Zoom warns investors they may become a victim of their own success as costs spiral



Author Surur // in News, Slider

The Zoom video conferencing solution has rapidly gained popularity and prominence due to the new Work from Home directives, but it appears all that success is coming at a steep price.

In a new security filling Zoom has warned investors that their rapid growth is forcing them to invest in building out the service faster than they had planned.

“We expect our cost of revenue to increase for the foreseeable future, both in absolute dollars and as a percentage of total revenue, as we expand our data centre capacity and third party cloud hosting due to increased usage stemming from the recent outbreak of the COVID-19 virus,” Zoom writes in the filing.

Zoom’s cloud infrastructure is likely powered by Amazon’s AWS, meaning their costs per user are fixed, even while most of their new customers are using their free plans.

“While we have seen increased usage of our service globally, there are no assurances that we will also experience an increase in paying customers or that new or existing users will continue to utilize our services at the same levels after the outbreak has tempered,” Zoom said in the filing.

Zoom also warns that there is a price for not investing more in response to the increase in demand.

“Any unfavorable publicity or perception of our platform, including any delays or interruptions in service due to capacity constraints stemming from increased usage due to the recent outbreak of the COVID-19 virus, or of the providers of communication and collaboration technologies generally could adversely affect our reputation and our ability to attract and retain hosts,” Zoom writes.

Poor reliability could force users back to more mainstream solutions such as Microsoft Teams, which runs its own backend. We have already heard how Microsoft is positioning themselves directly against Zoom, and any weakness on their part will likely rapidly be exploited.

For their part, Zoom has not yet clamped down in free users, and have in fact removed the 40 minute limit on video calls in China and for educational institutions in several countries.

For now, CEO Eric Yuan has said at the moment he is just focused on providing the best product to customers and helping those impacted by the pandemic.

Via BusinessInsider.

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