Zoom’s IPO Surges, But Company Still Has ‘a Channel Problem’

Zoom Video Communications’ strong debut as a publicly traded company offers an upbeat outlook for the startup that has taken the crowded field of enterprise conferencing by storm.

Zoom shares surged 72 percent on Thursday, raising nearly $357 million and giving it a market valuation of $16 billion. Founder and CEO Eric Yuan, who previously created Webex before selling it to Cisco for $3.2 billion in 2009, netted a $3 billion stake in Zoom this week following its IPO. Launched in 2011, Zoom is now regarded as one of the fastest growing players in the video conferencing market that’s dominated by big names including Cisco Webex, Microsoft Skype for Business/Teams and an emerging Google Hangouts, among others.

Zoom has charted triple-digit sales growth, with revenue in 2017 approaching $61 million, jumping to nearly $152 million in its 2019 fiscal year and almost $331 million for its 2019 fiscal year, which closed on Jan. 31. The company also eked a slight profit of $7.6 million last year, uncharacteristic of most tech startups that issue public shares.

Recon Research’s Ira Weinstein

“Zoom has earned every bit of its success,” said Ira Weinstein, founder and managing partner of Recon Research, which follows the enterprise collaboration and communications platforms industry. “What’s great about them is they are very easy to work with. My hope is that they can maintain the attitude that built their success once they become public.”

Weinstein said Zoom’s success stems from the user experience of its meeting platform, which he said offers easy conference setups and is simple to operate. The company’s model of offering free meetings for 30 minutes or less has also made it attractive to smaller businesses. Zoom also has caught the attention of numerous room system suppliers including Polycom, Yealink, and most recently, Logitech, which just announced plans to include Zoom with Microsoft Teams and Google Hangouts on its new meeting setup device.

Nevertheless, Weinstein noted that because Zoom is so easy to set up and use, the majority of its sales are direct. If Zoom wants to achieve the growth its new investors are seeking, it’ll need help from systems integrators and managed services providers, he said.

“Zoom has a channel problem,” he said. “They’ve done such a good job selling directly, and their price points are so competitive that there’s just not a lot of room for the channel partner. Some channel partners are waking up to the fact that whether it’s expensive or not, or whether it’s differentiated or not, they still need to deliver a good service. And I think they’re coming around. There’s just not a lot of money to be made, but they need to just put it out there as part of whatever bigger solution they’re offering.”

Zoom lists about 100 certified integration systems integration partners on its website such as AVI Systems, Genesis Integration and M3 Technology Group. Approximately 50 participate in its reseller/referral program including CDW, Insight and Softchoice as well as distributors …