Is the Second Coming of the “Zoom Boom” Brewing?

Charlie Mitchell

The Zoom Contact Center is perhaps the spark for Zoom’s renaissance

Analysis
Is the Second Coming of the “Zoom Boom” Brewing?

Many have written pessimistic headlines regarding Zoom’s tepid revenue rises, with its latest earnings revealing a seven percent YoY growth.

The figure is small compared to the 191 percent recorded in June last year.

Making such comparisons, CNBC suggested that the outlook for Zoom was “gloomy”. Forbes described it as “concerning.”

Scouring these articles, it is easy to conclude that the Zoom boom is over. Yet, the negative overtones seem to disregard its enterprise growth.

Indeed, delve deeper into the results, and a much brighter picture emerges.

Recent Positives for Zoom

It is no surprise that Zoom’s consumer business is down. Most anticipated this, with people once again able to meet up with their families and friends face-to-face.

Yet, teetering under the surface, Zoom’s enterprise business is gaining real momentum. The decline of its consumer business just masks this.

Indeed, take the enterprise alone, and its revenues increased 27 percent last quarter (YoY).

Referencing this in an interview with UC Today, Zeus Kerravala, Founder and Principal Analyst at ZK Research, predicts similar growth until the end of the year.

However, he suggests that next year may be much more prosperous, stating:

We will reach the point where the growth in its enterprise business starts to outpace the decline in the consumer business by quite a bit. Then, you’ll start to see that hockey stick growth curve again for Zoom.

Fuelling its enterprise growth is the sharp rise of Zoom Phone, which went from no seats to over three million in little more than two years.

Such positive results have enabled the video pioneer to increase its UCaaS market share by 40 percent in Q2 and culminated in the launch of Zoom One.

Yet, within Zoom One is a solution generating much hype: The Zoom Contact Center.

Its Contact Center Is the Golden Ticket

Its CCaaS solution is a cornerstone feature in Zoom’s go-forward plan. Why? A fundamental reason is that – in the UC market – there is only so much headspace a vendor can create.

Whether it is Zoom, Microsoft, or Slack, vendors continuously throw more features at their solutions. Over time, these become standardized as players poach each other’s ideas.

For instance, Zoom was first to introduce virtual backgrounds. Now every vendor has them.

The trouble is, as such innovations become commoditized, it is difficult to charge more. So, as solutions grow, prices hold, and there is little wiggle room for sustainable growth.

Recognizing this, it is easy to create “gloomy” and “concerning” headlines from Zoom’s earnings call. Yet, those that do are perhaps discounting the Zoom Contact Center – which is growing fast in a burgeoning market.

Indeed, despite being only six months old, sales of the CCaaS solution are exceeding expectations, with Zoom achieving results its executives had not anticipated for another 18-24 months.

These achievements are substantial in the current contact center backdrop, where average revenue per seat is increasing, thanks partly to new AI tools – such as agent-assist – coming to the fore.

Moreover, Kerravala points out: “The number of people using contact center [technology] is increasing. We see marketing, sales, account managers, and field service people using the contact center.

So, we’ve got a growing average seat price and a growing number of users. That is why the contact center is so appealing.

Zoom has recently tied this together with Kelly Steckelberg, Chief Financial Officer at Zoom, hoping the trend will propel Zoom One forward.

In doing so, Steckelberg reiterated its aim of reaching $10BN in annual revenue. Meanwhile, CEO Eric Yuan went further by targeting $15 billion. Such earnings would represent the second coming of the Zoom boom.

The Mindset Is There: Can Zoom Execute?

The only SaaS companies to have ever achieved $10BN in annual revenue are Microsoft, Oracle, Salesforce, and SAP.

Through each runs a common thread; they are all platform businesses. Each allows other companies to build on top of them and generate greater value from their product.

Zoom has this mindset, and it is – despite the headlines – gaining ground in the enterprise space. But whether it can execute is another question.

After all, as Kerravala says: “The next four billion is a lot harder than the first four billion.”

However, with its mindset – alongside the affection many of its users have for the vendor, evident in the growth of Zoom Phone – anything is possible.

 

 


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