
Zoom S-1 - wwwdonohue
https://www.sec.gov/Archives/edgar/data/1585521/000119312519083351/d642624ds1.htm
======
GolfyMcG
Zoom charged us a fraction of what we paid other more traditional video
conferencing companies (GoToMeeting, WebEx) and provided I think a better
product in many regards. Not only that, they paid out our previous contract
too (worth tens of thousands of dollars). At the time I thought either (a)
they're losing tons of money to close deals and grow or (b) traditional video
conferencing companies are built on infrastructure that was required 10 years
ago but with modern advances in web technology they either didn't lower their
operating costs by upgrading or did and just take more money off the top.
Either way, they're overcharging. Based on Zoom's financials, I think it's the
latter.

If I recall correctly, the founder of Zoom came from Cisco. This all strikes
me as someone technical seeing all the waste at their existing job and trying
to make change happen. Cisco couldn't see the forest for the trees and never
took them up on their ideas. The employee believed there was a large enough
technology gap so they left and totally undercut them by delivering the same
(or better) product for a fraction of the cost.

~~~
ram_rar
you hit the nail in the head. Companies like Cisco only thrive on
acquisitions, there has not been a single decent product launched from within.

~~~
GolfyMcG
Thanks! I also always felt like I was being ripped off by other companies too.
The cost severely outweighed the value I received. With Zoom, I pay a lot for
Zoom rooms but they are magical. Normal user accounts are affordable and they
work. All in, I feel like I pay for the value I’m receiving and it feels like
an equitable deal.

Ps. I swear this isn’t a Zoom ad. It’s like the cops - if I say it this has to
be true?! That’s how this works, right?

~~~
wbl
Or the FTC comes like a bag of bricks.

------
gz5
$7M profit is superb, especially in a domain which many folks claimed was
saturated and a commodity.

Another example that execution is still underrated. Everyone looks for the
what do you (startup x) do that is so different and unique from the rest of
the world to enable you to win. Feature-focused conversation.

Often the real answer is "simply" world class execution at scale, including
business model, UX, GTM etc - as it remains the most difficult task.

Nice work, Zoom.

~~~
madrasman
well said. Being innovative and smart seems to dominate mindshare more than
high quality execution.

------
vm
I'm surprised by the negative comments on Zoom's profitability. The return on
sales/marketing investment is _exceptional_. Net income is a poor indicator of
high growth SaaS company health.

See this deck for a detailed view on SaaS metrics that shows the cashflow
benefit of investing in quality growth.
[https://www.slideshare.net/DavidSkok/the-saas-business-
model...](https://www.slideshare.net/DavidSkok/the-saas-business-model-and-
metrics)

~~~
lconstable613
This is dead on. What's interesting is that capital flows strongly underprice
this in late-stage companies (until they're 12 months from an IPO) and even
pre-indexation. It's exactly why I started this -
[https://lembascapital.com/strategy/](https://lembascapital.com/strategy/).

If you read any of SEG's quarterly benchmarks, you'll see that a company like
Zoom really does stand on its own. You can see that here:
[https://softwareequity.com/research/](https://softwareequity.com/research/)

------
tiffanyh
I’m impressed by their financials.

$330m total revenues and $7m profit.

Rarely do we hear these days about a tech company IPO who’s profitable.

~~~
cobookman
Which might make this the best buy of all the recent IPOs

~~~
pmart123
Qualtrics did too, but SAP bought it literally right before it IPO’d.

------
CedarMills
We've tested so many video conference solutions (Cisco, Starleaf, Skype,
Google Hangouts, etc) and landed on Zoom. Nice to see this!

~~~
almost_usual
Zoom is great, have been using it for a couple years now. Congrats to the
employees at Zoom!

------
presscast
Zoom is objectively a good software solution but being _de facto_ forced to
install _yet another_ piece of software just to take business meetings has
left a sour taste in my mouth.

It's objectively impressive that they managed to "force" me to install
software. Hats off... but I plan on ditching them as soon as a viable
alternative appears.

I have no real point here, other than this: I wonder if my sentiment is
general, and whether or not this might bite them later down the road? Probably
not.

~~~
macspoofing
>Zoom is objectively a good software solution but being de facto forced to
install yet another piece of software just to take business meetings has left
a sour taste in my mouth.

No kidding. I can't tell conferencing clients apart anymore. I have the
following installed: GotoMeeting, WebEX, JoinMe, Zoom, Hangouts Meet,
BlueJeans and every other week I'll get invited to a meeting hosted by yet
another one (last week someone hosted a meeting with one called
'ringcentral'). They are all about the same, and I can't tell them apart
anymore.

