I recently had the pleasure of hearing Zoom Video (NASDAQ:ZM) founder and CEO Eric Yuan speak at my alma mater's business school. Appropriately, the presentation was flawlessly conducted using the company's technology.
The hour-long talk covered a range of subjects including Yuan's early life, founding the company, his management philosophy, and scaling a business perhaps faster than any company ever has. In retrospect, five keys to Zoom's success stood out to me, two from the past, two from the present, and one for the future. These factors helped me better understand the business and provided a lens to evaluate future growth and how big the addressable market might actually be.
Eric Yuan's story begins like many around the world: he saw the U.S. as a land of opportunity. Living in Japan in 1995, he attended a speech by Bill Gates and was captivated by the possible future of the internet. Two years later, he would find himself in Silicon Valley working at Webex, the web conferencing startup.
Unfortunately, customers were unhappy. This made Yuan unhappy and motivated him to start a competitor that would solve those customers' problems. That motivation blinded him, thankfully, to the challenge of trying to disrupt huge competitors and all the resources they had.
If he had stopped to consider that, he likely would never have started Zoom. By understanding customer pain points, and organizing the business to solve those, he was able to carve out a differentiated experience despite more established competition.
Yuan's new company wasn't officially named until two weeks prior to launch. Not only that, he admittedly didn't have a launch strategy. One of his advisors knew Walt Mossberg, then a widely followed Wall Street Journal Technology columnist. Mossberg wrote a glowing review, highlighting sharp video, the ability to have more attendees than other services, a text chat feature, and its ability to work across multiple operating systems and devices.
Yuan cited this column as spurring 50,000 users to sign up, including large tech-savvy influencers like a Stanford Continuing Studies group. The introduction was fortunate, but it wouldn't have happened if the service didn't impress. It reminds me of the old saying about luck being the result of hard work meeting opportunity.
Scaling and use cases
Before COVID, Zoom had been focused solely on serving enterprise customers. Obviously, this changed as "to Zoom" became a verb, similar to how one Googles, or Ubers. The company's scalable architecture -- 19 servers around the world with the ability to leverage the public cloud (think Amazon Web Services) -- allowed them to handle the avalanche of new consumers using the service with minimal hiccups.
There were some high profile security issues early on that Yuan admits never crossed leaders' minds. Business customers would never intentionally share inappropriate content, or post the link to their meeting on social media for that matter. On April 1, the team committed to spending the next 90 days shoring up security and pushing back any new feature development.
The plan has worked. The company now has a head for each vertical market, such as for businesses, consumers, legal systems, schools, and healthcare (which he emphasized several times). This allows them to better understand use cases and incorporate feedback into the development roadmap as they continue improving the experience.
Yuan continues to be amazed at the use cases that are discovered. He called out the Emmy Awards and Saturday Night Live specifically, and he also discussed the decision behind offering the service to more than 125,000 schools free of charge.
When asked about charging schools in the future, Yuan was adamant that being a part of a community, making the world a better place, and keeping employees engaged was much more valuable to the long-term success of the business than any fees they might charge. He had a lot more to say about employees, and it reminded me of one of the open secrets of some of the greatest businesses of this century.
Employees are engaged
With a founding goal to make customers happy, Yuan knew this started with having happy employees. His message was very clear: the goal of life is to be happy, and his goal as the CEO is to make employees happy. As he put it, "even engineers want to be happy. If they aren't happy, the code isn't any good".
Although the enterprise side of the business will continue to subsidize the consumer side, Yuan was not concerned about lost opportunity. He isn't worried about monetization; he intends to make sure employees feel part of "the big dream" and feel proud to work at Zoom whether they are in Silicon Valley or anywhere else in the world.
Killer app or platform
One of the more telling moments of the talk came near the end, as Yuan discussed his desire to transition the company from a killer application to a platform. He also hinted at spirited internal discussions trying to come up with a way to evaluate that journey. The key to being a platform would be the ability for others to build applications that run on Zoom. Some of that capability was highlighted at the recent user conference.
Zoomtopia, the company's user conference, introduced several new features that will go a long way in determining whether the company remains a killer app, or transitions to a platform. The "On Zoom" feature, that he compared to Uber, allows anyone to host an event on Zoom, where they can charge for attendance. Perhaps a more apt comparison could have been to Shopify (NYSE:SHOP). Despite not having a direct relationship with customers, hundreds of thousands of businesses are built, marketed, and operated on Shopify's platform. One day, Zoom could be the platform that remote and virtual interactions are built on for all types of organizations.
One thing was clear after listening to Yuan for an hour. We can expect the company to continue adding features that enhance the user experience for specific use cases, as well as embracing new technologies as they become available.
A few interesting nuggets that came up during the Q&A session hinted at that future. The ability for people to speak over each other, while not great for presidential debates, would be a wonderful feature that could facilitate plays and musicals. Features that appeared to be top of mind for the company were auto-generating a transcript of a meeting and facilitating real-time language translation within a meeting. A far-out use case mentioned was replicating the office environment utilizing virtual reality.
Perhaps one day, congregating in the meeting room will involve putting on a headset and logging onto Zoom. Until then, shareholders can feel confident that this customer and employee-focused CEO is thinking big about Zoom's future.