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How Does Zoom Make Money If It’s Free?

Shafqat M. is a professional content writer who has helmed digital marketing projects for the last 5 years.

Zoom is a virtual conferencing tool used to interact virtually through the medium of audio, video, and chat. The cloud-based video conferencing giant Zoom offers users unrivalled audio/video output to interact with each other and is easier to use compared to rivals Microsoft Teams.


Zoom was founded in the year 2011 by Eric Yuan in San Jose, California, United States. Eric Yuan is a former Cisco executive. The immense popularity and superiority of Zoom garnered it the current market value of $47 billion after its IPO in 2019.

How Zoom Makes Money?


Zoom makes money from Zoom Meetings, Zoom Phone, Zoom Events & Webinar, Zoom Rooms, Zoom United, and Zoom Contact Center via subscription fees. Hardware sales and ads also contribute to Zoom’s revenue.


Zoom’s freemium business model confuses many who then wonder how does Zoom make money when it’s free? But in reality, besides free meetings, Zoom has five subscription-based offerings for high-end users like large corporations and businesses, which generate the bulk of revenue for Zoom.


There are no absolutely free users of the Zoom video conferencing tool. Not even “Basic” free tier users. This is because Zoom shows ads to the free tier users. These ads show on these users’ screens once the meetings start.

What Is Zoom?


A cloud-based SaaS application, Zoom is a virtual conferencing tool founded in California, United States in the year 2011 by former Cisco executive Eric Yuan. Zoom offers businesses and individuals the facility to interact virtually using with each other through audio, video, and chat, along with the Zoom interpretation option.


Zoom supports gatherings of up to 1000 participants with a Large Meeting add-on, in addition to the default 100 participants in each meeting. Allowing, therefore, large corporations to conduct video conferences with hundreds of participants, besides one-on-one meetings. Using the Screen Sharing feature in Zoom participants can share the information more effectively.


The magic of Zoom lies in its accessibility and Chat facility. All can use it via a desktop app or mobile app or via a web browser. Zoom Meetings can be attended and held via a web browser, or desktop and mobile applications. The Chat allows users to write text to each other and offers a wholesome interaction facility where users can share files and create groups.

A Detailed Analysis of How Zoom Earns Money

As said before, subscription fees, advertising and hardware sales, remain the major revenue streams for Zoom. While its Meetings platform is free for all to use under the Basic plan, Zoom offers subscription-based plans such as Pro, Business, and Enterprise to enable businesses with large teams to communicate freely via audio, video, and text.

These subscription plans are targeted at different customer personas. Depending on the subscription plan chosen, customers can:

  • Host varying numbers of participants
  • Receive recording transcripts
  • Use the firm’s native branding during conferences
  • Buy add-ons like more cloud storage & premium support

As part of its monetization strategy, Zoom charges licensing fees, monthly or yearly, on its software products like Zoom Rooms and Zoom Events & Webinar.

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Similarly, its tailored solutions to sectors like education and healthcare fill the coffers of Zoom with a constant stream of revenue from plans and products.

Zoom's Freemium Business Model Explained

Zoom’s freemium business model means its products are free to use for customers, though users may need to pay an additional fee to enjoy advanced features like call records or hosting more participants, etc. That being said, the freemium model doesn’t bar Zoom from earning revenue as the video conferencing giant delivers ads to monetize freemium users.

Anyway, what drives users to Zoom is independent of its monetization methods and has to do with the flawless meeting or conferencing experience it offers to customers with some of the highlights being:

  • Fast loading times
  • High-quality audio/video output
  • Ease of use

With that being said, let’s dissect further Zoom’s monetization methods in the sections below. Keep reading!

Subscription Fees

Zoom in exchange for access to its products charges varying amounts to users in accordance with plans Pro, Business or Enterprise. This is how Zoom generates the most of its revenue.

The price paid to buy the subscription of choice unlocks access to additional features like obtaining recording transcripts or hosting hundreds of participants - but below 1000 (only if they have paid for an add-on) - or using the firm’s native branding while hosting conferences.