~~~
presscast
I'm seriously thinking about refusing to take meetings on software I don't
already have.

I strongly suspect it won't actually change anything, but so far I've been too
chicken to actually try.

~~~
macspoofing
It isn't worth the hassle. If you do push back, the other party won't care.
They'll have you book the meeting and set up the conference call instead.

------
mrnobody_67
One interesting metric to think about is valuation vs. money raised.

Zoom will go public at $3b+ after only raising $145m. That's a 20x+

Compare to Lyft. $25b valuation after $5b in capital. That's 5x.

~~~
TheHegemon
Lyft requires a lot more capital to work (lyft drivers).

~~~
jmathai
Does it matter when you're talking about multiples?

------
baxtr
We use slack and zoom. And I have to say: Zoom is so, so much better than
Slack re quality and stability. And it’s not even a close call. Slack calls
are simply poor quality and unstable.

~~~
photonios
A tight integration between the two would be magical for me.

------
jedberg
I've used zoom before but never hosted with it. It's always been great. I just
looked at their pricing page and was shocked that they give so much on their
free tier!

It seems like a small company could get away with the free tier for a long
time. My only question is, for that 40 minute time out on meetings, does that
mean you can just rejoin after 40 minutes, or is that a lifetime limit on the
account? Is the only thing stopping you from having a longer meeting really
just the hassle of rejoining every 40 minutes?

~~~
davnicwil
Seems to me a built in 40 minute timeout on meetings could be a feature,
rather than a limitation.

Seriously, usually people are pretty good at fitting stuff into the allotted
time, however long that may be. 40 mins actually seems like a pretty good
limit too, enough to accommodate most meetings without compromise.

------
tamalsaha001
We have been a very happy user of zoom. Thankfully they have a native client
for Ubuntu. I'm glad to see them go public.

~~~
captn3m0
+1 for their Linux support. Literally the only screen sharing tool that
detects my i3 workspaces across multiple monitors correctly.

------
yingw787
Profitability is underrated. I am jelly for those who have Zoom stock options
:)

Congratulations to the Zoom team! I use Zoom at work and it's a fantastic
product (maybe a little rough around the edges for UX IMHO but the video/audio
is excellent). If it doesn't get acquired I would be looking out to acquire
some stock :)

------
gianpaj
> Since our founding in 2011, we have experienced rapid growth. For example,
> our headcount has grown to 1,702 full-time employees as of January 31, 2019,

WOW. That's a lot of people

~~~
whalesalad
Yeah for a video conferencing tool. Makes you wonder what 1652 of those people
are actually doing.

~~~
austenallred
Probably building and selling a video conference tool worth billions of
dollars.

------
bevacqua
As an avid user of Zoom, this makes perfect sense. We've had meetings with
upwards of 600 participants without any issues, it's impressive software.

------
chadmhorner
As someone who has never been super-impressed with the Zoom experience, I'm
impressed.

Also, what is their moat exactly?

~~~
tehlike
none. as gsuite becomes more widespread, people will switch to it. I'd be more
worried about msft building something similar compared to zoom.

disclaimer: Used zoom couple times, use hangouts every day. google employee,
opinions are my own.

~~~
makmanalp
I've got to say that I've always wanted to love hangouts but it always makes
my laptop (reasonably powerful macbook pro) immediately max out CPU and make
fan noise like a spaceship taking off, and for comparatively worse AV quality
than the competitors. The only thing that kept me using it was that I didn't
have to install crap. Just used meet for the first time yesterday, reserving
judgement there, but honestly I didn't need yet another rebrand from google.

Zoom is the exact opposite: You have to get the client but it client works
with minimal resources, on many platforms (phone / laptop is seamless for me)
scales perfectly with large meetings / screenshare and video at the same time,
laggy mobile connections etc etc. Most importantly it ALWAYS works. I never
have to futz with it ever (whether in terms of connections, or "your link
doesn't work", "you have to invite me", "user is from a different organization
than you" etc). Just get the meeting ID and connect. This is how technology
should work in 2018.

~~~
apendleton
Meet isn't exactly a rebrand, it's an enterprise-oriented product variant. It
includes a bunch of extra features that the consumer one doesn't have, and
isn't free.

------
caprese
One yield curve inversion and everyone rushes to press submit on their draft
S-1

------
sidcool
I have been using Zoom for the past 2 years after using GoToMeeting, Hangouts
video (now google meet), WebEx, Fuze etc. and I must say Zoom is the best of
the lot. I don't know what they do differently that Google cannot, but the
product works amazingly well.

------
ejz
Look at that positive cash flow!

Can't wait to dig in deeper. But they show that execution and business
strategy (like HIPAA compliance) are still important.

------
cozzyd
Unlike WebEx and some others, Zoom has a Linux client that's not terrible.
It'd be nice if it just worked with webrtc though...

