Zoom is Losing.
I came across this poll on Twitter asking whether Zoom currently has a moat.
My answer: yes they do have a moat, but is it effective?
What is a Moat?
Medieval castles were often surrounded by a moat as a defense against attackers. Similarly, an economic moat is a business’ ability to keep its competitors at bay.
The longer a business can keep competitors away, the larger its market share and respective value.
There are 2 ways to build an economic moat:
- A Wide Moat — a combination of multiple differentiators
- A Deep Moat — a single differentiator
What Does Zoom Have?
A wide moat
Zoom has built a wide moat by combining 3 differentiators together
✅ Cost Advantages — Zoom is free & easy to use which reduces $ and time for users
✅ Network Effects — Using Zoom is much better when many people are using it
✅ Intangible Assets — Zoom has reliably higher video quality
Is it working?
When the pandemic began everyone from teachers to CEOs were scrambling to use video conferencing and Zoom became their go-to. Why?
With 1-click, $0 and no account setup anyone could host a high-quality video call with multiple people.
This worked in Zoom’s favor, similar to Slack’s bottom-up sales strategy, Zoom’s free tier was intended to win over users in the hopes they would persuade their bosses to purchase corporate licenses.
At the beginning of the pandemic Zoom’s popularity skyrocketed, but as it prolonged, Microsoft Teams’ growth rate surpassed Zoom’s. Why did this happen?
Why is Zoom Losing?
Microsoft dominates the enterprise market with their deep moat: Office365.
To keep competitors away Microsoft strategically bundled Teams with their Office365 suite, creating a ‘no-brainer’ add-on for their enterprise clients. This key decision lead to Microsoft Teams’ recent exponential growth, and at this rate, they will over take Zoom.
Zoom has a moat, but it hasn’t been strong enough for customers to consistently choose them over the competition.
How Can Zoom Still Win?
Similar to the internet, which started as a product and now powers almost everything we do, free high quality video conferencing has become a utility, a necessity for modern living.
Zoom is now the “Swiss Army Knife” of video conferencing, hosting different genres of calls from classrooms to happy hours. Each of these genres have their own respective needs and Zoom cannot satisfy all of them. As a result, Zoom will be unbundled.
For Zoom to win, it must transition from a first party video conferencing tool to the video conferencing infrastructure that future businesses will be built upon.
These 3 companies have started Zoom’s unbundling by building real businesses on top of it:
- Grain — record, transcribe and highlight Zoom calls — raised $4M seed
- Zmurl — branded landing pages for Zoom events
- Mmhmm — makes Zoom presentations immersive & entertaining — raised $31M pre-launch
But despite powering all of them, Zoom isn’t getting its share of the revenue
Zoom’s announcement Zapps, an app marketplace, indicates it may already be preparing to become a utility.
However, it has to move fast because if the companies who are already unbundling Zoom grow too big, Zoom will lose its leverage to charge fees and earn its fair share.