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Why Zoom needs to change despite its recent success

Shruti Shekar
·Telecom & Tech Reporter
·3 min read
Photo by: STRF/STAR MAX/IPx 2020 12/20/20 Zoom executive accused of disrupting calls about Tiananmen Square Massacre on China's behalf. STAR MAX File Photo: 8/31/20 Zoom Logos photographed off an iphone.
In Q4, Zoom's revenue grew 367 per cent year over year, but the company needs to do more to maintain its gains in 2021, experts say. Image credit: Associated Press

Tech companies that thrived in 2020 with massive stock market gains will need to find ways to offer more features to their services and branch out their offerings to stay relevant in 2021, experts say.

Companies like Zoom (ZM) and Peloton saw growth in 2020 that made them household names, as the COVID-19 pandemic forced people to work from home and adapt to a new lifestyle. In its most recent quarter Zoom reported year-over-year revenue growth of 367 per cent.

Carmi Levy, a tech expert and director at Info-Tech Research Group, said in an interview that while companies like Zoom were ready with technology and thrived at the right time, if they want to maintain gains from the previous year they will need to start thinking about adding more features than what’s currently offered.

If these companies do not evolve, they will die. Carmi Levy, director, Info-Tech Research Group

“The flip side of 2020 is in 2021 those conditions will not stay in place forever. In fact, we are already starting to see them change. If these companies do not evolve, they will die. That has always been a key rule in technology but that is especially notable for these companies that benefited from a very time-specific change in consumer behaviour,” he said.

“Those conditions that drove their success will not exist permanently. Either they find a way to perpetuate that success by changing the fundamental nature of their business or they will get swallowed up by more agile competitors.”

Zoom, in particular, faced notable competition from the likes of Microsoft (MSFT), Google (GOOG), and Cisco (CSCO) that all offered similar video-chat services, Levy said.

He noted that the pandemic made many consumers realize the benefits of online collaborative tools, and while Google and Microsoft had respective offerings like Meet and Teams, “there wasn’t a lot of marketing resources or money put behind them [initially] and they didn’t get a lot of attention or love.”

He added that where Zoom succeeded was offering something for the mass consumer market, which pushed Google and Microsoft to evolve their respective products.

Ritesh Kotak, a technology expert, echoed Levy’s comments and said that those other companies then noticed the heavy interest in specific video-chat tools, and began to invest to make their products more consumer-focused.

“One of the biggest issues with [Microsoft’s] Teams, was the ability to do breakout rooms. That feature never existed. It was clunky and complex and now they’re coming out with breakout rooms and different skins and virtual backgrounds,” he said.

Why Zoom could be sold in 5 years

Levy added that if Zoom doesn’t do something, it could be bought out in the next five years.

“If [Zoom] doesn’t evolve it will either cease to be relevant or it’ll become a likely acquisition target by someone else that wants to take them out and incorporate their technology,” he said. “Zoom doesn’t have that flexibility, doesn’t have that resourcing. So it’s highly vulnerable and I wouldn’t be surprised if one of the big players took them.”

Now that many provinces in the country are rolling out a vaccine for COVID-19, Levy said the companies that have profited by having an online model should think about partnering with companies to expand their business.

Levy said that while Peloton has expanded its offerings beyond just bike exercises to broader exercises, the company will need to expand in other ways.

“The Peloton of the future is going to look really different than the Peloton that we know. It’s going to be not just a bike company, it’s going to be a health company and that health offering will be visible and accessible in any number of ways both in your home and outside,” he said.

“That’s the only way the Peloton as we know it can survive.”