Proceeding ICST (2021)

e-ISSN: 2722-7375
Vol. 2, June 2021

How zoom dominate market share on video conferencing

platform

Ida Bagus Ketut Widiartha

Seoul National University, College of Engineering,1 Gwanak-ro, Gwanak-gu,
Seoul 08826, Seoul, South Korea,

ibk.widiartha@snu.ac.kr

Abstract. Covid-19 was firstly discovered and spread in Wuhan China, which then spread
throughout the world. The effect of this outbreak is also affecting both developing countries
and also developed countries. Economics of nations were stacked and citizens had to shut
themselves down before the new normal was eventually implemented to prevent the spread of
this epidemic. The businesses are still work , but actual face-to-face meetings were replaced
with the virtual ones. In these circumstances, a lot of businesses go bankrupt because they do
not have employees and market share, the tourism industry is dying because there are no
visitors (lockdown policy). However, because of these circumstances, there are many
businesses that have made big profits, one of them is Zoom (Iqbal 2020). Zoom is a business
that develops video conferencing software that is rising very rapidly in this pandemic. Zoom is
not the only company, it is newly established. It was founded in 2011, and the first product was
released in 2013. As a comparison, there are Cisco WebEx, and Skype founded in 2003 and
1995 respectively. How does Zoom occupy more than half of the world's video conference
market share? How does it grow so fast? In this research, based on the evidence, we observed
the strategies they implemented, linked to the theory available, in order to dominate market
share in the video conferencing field. This study found that zoom uses multiple tactics, ranging
from product differentiation, bundling, price discrimination, etc.

Keywords: Zoom; strategy; bundling; price discrimination; profit maximizing

1. Case description
Covid-19 was firstly discovered and spread in Wuhan China[1], which then spread throughout the
world. The effect of this outbreak is also affecting developing countries and even developed countries.
Nation economies were stacked and people had to shut themselves down to prevent this virus from
spreading before the new normal was eventually implemented [2] so that activities could continue, but
actual face-to-face meetings were replaced by virtual face-to-face meetings.
In these circumstances, several firms go bankrupt because they do not have employees and market
share, the tourism industry is dying because there are no visitors (lockdown policy), but due to these
circumstances, there are many companies that have made huge profits, one of them is Zoom[4].

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 Zoom is a business that develops video conferencing software that is rising very rapidly in this
pandemic. Established in 2011, Zoom has released its first product in 2013. There were no more than 1
million regular zoom meetings in its early years, but after December 2019, zoom users jumped very
sharply until the data was reduced, reaching more than 300 million zoom users per day[4], as shown in
Figure 1.

Figure 1. Zoom Daily Meeting Participants

Its share price had jumped significantly as the share price per share was just USD 36 when it was
first launched (IPO), but it had hit USD 146.12/share in March 2020, or around 225 percent within a
year. What wonderful accomplishments. This company's revenue has jumped sharply based on data
reported in Quartile 1 (Q1) of 2019, with a turnover of just USD 60.10 million, but it jumped to
USD 105.8 million at the end of 2019 (Q4-2019). This occurred as the Corona Virus started to spread,
and classroom learning was moved worldwide into online learning. Entrepreneurs' meetings and
official meetings must be held online. Zoom turnover continues to grow to USD 199.3 billion until Q4
of 2020, as the global community has begun to embrace a new habit (new normal) by eliminating face-
to-face meetings and replacing them with meetings using media conferences, work from home (WFH),
online learning social distancing, and so on, helping to increase demand for this commodity [4] as seen
in Figure 2.

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 Figure 2. Zoom omzet

2. Economic logic of case analysis

It is common for Zoom to achieve an exceptional increase in turnover, paying attention to the
definition case above, because the technology it has is very useful in a pandemic such as this
time. In this report, there are several items that will be discussed related to the zoom strategy
to gain market share and the market balance generated. It will be studied in detail:
1. We will first examine whether the zoom of a single player will monopolize the market.
2. What method does zoom use to dominate the market of this video meeting application in
order to achieve exceptional achievement?
3. In these conditions, is there Pareto efficiency?