~~~
ssnistfajen
Recently though I've found Zoom sessions to crash gnome shell as soon as I try
to switch workspaces in the middle of a meeting. Probably a more technical
issue than overall design but it's forced me to boot into Windows for Zoom
meetings for now (because I'm too lazy to try diagnose the crash myself).

~~~
cozzyd
Interesting... works perfectly on my laptop (intel graphics + Wayland),
although of course screen sharing only works for XWayland applications.

------
dannykwells
Literally signed up for Robinhood for this. I think Zoom is a potentially
transformative/disruptive product - at our organization it is essentially
enabling us to become more and more remote, with all the benefits that brings,
and no downsides. I would honestly use whatever tool they rolled out - email
client, chat/slack competitor, whatever. Their products just work.

------
alex_young
Looks like they are running their own data centers and colos?

~~~
jabart
They have PSTN hookups, which a cloud vendor would not allow. You have to go
colo for those. Bandwidth is also not cheap in the cloud, video conferencing
would eat bandwidth. Looks like they spend 61 million a year for data centers,
phone connections, software dev, personal expenses or pay another ~$20 million
and you get just Lyft's AWS bill.

~~~
icedchai
Why wouldn't they use VOIP instead of direct PSTN connection?

~~~
diggan
Guessing it's because you call a normal telephone number and join a meeting.
Handy if you don't have any internet connection.

~~~
icedchai
VOIP (on the provider side) has let you do that for ages. Services like
Twilio, etc. let you set up normal numbers people can call.

------
pkz
Zoom is one of the few web meeting solutions that just works - even for people
without the client. I was surprised to see that they seem to skipped WebRTC
and have a custom implementation instead: [https://webrtchacks.com/zoom-
avoids-using-webrtc/](https://webrtchacks.com/zoom-avoids-using-webrtc/)

------
zitterbewegung
I have used zoom and it is by far the best experience for teleconferencing .

------
StreamBright
Zoom is the best conferencing solution right now, hands down.

------
lxe
Excited about this. Surprisingly good product overall and what looks like
profit!

------
buboard
i hope they grow to eat skype. will be justice for what MS did to skype

------
splonk
I can't speak much towards Zoom's quality at videoconferencing relative to
their competitors (I think it's bad, but I've never had any VC solution that I
thought was good), but as a chat client, using it with the combination of
Linux and Android is utter garbage, and I say that after seeing significant
improvement in the Linux client in the past ~6 months or so. Something about
how those two clients try to sync with each other is broken, to the point
where it's not reliable at all as a chat client, and I have to tell people to
just text me if there's anything urgent. Other people in my company who are on
iOS/Mac say it's fine, though.

\- Get a chat directly to you? It might show up on your phone. Or maybe not.
There are plenty of times where I show up to work in the morning and notice
that somebody's tried to get a hold of me the night before.

\- Actually answer a message on your phone? Usually the chat history will show
up on the Linux client. Eventually. Probably. (This is a wild improvement from
last year where it was guaranteed to never show up at all, and there appeared
to be no way to refresh chat history. I spent way too much time copy and
pasting text from chats on my phone to some place where I could use it on
desktop). Possibly worse, sometimes the chat history is just missing some
lines with no indication of where.

\- Even now, sometimes chat history just completely disappears on the desktop
client. Restarting generally fixes this. It seems like whatever triggers the
load for older chat when you scroll up in history sometimes just breaks
entirely.

\- Speaking of scrolling, have fun with that. It's always a fun surprise to
see where the cursor ends up. I think maybe it's trying to target the last
read message but it fails pretty badly, possibly from loading images and
rerendering? All I know is that I scroll up a couple pages, wait a little
while for all the text to stop jumping around, and then try to figure out
where I am and scroll back to where I'd originally targeted.

\- Answer a message on the desktop client and continue a conversation in chat
on the desktop? Have fun having your phone buzz with notifications for maybe
half the responses you receive.

\- Have someone @me in a chat somewhere? I'll probably get that notification.
Somebody does @all in another chat? Well, that takes priority, so I'll just
kill the @all notification and never notice the one targeted for me.
Admittedly this is partially a culture problem with people abusing @all in our
chats.

\- There a bunch of other functional things that are/were left out of the
Linux client that I can at least understand as being lower priority (gif
support, code formatting), but still make it clear that the Linux client is a
second class citizen at best.

The whole experience has been bad enough that I get actively annoyed at seeing
giant Zoom ads plastered all over 101, on buses, at T5 at JFK, etc. and think
about what those cost compared to allocating some engineering time to fixing
really basic bugs. Maybe it's a cheaper solution than the other options, I
don't really know. But if the decision was up to me, Zoom would be basically
last on my list if any significant portion of the company was using Linux.

