities such as visiting restaurants, going shopping, or seeing a movie.
Still, none have become quite as essential to day-to-day life as Zoom, which now fills in for almost every kind of necessary in-person interaction a person could think of.
This could explain why Zoom stock has seen such a sharp 2020 rise compared to other well-performing firms.
What does Zoom’s future look like?
In mid-January, Zoom raised $2.0 billion, so it is well-placed to adapt to changing circumstances, as easing lockdowns and vaccines let children return to school and people can finally attend in-person birthday parties.
Capitalising on its name and what must be a near-universal familiarity with its product, Zoom is now working to extend its reach. The company’s new revenue stream will let customers integrate Zoom’s tech with their own existing brands, keeping Zoom a firm presence in our lives even without the brand name.
At the same time, not everything will return to normal post-pandemic. Many businesses and industries that have adapted to the pandemic have found that some changes worked to their advantage.
It’s very possible that companies will be more willing to forego in-person meetings over Zoom calls, or that doctors will continue to offer online appointments to patients.
Many people have already moved away from their offices and don’t plan to come back, wanting to avoid dreaded commutes. Covid has shown us that conferences, which involve considerable travel time and carbon emissions, aren’t always needed.
It is for this reason, perhaps, that Zoom stock has dipped of late but has yet to dip below the $300 mark so far this year.
And where some things will go back to the way they were, Zoom certainly will not. It is now a feature of human life, a tool that few would want to put down.
As vaccines give us more control over Covid-19 and governments start to permanently remove lockdowns, Zoom has found a new way forward and is forging its path.