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  • This video was brought to you by Slidebean. A platform for startups and small businesses

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  • signing up at slidebean.com/youtbe. These are strange times and, if you are in

  • your house (which you should be!) chances are you've used some sort of video call

  • to talk with family, friends or even go to school. And, most likely, it's been Zoom.

  • The videoconferencing software has taken the world by storm. But, in the presence of giants

  • like Microsoft with Skype and Teams, and Google with Hangouts, why is everybody using Zoom?

  • To find the answer, we must go back a few years. And, yes, spoiler alert, this is Forensics,

  • so not all is glitter and glamour.

  • Let's talk about one of the most popular apps right now, Zoom, and how it became

  • successful.

  • If you google Zoom and successful, you might be surprised to see articles praising the

  • software that date back as far as, well, its launch in 2013.

  • The reason for this praise is mostly due to this man. Meet Zoom's CEO Eric Yuan.

  • In the late 80s, he emigrated from China to the U.S. to work in tech. He had the vision

  • that one day, technology would allow portable, easy-to-use videocalls. And this became his

  • obsession.

  • As an engineer, he landed a job in a company called WebEx Communications. From the start,

  • Yuan became a key player in developing their video conference software. WebEx became one

  • of the first options for videocalls in the market and, at first, it seemed geared for

  • success.

  • So much so, that Cisco bought it for $3.2 BN in 2007.

  • Yuan doubled down his efforts to improve the software, at the same time climbing up the

  • ranks, reaching the rank of VP of Engineering. Under his guidance, WebEx grew to more than

  • 750 engineers and had annual revenue of more than $800 million.

  • WebEx was not only one of the first, but also one of the most complete, videoconference

  • tools. So, it was a hit at the time.

  • But it wasn't perfect: connectivity was unstable, audio and video would lag, and the

  • installation process was frustrating for IT departments. Remember this.

  • WebEx survived because there was very little competition in the market. But things wouldn't

  • remain the same for long.

  • Yuan was aware of WebEx's deficiencies. In fact, he suggested changes, but upper ranks

  • didn't go along with them. And, after dealing with a lot of resistance, he left. But his

  • time in WebEx taught him valuable lessons.

  • Check out what he said in an interview:

  • This gave Yuan a north: customers had to be happy. So, he took all these new problems

  • and aimed to create a videoconference software to solve them.

  • Was it a bit crazy at this stage?

  • Well, others believed in his idea too. In an interview with Forbes, Yuan recalls that

  • close 40 engineers left with him to pursue this goal.

  • Investors believed in it too. In 2011, he raised $3 million to start his idea and within

  • two years, he had created the first Zoom iteration and here we have to highlight a key element

  • in his strategy. He created Zoom with a video-first mentality.

  • Other companies, like Skype, had created audio first and then adjusted to video, which proved

  • costly.

  • With Zoom, Beta testers were very happy with the product and, after finetuning some issues,

  • it launched in January 2013.

  • From the start, it was massively successful. By May, Zoom claimed, they had reached 1 million

  • participants.

  • With the launch, they clinched another round of funding, this time for $10 million, with

  • a valuation of about $25 million. And by late 2013, another round of funding secured them

  • $6 M more and doubled the company's valuation. By, 2014, Zoom claimed 10 million users. But,

  • why was it so good?

  • It was so good because it provided a lot for very little.

  • Tech magazines like CNET highlighted its 3-in-1 package: HD video conferencing, mobility and

  • web meetings, all for $9.99, which was cheaper than other options which only provided one

  • or two of these services.

  • Zoom was as compatible as it possibly could with browsers like Firefox, Chrome, and Safari.

  • It also detected devices instantly, so there was no need to have versions for Mac or PC

  • and its data use was low enough that it worked well even in slow or weak connections.

  • Plus, Zoom had free features that other competitors like Skype charged for, at the time like group

  • video calls. Microsoft would eventually learn from their mistakes and make them free on

  • Skype.

  • But Zoom didn't tend only to the users. Remember how WebEx was particularly hard for

  • IT departments?

  • Well, Zoom wasn't. Cloud meetings meant intrusive installations weren't as frequent,

  • and when they were needed, the process was easy.

  • Then, there was this: 150 milliseconds.

  • That's all it takes for a conversation to feel unnatural. So, CPO Oded Gal has stated

  • that they work hard for their entire platform to ensure that those 150 milliseconds are

  • never surpassed.

