Zoom's rise to prominence has been meteoric – its fall could be equally spectacular

Last weekend we hosted a Zoom-based birthday party for my girlfriend, packed with a four-round quiz, six-part scavenger hunt and a few rounds of e-Pictionary. Oddly enough we were having just as much fun online as we would if we’d headed for a night out at Popworld, as was originally planned. This has become the new normal, and we’re not alone.

Millions of us have inexplicably signed up to the business-centric video conferencing platform in recent weeks to stay in touch with friends and family. Our online gatherings now extend beyond work meetings into the realm of virtual pub trips, birthday parties, and even pre-booked dance classes.

Even as the coronavirus crisis began escalating, nobody could have foreseen the extraordinary surge in Zoom’s popularity, especially given the former dominance of Skype. Not even Zoom’s founder and CEO, Eric Yuan, would have anticipated a thirty-fold increase in usage, with daily meeting participants ballooning from 10 million in December 2019 to 300 million just last month.

Zoom’s surge is bizarre in many ways, none more so than how it flew by Skype, although the surge in popularity is something of a special case. Its success is entirely predicated on a short-term growth in demand fuelled by COVID-19 lockdown measures, which will likely be lifted to a great extent by the end of the year. The firm’s privacy and security woes have proven that success isn’t always a walk in the park either, but these problems are ultimately manageable. The more worrying challenge might come a little later down the line.

There’s every possibility, first of all, that the company has hit its peak in terms of its user base. Additionally, many of us have been taking advantage of the company’s cost-free tier, meaning the company now encounters a headache that oddly enough resembles the existential crisis plaguing the digital media industry. While online publications have had no problem attracting hundreds of millions of online readers, figuring out how to monetise this massive traffic has been difficult. Zoom, similarly, may struggle to actually convert this unprecedented demand into a viable revenue stream.

To make matters trickier, phasing in a cost-barrier beyond a 40-minute time limit, which itself can be easily bypassed by starting a new conversation with participants, may drive people away. The likes Skype or Facebook’s own newly announced services are just as capable.

The final, crucial point to consider is that people aren’t attached to Zoom as a company or platform, but to the friends and family it allows them to keep in touch with. Once lockdown measures are lifted, it’s more likely than not we’ll leave the service as quickly as we found it and arrange to meet up in-person with the folks we’re desperately missing. As enjoyable as our Zoom-based birthday bash was, I’d still choose that night out in Popworld if given the option.

For these reasons, the company’s explosion in popularity, a surge in daily participants and even its exorbitant $40.5 billion valuation – more than double its $16.1 billion market value in January – are all highly volatile. Zoom’s executives, therefore, must ensure all business and product decisions made in light of this short-term success are sufficiently future-proofed.

There really is no predicting what might happen in a world riddled with coronavirus, but there’s every chance that once we’re all allowed outside and Zoom’s active daily user count plummets, its investors will lose confidence and cut their losses. That could leave the company in a far more precarious position than it has ever been, even before COVID-19. While Zoom represents an astounding story of business success in 2020, the same forces that fuelled its rise may also be the root of its downfall.