3. Theoretical Discussion
In order to maximize profitability or reduce losses, companies such as Zoom will take different
approaches based on their own organizational strengths. While product differentiation and low prices
may be crucial to maximizing profit, cost control, and retention of market share may be more
important in order to minimize losses. Regardless of what assets a company holds and how much
capital it bears, losses can eventually, over long periods of time, weaken a company's asset positions
and reduce the amount of its cash reserves.

3.1 Product differentiation

Companies who can distinguish themselves through the availability of top-quality goods or services
are also able to influence higher market prices. While price alone does not guarantee profit, it gives
businesses the chance to maximize profit. All things being equal, the higher the price that businesses
charge for the superior quality of their goods or services, the more benefit companies may expect. The
strategy for differentiation works only if businesses have a target market in which consumers are less
price-sensitive but more quality-conscious than other market customers[5].

3.2 Low-price strategy

The market's consumers are not homogeneous. The low-price approach may be followed by businesses
catering to these consumers as customers search for goods or services with simple functions at
reasonable prices. The lower the price, the higher the demand would be when the demand for a
product or service is highly elastic. Although businesses are projected to gain less profits per unit at a

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lower price, the much higher volume of sales would lead to higher net profit. The ability to provide
mass production and increased distribution is the secret to a low-price strategy's success [5].

3.3 Control cost

At times, businesses will incur losses not because of a lack of revenue from sales, but from cost
overruns. A big move towards minimizing losses is to manage costs. They would be in a stronger
position to withstand any price loss or market downturn and remain profitable if businesses can
function at a constant low-cost pace. The lower the rate, the greater the margin of profit. If the cost
increases to a degree that results in a limited profit margin, businesses are vulnerable to any price
shock or decline in revenue and may incur substantial losses [5].

3.4 Maintain market share

Companies that undergo anemic sales are unable to reach profitability. While revenue from each sales
unit may be sufficient to replace variable unit costs and gain some unit profit, businesses rely on the
accumulation of unit profit from multiple sales units to completely fund fixed costs and even break
down. Companies may not be able to cover all fixed and operating costs without adequate sales
volume to sustain a necessary level of market share. Companies must aspire to reach break-even
revenue volumes by retaining a satisfactory degree of market share in order to reduce losses [5].

3.5 Bundling
Bundling is when businesses package as a single combined unit some of their goods or services
together, often at a cheaper price than they would charge clients to purchase each item individually.
This marketing technique promotes easy purchasing from one business of many goods and/or services.
Typically, the goods and services are related, but they may also consist of various things that cater to
one group of clients [6].

3.6 Price discrimination

Price discrimination is a pricing tactic that charges consumers different prices depending on what the
vendor feels they can get the consumer to consent to for the same good or service. The vendor charges
each client the maximum price he or she would pay in pure price discrimination. The seller positions
consumers in groups based on certain characteristics and charges each group a particular price in more
traditional types of price discrimination [5].

- First-degree Price Discrimination

First-degree discrimination, or perfect price discrimination, occurs when, for each unit consumed,
a company charges the highest possible price. Since prices differ between units, the business
captures all possible demand surplus or economic surplus for itself [7].

- Second-degree Price Discrimination

For such quantities consumed, such as discounts for bulk purchases, price discrimination to the
second degree occurs when a business charges a specific price [7] as seen in Figure 3.

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 Figure 3. Second Degree Price Discrimination [8]

- Third-degree Price Discrimination

Third-degree discrimination in prices occurs when different customer groups are paid a different
price by a business (See Figure 4). For example, when watching the same movie, a theater can
divide moviegoers into seniors, teenagers, and kids, each paying a different price. This is the most
prevalent prejudice [7].

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 Figure 4. Third degree Price Discrimination

3.7 Asymmetric information

Asymmetric information is when one party to an economic transaction has greater material knowledge
than the other party, asymmetric information, also known as information loss, 'occurs. Usually, this
manifest when the seller of a product or service has greater expertise than the buyer; but it is also
possible to reverse the dynamic. Almost all economic transactions include the asymmetry of
knowledge [9].

