Zoom CEO Eric Yuan on the challenges of adapting an enterprise product for consumers

Shifting an enterprise produce to fit the needs of consumers proved to be a big challenge for Zoom as growth exploded during the pandemic. …

There’s been a lot of talk about the consumerization of IT in the workplace. But in the case of Zoom, the pandemic forced the high-flying video conferencing service to rapidly shift gears in the other direction, resulting in some painful lessons along the way.

Zoom founder and CEO Eric Yuan said despite the company’s culture of always trying to see the world through its customers’ eyes, it had to rethink many of its assumptions when suddenly a wide range of consumers began using Zoom for everything from distance learning to having virtual cocktails with friends.

“On the one hand, we were very excited, because after many years of hard work your dream is coming true of helping people stay connected,” Yuan said. “But then suddenly, you have 30 times more growth than you were expecting, so how do you handle that? You’ve got to work harder.”

Yuan spoke on day 2 of the Web Summit mega-conference where the impact of the pandemic on work and technology has been a big theme this year.

Founded in 2011, Zoom initially targeted the kind of customers who had been using Cisco’s WebEx. Yuan had been an early WebEx employee and stuck with the company after Cisco acquired it. But after several years, he found himself losing motivation because customers seemed increasingly unhappy with the product.

“The year before I left, every day I did not want to go to the office because I did not see a single happy WebEx customer,” Yuan said.

So Yuan knew that despite a large number of video conferencing options, they weren’t meeting the needs of business customers. Still, he had a famously hard time raising money, with a long list of venture capitalists taking a pass. Looking back, he doesn’t blame them.

“I think they were not wrong,” he said. “Because it was indeed crowded. Nobody thought the world needed another video service. However, I spent a lot of time talking to the customers. I knew the market potential was big because nobody liked the existing products.”

Time proved him right, with Zoom going public in 2019. At one point, Zoom was the best-performing tech IPO of 2019. The video conferencing company priced its IPO at $36 a share and saw it pop 72% on the first day of trading before eventually reaching $102.30 per share in June. It closed in late December at $66.64 as investors felt it faced growing uncertainty heading into 2020.

Instead, COVID happened. The company had been preparing for growth, but nothing like the tidal wave that hit.

As the company reorganized around the new reality, Yuan had to rethink how to onboard new employees as the company continued its rapid hiring pace. A year ago, Zoom had 2,400 employees and now it has 3,400. Like many companies, Zoom had to devise new methods to impart the company’s culture to employees that most had never met in person while making sure the new hires felt integrated into the virtual workplace.

More dramatically, consumers flocked to Zoom, which went from being a business tool to being a cultural touchstone, a word that became practically synonymous with video calls. People were no longer Skyping. They were Zoom-ing.

Initially, the company was overjoyed. Zoom’s daily meeting participants exploded to more than 200 million in March from a previous high of 10 million. As VentureBeat’s Emil Protalinski wrote in April: “Let’s put those numbers into context. Skype’s daily active users grew by 70% month over month. Microsoft Teams’ daily active users jumped 110% in four months. Zoom’s daily active users exploded 1,900% in three months.”

The stock market applauded, driving its stock up to $559 per share in mid-October. But there were stumbles and some blackeyes as the company struggled to adapt to these consumers.

While Zoom offered a certain ease-of-use, some of the settings left consumers vulnerable to “Zoombombing”. Zoom had to change the defaults on its K-12 program settings so that teachers had more control over who enters and what can be shared. The Electronic Frontier Foundation even issued a consumer’s guide to Zoom settings.

Security proved to be an even bigger embarrassment. Success brought more scrutiny, and soon the company seemed to be facing daily headlines over security flaws, privacy breaches, lawsuits, and investigations. Eventually, the company announced it would stop all new feature development until these problems were fixed. In October, the company announced a gradual rollout of end-to-end encryption for all customers.

Looking back on this, Yuan said the fundamental problem was a failure to see the world from the eyes of these consumers. When it came to security, for instance, that had typically been something addressed by the IT teams of enterprise clients.

“Normally, the enterprise IT team working together with us would enable or disable some features,” Yuan said. “With consumers, we have to take this approach further and so we’re learning quickly. And that’s why we have to change our internal approach.”

The post-pandemic world

With vaccines arriving, Zoom is again facing uncertainly. Over the past six weeks, news about vaccine progress has sent its stock plunging while new vaccine obstacles can push it right back up. Clearly, Wall Street isn’t convinced that the world is going to still use video conferencing at the same rate once schools and offices are open.

Yuan generally agrees, but he’s more optimistic that the exposure to video conferencing will lead to some fundamental changes that will endure. In terms of business travel, for instance, he argues that it’s going to be hard to justify many of the traditional trips given the time, costs, and environmental impact.

As for offices, he believes a hybrid model will emerge as companies experiment with different mixtures of remote work.

“Maybe today and tomorrow we all can work in the office,” he said. “And next week, we can all work from home. It shows you can have more time, and you have some control to be with your family and to get what you want.”

Further down the road, Yuan sees more dramatic changes as 5G networks become ubiquitous over the next decade, and augmented reality allows for richer interactions over video. These tools should bridge more of the distance between a real-world and a virtual meeting.

“We’ll feel like we’re sitting in that same Starbucks coffee and drinking a coffee together,” he said. “Anyone, no matter where they are, will always feel like they’re in the same place together.”

Live Updates for COVID-19 CASES