1. Zoom Meetings & Chats

Zoom’s flagship product Zoom Meetings limits the number of participants a user can host. A similar limitation is on the duration of the meeting, which means the meeting can’t last beyond a certain time limit. The two standout features of Zoom’s Basic plan include the following:

  • Host meetings with up to 100 participants totally free
  • Meetings cannot last longer than 40 minutes

Since 40 minutes are short for business meetings which tend to last longer, Zoom offers business customers paid meetings to overcome the bar put on the number of participants and time duration.

Those users can choose between three paid plans: Pro, Business, and Enterprise.

Zoom’s Pro plan looks like this:

  • $149.9 a month
  • 100 participants
  • No time limit (30 hours!)
  • 1GB of cloud storage for recording meeting playback
  • Social media streaming

Zoom’s Business plan looks like this:

  • $199.9 a month
  • 300 participants
  • No time limit (30 hours!)
  • Single sign-on, recording transcripts, company branding

Zoom’s Enterprise plan looks like this:

  • $240 a month
  • 500 participants
  • No time limit (30 hours!)
  • Unlimited cloud storage

2. Rooms and Workspaces

Rooms in which businesses can avail themselves of workspaces for their hybrid teams. Using it, different teams that are based remotely can leverage video technology to collaborate more efficiently.

The pricing for Zoom Rooms is $499 a year and offers features like a) one-click joining, b) 1,000 video participants, c) 1080p HD video and audio, d) 10,000 webinar viewers, e) calendar integrations, and more.

In the absence of conference room setups, customers can avail themselves of Zoom’s installation support. In other words, Zoom in partnership with manufacturers delivers necessary hardware to customers if needed.

3. Zoom Phone

Zoom Phone is another popular revenue stream for Zoom available to users at the following subscription rates $120 a year, $180 a year or $240. This cloud-calling service is a necessary alternative to video meetings where only audio is required and offers seamless communication to remote and hybrid teams.

4. Zoom Events & Webinar

Zoom Events costs $890 a year. Zoom Webinar costs $690 a year. These flagship offerings from Zoom are used to host webinars with over 10,000 participants. Zoom Webinar allows the organizer to share the screen as well as multimedia files like audio and video. For attendees, the software features facilities like Chat, Q&A, and Polling.

Hardware Sales

Not all users of Zoom’s products have the requisite hardware to get the most out of Zoom’s software products. To fill in, Zoom offers its customers hardware items as well along with software products.

These include speakers, telephones, whiteboards, tablets, and more. Zoom earns from the monthly subscription fee customers have to pay for using these hardware devices.

Advertising

Advertising is another revenue stream for Zoom which it leverages to show ads to freemium users after the meeting starts. These ads are being shown only to “Basic” free users of Zoom Meetings who don’t buy a subscription plan. Put simply, Zoom monetizes millions of its free users through advertising who are not keen to use its paid services.

Investments

Zoom is very much involved in various startups through its investments. Its Zoom Apps Fund was created with the aim to invest in startups to build a robust ecosystem around its services. Till 2021, its investments have poured into 20 startups. And when it so feels the time is ripe to sell the shares for a greater price than originally bought, Zoom can do so and in no time generate revenue for itself.

Zoom Funding, Valuation & Revenue [Stats]

  • Zoom raised $276 million from venture funding in eight rounds - according to Crunchbase.
  • Zoom investors include Horizons Ventures, Sequoia Capital, Emergence Capital, etc.
  • Zoom raised $356.8 million in its IPO in April 2019. Its valuation at the time was $9.2 billion which has now crossed the $47 billion mark.
  • Zoom recorded total revenue of $2.65 billion for the fiscal year 2020, up from $623 million a year prior with a net profit of $1 billion, up from just $101.3 million in 2019.

Conclusion


From the above discussion it’s safe to say that Zoom makes money from subscription fees it charges users of Zoom Meetings, Zoom Phone, Zoom Events & Webinar, Zoom Rooms, Zoom United, and Zoom Contact Center, whether on a monthly or yearly basis. Other monetization methods Zoom leverages to generate revenue include hardware sales and advertising.


Though the coronavirus is in decline the pandemic is far from over yet. Remote is still in vogue today even though the curbs on movement have been lifted. As people become more accustomed to remote work, Zoom will continue to hold the sway over remote conferencing. And it’s safe to say, it will continue to amass revenue for years to come.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2022 Shafqat M

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