4. Prescription for case

Is Zoom a single player in this area? Apparently not, there are many industries running in the field of
video conversing as shown in Table 1. According to the data presented in Zoom revenue and statistics,
there are 54% of video conference users around the world using Zoom [4]. The remaining 45% is
contested by several players such as Cisco WebEx Meeting, Google Hang Out, Join Me, Blue Jeans
Meeting, Cisco Jaber, Team Viewer, Adobe Connect, Cisco WebEx Teams, Global Meeting
Collaboration, etc.

Bandwidth Requirement

Figure 5. Zoom differentiate their product by using the least bandwidth requirement

In an effort to achieve its success in maximizing profit, many things have been done by zoom,
starting from making its products different from its competitors (product differentiation), low cost
strategy, bundling, price discrimination, and also avoiding asymmetrical information. In Table 1, you

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can see that Zoom and the Cisco WebEx Meeting have the most complete facilities for video meetings
and teaching learning processes. This shows that Zoom is trying to make its products different from
those of its competitors, even though in this case there are competitors who also match the facilities
that Zoom has prepared. However, the easy operation of Zoom makes this product superior / different
from other products [10]. Zoom also make their product use the least bandwidth requirement (as
shown in Figure 5) to differentiate their products. In the use of video conferencing, bandwidth is the
most important factor, since the price is reasonably expensive, so this offers a special attraction for
Zoom users.
The low-cost strategy is also implemented by zooming in its products. Zoom provides free prices to
new Zoom users, thus attracting customers to use, at least to test the product. This policy also aims to
avoid asymmetric information that can lead to market failure, Zoom provides the use of zoom for free,
this is not detrimental to Zoom because this will be a gap for someone to only use the free one. By
providing free usage but limiting the usage to only 40 minutes, it becomes a place to use and try
Zoom's ability, so that once people are interested, they will choose to buy Zoom because they are
familiar with using it. Is this strategy harmless? Not even though in this free version all zoom facilities
can be used, so that it can provide information to potential customers what and how Zoom is used, but
Zoom limits its use to only for the first 40 minutes, after which it will be disconnected.

Table 1. Video Conferring Software and It's Facilities

Product's name Facilities
Virtual Screen
Cisco WebEx Meetings
Classroom Video Conferencing Sharing
Virtual Screen
Zoom Classroom Video Conferencing Sharing
Screen
Google Hangouts Meet
Video Conferencing Sharing
Screen
Join.me Video Conferencing Sharing
Screen
Blue Jeans Meetings Video Conferencing Sharing
UCAS
Cisco Jabber
Video Conferencing Platform
Screen
TeamViewer
Video Conferencing Sharing
Virtual
Adobe Connect Classroom Video Conferencing
Screen
Cisco WebEx Teams
Video Conferencing Sharing
Screen
GlobalMeet Collaboration
Video Conferencing Sharing
Screen
Blackboard Collaborate
Video Conferencing Sharing
UCAS
Fuze
Video Conferencing Platform

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 Another policy that zoom applies is Bundling, which is to package its product with other products
at a lower price so as to attract consumers to buy the bundle instead of just buying one Zoom product.
Zoom gives different prices for different product combinations, as shown in Figure 6. The Pro bundle
is priced at USD 149.9 annually. The bundle is a video conferring package consisting of host up to 100
participants, unlimited meeting participants, social media streaming, and 1GB cloud storage. On the
other hand, Zoom also sells another bundle with a much higher number of participants with the bundle
price which has increased only slightly as shown in the Bundle Business, which is also equipped with
other attractive products. This bundle is referred to as Small & Medium Business. In this package the
number of hosts is limited to a maximum of 300 participants (3 times bundle #1), single sign-on, cloud
recording transcripts, manage domains and company banding. For a company, this package becomes
much more attractive than the previous package even though the price is higher. Zoom United
Business is the 3rd Bundle, this package is much more expensive than the previous two bundles but has
a combination of the number of products that is far more than the number of products available. This
package is priced at USD 359 / year / license which consists of the Phone package and the Meeting
package. This package is bundle # 2 combined with the phone package. This phone package which
consists of all the phone features of zoom united Pro, Unlimited calling with Global select and
Optional add-on, add unlimited calling in up to 18 other countries. For large companies that have
branches in many countries, with intensive communication, they might choose this bundle because it
meets the needs of communication and conferences with a very wide scope.

