Since the pandemic started, Zoom (ZM +2.02%) has flourished, but can it continue? In this clip from "The Rank" on Motley Fool Live, recorded on March 21, Fool.com contributors Connor Allen, Matt Frankel, and Jason Hall wonder if the video conferencing company will be able to keep growing in a post-pandemic world.
Connor Allen: From a Zoom perspective, I have more fear about Microsoft (MSFT +1.01%) than you might have Jason, and the reason for that is that Zoom is super reliant on corporations in order to continue growing. Every single time they release a quarterly report, I believe that they include which customers are paying over $100,000 annually and that's a key component to their growth.
Most of these customers are our corporations and that's where the growth is stemming from and I think Microsoft is going to come in and I think they have already started to do this and take a lot of that share away from Zoom because they have a more all-encompassing option not just with video conferencing but with something like Slack involved with it.
I'm not a huge fan of any video conferencing platforms as far as the product goes. I think Zoom could be a lot better, I think Microsoft Teams could be a lot better, I think Google Meets could be a lot better and I think there's a lot of room to develop the products to be better in the future.
But I think as far as growth with corporate customers goes, I think Microsoft has a leg up there because of their Teams option which has a lot more options available for corporations and their businesses. That's my concern.
Matthew Frankel: I have a very unpopular opinion on Zoom. I think Zoom and I totally understand that. I'm the one who thinks GM is going to Ten-X and Zoom isn't [laughs] but I'm not convinced Zoom is going to be a One-X in 10 years and the reason being is that as Jason mentioned some great statistics that net revenue retention rate is still fantastic. Even eight quarters into the COVID pandemic, it's still fantastic, things like that.
We haven't seen what is going to happen when people return to the office in large numbers. It just hasn't happened yet. Office returns have been delayed, they're just starting to happen now. Even in the fourth quarter with the omicron surge and things like that, we don't know what it's going to look like in a normal post-pandemic world for Zoom.
So I think the decline is going to be just as fast as enterprise clients adding features in a lot of cases so I really worry about Zoom in a post-pandemic world. I love the product. Obviously, we are on a Zoom call now to do this but I worry about the sustainability of the pandemic era gains after, in the next few years.
Jason Hall: I think that's fair and that's one of the reasons I'm really glad that the company is doing this pivot. They are shifting away from being so reliant just on the remote video conferencing thing and they are building tools for customer service and so many other things.
The deeper they become integrated, the more important they become, the more sticky it is. I think those are valid concerns that both of you bring. The competition is going to be real, it's going to be fierce but Microsoft isn't getting in this to break even, that's a company that generally gets 80%-plus gross margins.
This is a profitable space so I think that's a reminder there and it's really big. I think it's big enough for Zoom and Microsoft to both survive and I guess the biggest things I'm just less concerned about what's going to happen in the enterprise space with things like Zoom than you are, Matt.
