How did Zoom manage to flourish during the pandemic?

Video conferencing company Zoom has reported phenomenal growth, eclipsing even the most optimistic of Wall Street forecasts, as it quickly became the key platform for work meetings and social gatherings during lockdown.

In record time, the company’s name has jumped from relative obscurity to become one of an elite few firms that has become its own verb.

If you work in an office but now work from home, jumping on a Zoom call has probably become a regular part of your day.

The basic product appears similar to other options available like Microsoft Teams or Google Hangouts.

But, unlike some of its competitors, it’s equally intuitive to use both for big corporate meetings and family catch-ups.

Its breadth of appeal may be down to the fact that he company has focused everything on making a product that just works. Zoom says it dedicates a fifth of its engineering staff to building changes that users say they want to see.

Undoubtedly Zoom’s main attraction when countries rapidly went into lockdown in March was that it lets people conduct meetings of up to 100 people for free.

It meant that many organisations saw it as the default option when the pandemic hit and millions of people were ordered to work from home. People tried it, quickly learned to see it as invaluable and chose to subscribe.

It’s the standard "freemium" model that thousands of apps rely on: offering basic services for free and then charging for extras.

What has added to Zoom's success is that office workers who used it then went home told friends and family, who they weren’t allowed to meet, to use Zoom to stay in touch. This is the so-called network effect that apps from Monzo to Facebook strive for. The more people sign up, the more useful the product is to other people, so they join too. It requires momentum and once it reaches a critical mass it gathers pace quickly.

While there is an element of being in the right place at the right time, it would be unfair to put Zoom’s success down to serendipity.

The company has navigated tumultuous times impressively, scaling up its capacity to deal with a phenomenal surge in demand.

When Covid-19 hit, Zoom founder and CEO Eric Yuan, who helped build video conferencing pioneer WebEx in the late 1990s, shifted all engineering resources to focus on reliability and capacity.

There have been problems, including several occasions where the service has been down and concerns over privacy after it became clear how easy it was to eavesdrop on meetings (the company says it’s now tightened security).

But overall, Zoom has coped, and proved itself able to compete with the huge resources of Microsoft and Google.

The company is also well-run. That might sound like an obvious ingredient for success but it’s by no means a pre-requisite for a founder to become very rich from a Silicon Valley start-up.

The list of multi-billion dollar tech “unicorns” which have never turned a profit – and might not ever do so – is long and growing.

An all-too-familiar business model seems to be: generate vast amounts of hype about an average product, convince venture capital funds to invest, put competitors out of business by undercutting them while eating up vast sums of other people’s money, begin to enjoy the trappings of success – perhaps a corporate jet, some lavish entertainment - generate some more hype, make hundreds of millions of dollars by selling shares to the public.

Zoom, by contrast, was in the black last year, generating $25.3m profit. It’s accounts show it had $855m in cash as of 31 January, meaning it entered the pandemic in a strong position.

Since then, it’s quickly established itself not just as an important office tool but one for socialising and learning.

Its credentials in the education world were boosted by the savvy decision to offer its services for free to US schools and colleges without limitations on meeting sizes.

The big question now is whether it can maintain its success as life goes back to something approaching normal. With more and more indications that the pandemic will have a long-lasting impact on the way we live and work, Zoom seems likely to go from strength to strength.