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Zoom will likely lose users to Facebook's new video chat product, but that could actually help its business, experts say (FB, ZM)

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  • Zoom faces new competition from Facebook, which recently released a group video chat product called Messenger Rooms.
  • Zoom has seen its usage skyrocket in the last few months from the enterprise, but also consumers who are using the tool for online classes, happy hours and even weddings. 
  • Industry experts say that while Facebook may steal some of Zoom's new consumer users with Messenger Rooms, it likely won't have an impact on the video conferencing company's business and, in fact, may even benefit it. 
  • Why? Because it would be hard for Zoom to sustain all its free usage long term.
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As Zoom's popularity has surged due to the coronavirus pandemic, its competitors have been upping their game: copying features and touting their higher level of privacy and security.
Google, for instance, is making its business video conferencing tool Meet, free for everyone. Facebook also recently announced a new video chatting product called Messenger Rooms, which allows users to create public or private video chat rooms that can hold up to 50 people. While it's not a direct competitor to what Zoom offers, since it's not geared towards the enterprise, it shows that Facebook is thinking about how to win over some people who may be using Zoom for social functions.
Industry experts say that while Facebook may steal some of Zoom's new consumer users with Messenger Rooms, it likely won't have an impact on the video conferencing company's business and, in fact, may even benefit it.
Here's what they said:

Losing free users probably won't impact Zoom's business

As shelter-in-place orders force people to stay home, people have used Zoom for online classes, happy hours, and even weddings.
Zoom's pandemic popularity signaled to other tech companies with video capabilities, including Facebook, that people craved larger virtual meetings in the consumer space as well as the business one, Gartner research director Adam Preset told Business Insider.
"Facebook already had video in Messenger, but the need to meet in larger groups in virtual rooms for social activities has been made abundantly clear," Preset told Business Insider.
While some of Zoom's users, free and paid, may decide to use Messenger Rooms for social activities now that it's an option, the majority of its paid customers are organizations and corporations, which aren't going to ditch it for Facebook.
"I don't think it's gonna be a game changer and I don't think it's going to necessarily disrupt anything that Zoom is doing," Brent Thill, an analyst at Jefferies, told Business Insider. "The reality is, at the end of the day, Facebook is known for their consumer products and not known for their enterprise products."
Facebook's Messenger Rooms product is more of a threat to consumer apps that don't charge for their services, like Houseparty, which allows users to drop in on friends via a video call, Thill added.

Here's why losing free users may even help it

Not only will losing free users not hurt Zoom, but it could actually help the company.
CEO Eric Yuan told Business Insider that Zoom does not currently have plans to monetize its free users or create a consumer business, and Carolina Milanesi, an analyst at Creative Strategies, said she thinks it's impossible for Zoom to sustain all its free usage long term.
"Zoom cannot sustain not having people pay for their video time," Milanesi told Business Insider. "It's all cloud traffic that somebody's paying for and it's not consumers."
If Zoom doesn't start charging its new consumer users or find some way to monetize them through advertising, then it's spending more money on bandwidth without any benefit. In that way, losing free users to Facebook could actually help Zoom's business and increase it's average revenue per user. 
Zoom's stock price has risen as it's revealed how much more usage its received during the pandemic, but it's still unclear how much Zoom's surge has actually affected its business at this point since it hasn't broken out its number of free versus paid users.
The number of new users Zoom actually has is, itself, a muddled question: The company said in a recent blog post that it had 300 million daily active users but later amended it to 300 million Zoom meeting participants, a different but related metric.

How the video conferencing landscape has changed 

The coronavirus pandemic may have permanently changed the video conferencing landscape.
What used to be nice-to-have tools have transformed into must-have tools for business users and consumers alike, said Simon Glass, the CEO at Discuss.io, which offers a video conferencing tool for businesses to communicate with customer test groups. The industry as a whole is still in its early stages, he said, and he expects to see a lot more innovation going forward.
Glass also echoed Milanesi's point that, for Zoom, having one tool that's being used for both business and pleasure purposes could hurt it in the long-term. He believes that Facebook's new Messenger product may cause Zoom to think about specializing its tool for specific industries and uses.
Garner's Preset agrees that trying to appeal to different types of users is smart, and that it may be easier moving forward.
"Lines have blurred for many people between work and home right now," he said. "If it stays blurry, that makes it easier for tech companies to get buyers on both sides."
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