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Zoom still needs little people

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Zoom’s revenue growth from online customers has slowed markedly over the past few quarters.


Photo:

Justin Sullivan / Getty Images

An ironic challenge

Zoom Video Communications

Z.M. 6.52%

it’s like weaning yourself off the very customers who made it famous.

First quarter fiscal results from a video conferencing provider on Monday afternoon showed progress on that front. Revenue from corporate clients has grown 31% over last year and now accounts for just over half of its business quarterly. This is well ahead of the company’s overall revenue growth of 12% for the quarter.

Zoom also managed to give a forecast that was ahead of Wall Street estimates for the first time in more than a year, helping downgraded stocks pick up growth on Tuesday morning despite sharp sales in the rest of the technology sector.

The very roots of Zoom lie in the enterprise market; the company was founded by the former

Cisco

a chapter with an idea on how to create a video conferencing platform for businesses that could challenge this company’s WebEx offerings. The result is a very easy to use service quickly became a lifeline for the masses sent home from offices during the start of the Covid-19 pandemic.

Zoom’s “online customers” – denoting those individuals and small businesses who signed up for the service without contacting Zoom’s sales representative or one of the company’s intermediary partners – accounted for 25% of its total revenue in the fiscal quarter ended January 2020. the beginning of the pandemic. During the year, this contribution increased to 56%.

But this customer base is much less sticky, and the cancellation involves a few clicks on the web page as more people resume the meeting in person. Zoom’s revenue from online customers has slowed significantly over the past few quarters and has been negative for the first time in recent years – down 2% year-on-year to about $ 514 million.

Analysts expect that this trend will continue. According to consensus estimates by Visible Alpha, Zoom’s online business revenue is declining for the remaining three quarters of the current fiscal year.

The company is right investing in sales representatives and other tools to create a more stable enterprise base; Sales and marketing expenses accounted for 34% of revenue in the last quarter, compared to 26% for the same period last year. But the faster deterioration of the online customer base to pre-pandemic levels will still put pressure on the top line of Zoom.

Again, Zoom’s stock price fell more than 48% for the year – and 83% from its peak – even after a 5% jump on Tuesday. Sometimes there really is nowhere to go but up.

Write Dan Gallagher on dan.gallagher@wsj.com

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