Zoom's CFO Looks to OnZoom to Grow Revenue Opportunities
October 20 2020 - 4:40PM
Dow Jones News
By Nina Trentmann
Zoom Video Communications Inc.'s finance chief is working to
monetize a new events platform, part of a broader effort to expand
the company's product offering.
The San Jose, Calif.-based company, whose video-conferencing
tools are being used by millions of people working from home during
the pandemic, last week launched OnZoom, among other features.
Hosts and organizers can advertise their virtual events via OnZoom
-- yoga classes, cooking sessions, art workshops, for example --
and include them in an open directory, potentially attracting new
customers.
Zoom has seen rapid growth since the beginning of the pandemic,
with revenues rising 355% to $663.5 million in the quarter ended
July 31 compared with the prior year period. The company is
forecast to book roughly $2.4 billion in revenue for its current
fiscal year, up from $622.7 million in the previous fiscal
year.
Zoom recently introduced Zoom Phone, a voice-over-internet
protocol phone service, and Zoom Rooms, a conference room system,
to broaden its portfolio. It also presented an end-to-end
encryption service following concerns earlier this year about its
privacy protections, and a tool to integrate applications such as
Slack into its platform.
The company plans to charge hosts, who usually take a fee for
their virtual events advertised on OnZoom, next year, said Kelly
Steckelberg, the chief financial officer.
"We are in the early stages of this," she said, referring to the
company's plans to monetize the new offering. "There will be some
way of charging hosts."
Zoom expects the events platform to contribute to its revenue in
the fiscal year ending in January 2022, Ms. Steckelberg added.
The company currently generates the majority of its revenue from
the monthly subscriptions companies pay for using its
communications platform. OnZoom could provide additional growth as
in-person events remain restricted in many parts of the country,
said Dan Romanoff, an analyst at Morningstar Research Services
LLC.
"I like that it is an extension of the company's service into a
new but highly related area to its core business which should help
with monetization," said Joseph Bonner, an analyst at Argus
Research.
Zoom is facing competition from other video-conferencing
providers, including Cisco Systems Inc.'s Webex or Microsoft
Corp.'s Teams, forcing it to build out its product range. "Demand
is spiking in an unprecedented way right now. There is room for
multiple winners in my view," Mr. Romanoff said.
OnZoom could become a feature designed for paying users to
expand their own content and services through Zoom, said Tom
Roderick, an analyst at Stifel Financial Corp., an investment
banking firm.
"I don't necessarily foresee it becoming its own revenue
category as a function of revenue-sharing, but rather, an appealing
branding tool to incentivize consumer-facing businesses to sign up
for premium levels of Zoom usage," Mr. Roderick said. OnZoom is
currently available only to paying customers.
Ms. Steckelberg's focus will be on pricing the new product and
evaluating its financial success, Mr. Bonner said. Forecasting
demand for a new solution such as OnZoom could pose a challenge,
Mr. Romanoff said, adding that it might require some additional
investments in infrastructure.
Zoom in recent months has diversified its customer base. Prior
to the pandemic, 80% of revenues were generated from businesses
with more than 10 employees. In the latest quarter, that percentage
decreased to 64%, while the percentage of small businesses with
less than 10 employees increased to 36%, Ms. Steckelberg said.
"We can scale both ends of the spectrum," she said.
Write to Nina Trentmann at Nina.Trentmann@wsj.com
(END) Dow Jones Newswires
October 20, 2020 16:25 ET (20:25 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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