By Jennifer Min

Covid-19 has kept us apart in many ways, but it has also brought us closer … to our electronic screens. While industries around the world are reeling from the economic fallout of the pandemic, the video conferencing industry has taken off (Brandl, 2021). Among the dozens of video conferencing tools available, Zoom has stood out, clocking a whopping 326% increase in annual revenue between January 2020 and January 2021 (Zaveri, 2021). Zoom has even become a verb with the blessing of the Oxford English Dictionary. Nowadays, we don’t attend meetings or classes; we “zoom” into them. Zoom has proven how innovation can pay off in today’s digital platform economy despite the odds. 

To get to where it is now, Zoom had to jump a lot of hurdles. Notably, it had to battle with video conferencing giants, like Microsoft and Google, and the network effects that they enjoyed exclusively. Network effects are when a product increases in value as more and more people use it. They are a common characteristic of tech titans like Facebook and Google. They are arguably what kept Zoom outside the elite circle of the video conferencing giants over the eight years since its inception.

With the arrival of covid, however, the tables were turned. In the first quarter of 2020, Zoom reported a 169% year-on-year increase in revenue. What is interesting about Zoom’s meteoric rise is that Zoom doesn’t offer a ground-breaking innovation. It hasn’t spawned a new market, nor is it all that different from other video conferencing platforms. Yet, its app has managed to beat the competition from Skype, Microsoft Teams, and Google Meet. Zoom’s market share almost doubled between 2020 and 2021 – from 26.4 to 48.7 percent (Brandl, 2021). Skype, once the leader of the pack, saw its share plummet from 32.4 to 6.6 percent. 

So, what is Zoom’s X factor? If there is anything “special” about Zoom, it is the simplicity of its app. Anyone can access a Zoom meeting by simply clicking a link, without the need to create an account, which was not always the case for every video conferencing app. Zoom participants can then take advantage of a user-friendly interface and a suite of fancy features in their meeting room, including breakout rooms and screen-sharing. These aspects are arguably what have drawn people to Zoom. The app’s virality has been a win for its users, too. With more and more people using Zoom to run public events, we can now access a wider range of resources than we had envisaged when we signed up for Zoom, from networking events to international panel discussions. 

Platforms like Facebook might have led people to believe that it is impossible to overcome network effects in the digital platform economy. Zoom’s story suggests that there is a possibility. It demonstrates that people are willing to switch to better products if the costs of doing so are not too high. That very fact, though, is now threatening Zoom’s success, as its contenders try to topple it by incorporating some of the Zoom app’s features in their own apps. If it isn’t careful, Zoom may get a taste of its own medicine from its rivals in the industry. 

For now, Zoom doesn’t seem to be losing traction. (Zaveri, 2021). That is to be expected. The opportunity cost of ditching Zoom for a comparable app would be too high for many. People have invested precious time and money to use the app. For example, the University of Queensland, having purchased a licence from Zoom, would not be able to switch to another app at its whim. The same goes for the thousands of universities out there that have effectively operated as Zoom universities over the past year and a half. But as time passes and as Zoom’s rivals catch up, the demand for Zoom’s app may become more responsive to any changes in the opportunity costs of using the app.  

Zoom’s dominance may usher in a period of what the late economist, Joseph Schumpeter, called “creative destruction”. The term describes the replacement of existing firms or industries by new, innovative alternatives. Zoom has used its imagination to nudge its way through well-established firms like Microsoft and Google. Its journey has followed the classic David-vs.-Goliath story that the theory of “creative destruction” encapsulates. Now, only time will tell whether Zoom can keep up its game, as people gradually return to their offices. In any case, Zoom’s fate will rest in our hands – literally! 

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