~~~
sciurus
Zoom supporting Linux (albeit not as well as the like) should put them towards
the top of your list, not the bottom. Most vendors in this space don't bother
at all AFAIK.

~~~
kijiki
Blue Jeans has pretty good Linux support as well.

------
alexcnwy
blows my mind that video conferencing software with such low switching costs
can be worth so much.

~~~
timcederman
Have you seen their fully integrated video conference systems for meeting
rooms? Or their scheduling integration (e.g. Calendly)? They are the first
company to truly solve remote meeting and calendaring for me without any
gotchas.

~~~
alexcnwy
I haven’t but I recently used their video conferencing software on calls with
40+ people and it was really buggy.

All of those things sound great and important but there are many competitors
who also do those and again, the switching costs for the user are low.

Meeting room support and scheduling integration don’t sound like they justify
the massive valuation but I’m totally open to the possibility that I just
don’t “get it”.

------
hexo
I know Zoom, they are making guitar effects!

~~~
hexo
arent they? or who cares about "company" making internet videoconferencing -
technology already DONE at least 15 years ago. all companies today only worsen
actual performance and completely destroy user experience.

------
temp129838
One of the first mainstream, non-gaming applications for VR has got to be
meetings.

~~~
jgrahamc
How's that going to work? Am I going to see avatars of my colleagues in 3D, or
alternatively am I going to see actual images of my colleagues all wearing
Oculus Rifts? Either way it's going to be weird.

~~~
underwater
The technology already exists to show lifelike avatars of meeting
participants. [https://www.wired.com/story/facebook-oculus-codec-avatars-
vr...](https://www.wired.com/story/facebook-oculus-codec-avatars-vr/)

------
chris32he
Zoom's questionable

------
throwawaysea
They have 1702 employees and $7.6m profit (net income) on $331m revenues for
2019. Their financial statement shows that of their $263m in 2019 operating
expense, $186m is in sales and marketing. $33m in R&D. And nearly $2m of that
$7.5m in net income comes from interest income and other income.

The gross margin figures (82% for 2019) are defined as "revenue - cost of
revenue". And cost of revenue is:

> Cost of revenue primarily consists of costs related to hosting our video-
> first communications platform and providing general operating support
> services to our customers. These costs are comprised of co-located data
> center costs, third-party cloud hosting costs, integrated third-party public
> switched telephone network (PSTN) services, personnel-related expenses,
> amortization of capitalized software development costs and allocated
> overhead costs. Indirect overhead associated with corporate facilities and
> related depreciation is allocated to cost of revenue and operating expenses
> based on applicable headcount.

While I do like that they are profitable and have a plan for profit, unlike
the other glitzier tech IPOs, it does seem like the return on capital is low.
They have received $146m in funding to date
([https://www.crunchbase.com/organization/zoom-video-
communica...](https://www.crunchbase.com/organization/zoom-video-
communications)) after all, and in the end, $7.6m/year is not much to show for
it. This is really a bet that in the long term, the costs in sales, marketing,
R&D, and General Administration can be cut severely so that the revenue can be
realized as mostly profit. Hard to know if that day will actually come.

~~~
ultrasaurus
They haven't spent all of that $146: "Much of the primary capital that we have
raised in recent years remains on our balance sheet" in fact it looks like
they actually have more cash on hand than they raised (due to pre-pays for
contracts, even if they can't recognize it).

Profitable + Net dollar expansion of 140% + Growing 118% YoY at over 100MM in
revenue + 4%-ish penetration in the F500 so there's room to grow, this is an
amazing set of numbers.