Figure 6. Price Bundling in Zoom

Another strategy that Zoom uses in order to maximize profits (Figure 7) is to achieve a consumer
surplus by applying a strategy price discrimination. In this case the zoom uses Third-degree Price
Discrimination. Zoom provides different prices for customer groups such as business, educational, and
professional groups. The education sector / group is given the lowest cost, which is only USD 90 /
license annually, Business USD 19.99 - 199.9 / license annually and the professional version starts
from 14.99 - 149.9 / license annually as shown in Figure 7.

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 Figure 7. Third degree price discrimination on Zoom Meeting

Figure 8. Maximizing profit by Price Discrimination

By using a price discrimination strategy, Zoom can maximize profits by taking it from surplus
customers. In pure competition, conditions can be depicted as in Figure 8. With the various strategies
implemented, it turns out that Zoom, a very young company, is able to maximize its profit and even
grab 54% of the video conversating market share. This is an extraordinary achievement.

Figure 9. Zoom Net Revenue

Zoom's Net Revenue (See Figure 9) shows a very good trend even though it had negative net
revenue in Q1-2019 and Q3-2019. Since Q4-2019 Zoom's net revenue crawled up to the position of

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USD 1.20M, and continued to increase, an extraordinary spike occurred in Q4-2020, Zoom's Net
Revenue reached USD 15.30M, this shows that the strategy has been done is correct and user
confidence in Zoom is very high.
This pandemic phenomenon causes the demand for video conferencing to increase in the case of
Zoom, as seen in Figure 10. Of course, the quantity will increase from Q1 to Q2, and the price will
increase automatically from P1 to P2. This is one of the items that raises Zoom's profits. The market
balance has also changed from Eq1 to Eq2 due to earlier supply-demand shifts.

ric S: Zoom
e

Eq2

P2 Eq1

Demand on pandemic
P1 Demand before pandemic

Q1 Q2 Quantity

Figure 10. Shift in equilibrium because of pandemic

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 Others

46
PointBisthesituationwhereZo
omandothergoodshavethe
Pareto efficiency,
Althoughtheamountofsalesis
different,theydonotfeeldisadv
antagedbyeachother

54 Zoom

Figure 11. Pareto efficiency player in video conferencing

In addition to the strategy that is carried out to gain more market share, when compared to similar
products, Zoom has a higher market confidence, although with a higher price for certain bundles, so
that the pareto efficiency can be drawn as in Figure 11.

5. Generalization and implication

A company's performance is affected by multiple variables, including natural variables, but factor
strategy plays a far more important role than natural variables. In this case, Zoom gets benefits from
natural factors that make the world community use video conversating media to replace face-to-face
encounters so that similar products become very popular. Even though there are many companies that
sell similar products and even many that were established before Zoom was established, however,
Zoom is still a superior product by reaching more than half of the market share in the video
conversating sector, of course, this is not due to natural factors but because of the efforts and strategies
that have been implemented. Natural variables, in this case, are the pandemic, cause an increase in
demand which in turn shifts the market equilibrium.
For making its products special in the point of view of users, Zoom use the Product Differentiation
strategy. Conducting promotions by giving very low prices and even free of charge to attract user
interest (low prices strategy) as well as to give a signal to the user that the product used is a superior
product so that there is no more asymmetric information.
Bundling is a strategy to provide various prices for certain product packages to maximize profits.
Zoom has also conducted. Third-degree price discrimination to maximize profit by differentiating
prices for groups of students, professionals, and businessman to take the existing consumer surplus.

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