ZOOM KABOOM!
ERIC YUAN IS HELPING MILLIONS OF PEOPLE SURVIVE SOCIAL DISTANCING BY GIVING AWAY HIS VIDEOCONFERENCING TOOL, ZOOM, FOR FREE. THE MOVE IS EARNING HIM MUCH RESPECT, AND WHEN THE PANDEMIC HAS PASSED, THE BILLIONAIRE’S BUSINESS WILL LIKELY BE STRONGER THAN EVER. BUT IN THE MIDST OF A GLOBAL CRISIS, CAN HIS APP WITHSTAND A 610% SPIKE IN TRAFFIC VIRTUALLY OVERNIGHT AND THE SCRUTINY OF PRIMETIME?
Zoom CEO Eric Yuan’s kids finally care about what he does for a living. Sure, they were there that morning in April 2019 when Yuan, the founder of the world’s most popular videoconferencing company, rang the opening bell at Nasdaq, with Zoom’s stock-market debut making him a billionaire. But it wasn’t until a Monday in mid-March that Yuan’s eighth-grade daughter, forced by the coronavirus to go to school remotely, finally had a question about her father’s work. “My daughter had never asked what I’m doing,” Yuan says, beaming. “For the first time, she stopped by to say, ‘Dad, how do your raise your hand in Zoom?’ ”
Yuan’s son, a college freshman, has become an emergency Zoom user, too. “I told my son, ‘I finally realized why I was working so hard,’ ” Yuan says. “I realized, ‘Maybe I built these tools just for you to use in your online class now.’ ” This newfound respect still wasn’t enough to stop either kid from battling for the family’s WiFi with Dad, jokes Yuan, 50.
Welcome to the new work-from-home family life: conducted, increasingly, over Zoom. As the coronavirus ravages the planet, leading to quarantined cities, states sheltering in place and schools and universities closing down worldwide, Zoom has emerged as one of the leading tools to keep businesses up and running, students learning and people connected through virtual birthday parties, happy hours and yoga classes.
On the last Saturday of March, nearly 3 million people globally downloaded the Zoom app on their mobile devices for the first time—a record for the company, bringing the number of downloads since its April 2019 IPO to more than 59 million, according to mobile intelligence firm Apptopia. Zoom recently ranked No. 1 among all free apps on Apple’s App Store, ahead of Google, WhatsApp and even Gen Z favorite TikTok. None of that accounts for the millions who tune in via laptop or desktop computer.
All of this has pushed Zoom, based in San Jose, California, into a new financial stratosphere. Its shares are up 143% since the IPO and 44% in the last month—a time when the S&P 500 fell 11%—giving the company a market cap of $42 billion and Yuan a net worth of $5.5 billion, making him one of the richest self-made newcomers on this year’s Forbes Billionaires list. Even before the spread of COVID-19, Zoom was on a tear, with at least 81,000 paying customers, including Samsung and Walmart. It posted revenues of $623 million and net profits of $25 million through its fiscal year ending January 2020, up 88% and 234%, respectively.
Zoom isn’t just a darling of Wall Street. It’s a social-media phenomenon. On Twitter, TikTok and elsewhere, Zoom has gone viral—quite a feat for a piece of business software. “Just got an email from a prof: ‘As a reminder, you are required to wear clothes during Zoom meet
ings.’ Rules are made when they become necessary, not before,” one Twitter user quipped, getting more than 85,000 likes. Joked another, to 21,000 likes: “Lol you thought you were better than me cause you went to Harvard??? We’re all attending Zoom University now.” (The real Harvard is conducting all of its remaining classes on, what else, Zoom.)
Much of the Zoom boom is fueled by Yuan’s decision to provide unlimited free access—first to affected regions in China and then, in mid-March, to all schools shut down in the United States, Italy and Japan. He’s since expanded the offer to schools in at least 19 other countries; around 84,000 have signed up. Add to that millions of new individual users taking advantage of Zoom’s complimentary 40-minute video chats (available to any individual or group with fewer than 100 participants), which were already free before the pandemic. Zoom won’t say how much money all this free service is costing, but Stifel analyst Tom Roderick estimates the additional tab at $30 million to $50 million. And all those people are sucking up costly bandwidth—meaning Zoom is likely having to invest in public cloud resources as a stopgap, estimates Sterling Auty, an analyst at JPMorgan Equity Research. Zoom says its infrastructure can already support 8 billion meeting minutes per month: “In the case of an unprecedented, massive influx of demand, we have the ability to access and deploy tens of thousands of servers within hours.”
While Yuan’s generosity might be expensive in the short
term, it will undoubtedly pay off richly for Zoom, which is already well on its way to becoming the generic term for videoconferencing, much as the brand names Xerox, Kleenex and Google are for their products. (According to its S-1, the majority of its top customers in 2018 had started out with a free account.) Zoom’s biggest challenge now is not how to make money but ensuring that its systems don’t crash under the weight of millions of new users or collapse under the spotlight.
“It was not a hard decision,” Yuan says. “When we thought about this decision, we were very excited. We know that whatever problems we face, we will overcome. Cost, our public company gross margin, our capacity: Everything else is secondary.”
The son of mining engineers in China’s eastern Shandong Province, Yuan grew up fascinated by entrepreneurs like Bill Gates. After graduating from Shandong University Science & Technology with a degree in applied mathematics in 1991, he decided to head to America. Before his departure, U.S. Customs asked for an Englishlanguage version of his business card. It listed Yuan as a consultant, and he was misunderstood to be a part-time contractor. His visa was denied. For the next year and a half, the now-skeptical immigration services would deny him seven more times. But Yuan refused to give up.
He eventually made it to California and got a job at Webex, an early player in web-conferencing and videoconferencing applications. It was acquired by Cisco in 2007, and Yuan left four years and four months later, disillusioned by the quality of the service. He started to build Zoom and began offering to hook up some in-need organizations and institutions, such as the University of San Francisco, for free.
Now that altruistic impulse is taking on global importance as Zoom has become vital for the work-from-home economy. But it’s far from the only company stepping up to meet this trend—and standing to profit later. Google and Microsoft also announced they were opening up more free features for their own classroom and videoconferencing tools. RingCentral, a Belmont, California–based cloud communications company, and Newsela, a New York City– based ed-tech firm, are two of a host of lesser-known players doing the same.
But likely no other company has signed up so many new users, so fast. How can Zoom possibly keep up? “Is your platform prepared for practically every college class in America to be using it? Simultaneously? Asking for a whole lot of friends,” said Adrienne Keene, an assistant professor of American studies at Brown University, via Twitter. “It’s unrealistic to expect we can just transfer class to a Zoom call and things will be fine,” she later emails Forbes, noting that some students live internationally, have spotty Wi-Fi or have no quiet space at home. “However, I am looking forward to seeing their faces and hearing their voices.” Yuan is not worried. He’s confident in Zoom’s infrastructure, and his team is working on oth