  • But in the end, all of this is a reflection of what mattered to Yuan: the people. He has

  • insisted that eye-contact is essential for success and for happiness, so the company

  • has worked hard to make this happen as easily as possible.

  • It seemed like there was no stopping them.

  • What do most, if not all, tech companies want?

  • Well, to be profitable. But very, very few companies are able to get there and, as we've

  • said, Zoom seemed unstoppable. All cylinders were firing, and people loved the app and

  • customer service.

  • CEO Yuan would even reply to tweets from unhappy customers.

  • This is a quote for a former Cisco customer who switched to Zoom:

  • So, investment came easy.

  • From 2014 to 2016, funding increased and so did the company's valuation until, in January

  • 2017, in their Series D funding, Zoom received $100 million and finally reached a $1 BN valuation.

  • And, oddly enough, Yuan has said that they weren't even looking for funding. Sequoia,

  • one of the main investors, just knocked on the door. Who wouldn't love that?

  • So, this means that Zoom was now a unicorn: a company valued at $1BN. But a very different

  • one at that. Contrary to most unicorns, Zoom was making profit year after year.

  • So, with the 1BN valuation in 2017, solid growth in the next two years, it was time

  • for the company to go public. In April 2019, when it went public, shares went up 72%, from

  • the original $36. That day, Zoom was valued at $16 BN. Not too bad!

  • Do you notice one thing about this episode?

  • Zoom's success happened before 2020. It did a lot right beforehand. So, it should

  • come as no surprise that Zoom was a hit when people were sent home and WFH took off.

  • But it still was. Why?

  • Because it seemed as though everything was already taken. Besides Zoom, there was Microsoft,

  • Google, WebEx, GotoMeeting, just to name a few. But none provided a complete package.

  • Zoom even gave users free 40-minute meetings for up to 100 people! And it works in slow,

  • saturated internet.

  • And, sure, Zoom couldn't have predicted what happened in 2020. No one could. Since the entire

  • world was taken by surprise by this situation, searches for webinars, videoconferencing tools

  • and VPN spiked in a matter of days, if not hours.

  • So, all these years working on making video calls easy came in handy at the right time.

  • People needed a tool that was ready for the job and, amidst all of them, there was one

  • that stood out: Zoom.

  • But this is Forensics, right? You know this show.

  • No one knows what will happen, especially right now. But experts have highlighted some

  • possible areas of risk for the company. One is its stock. Even if use has spiked, its

  • share value is volatile.

  • In late March, it traded at a value 37 times higher than what the company had estimated

  • for 2021, because of this very same spike in use. But, at the same time, since companies

  • will definitely look to cut costs and increase employee efficiency, Zoom continues to be

  • a tempting offer in the market. The key for them will be to turn all those sudden free

  • users into paying, loyal customers.

  • And it's not like Zoom is free of conflict. As this crisis has evolved, reports have

  • surged that the app is facing security issues. Not a good thing when many people are diving

  • right into Zoom to have conferences, including prime minister Boris Johnson.

  • The bad news? This isn't new. Security issues have surfaced in the past.

  • In 2018, a security vulnerability was raised as it was found that users were prone to message

  • processing. Zoom worked on this issue, but it didn't stop there.

  • 2019 saw Apple create an update to remove the Zoom server from its devices, after it

  • was found that the server-rendered Mac computers vulnerable, even after uninstalling it. Again,

  • Zoom created patches and upped its security. And, again, it didn't stop there.

  • In the midst of this most recent crisis, reports came up of phishing scams, impersonating Zoom

  • cloud meetings to retrieve information.

  • Zoom is a great example of a company that did three things right: it worked hard at

  • solving a big problem, they aimed for a problem that affected many people and, all the while

  • focused on the customer.

  • But Zoom might just be a victim of its own success. We don't know yet. Does that mean

  • that we are seeing our first, real-time episode of Forensics as it evolves?

  • I don't think so. I think Zoom is going to keep growing like crazy.

  • What I also think is that you might like a new Slidebean t-shirt. Which you can get by being

  • one of the first 10 people to leave a comment in this video.

  • If you are on lockdown you can also spend that time watching the stories we published of over 20 failed

  • companies that we've broken down in this Company Forensics series.

  • Including WeWork, Toys r Us, and Forever 21.

  • We'll start doing t-shirt giveaways in the next few videos, so you want to hit that Subscribe button

  • to be the first one to watch.

  • See you next week.

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Zoom company story: How Eric Yuan defeated Skype

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