Does Zoom have a defensible "moat"?
“Everything starts out looking like a toy” (No. 13)
This week’s toy: A GPT3-powered business idea generator. The sample prompt: “A startup that provides a service to help companies create a video explainer for their website” is a good place to start if you’re thinking about new ideas and want a prompt. Now, if they only would use GPT to write new Star Trek episodes… Edition No. 13 of this newsletter is here - it’s September 26, 2020.
The Big Idea
Ben Evans wrote recently about Zoom and whether or not it has a moat – or stated differently, a defensible business strategy that will allow it to prosper – suggesting that Zoom has not yet found its raison d’etre:
Zoom has done a good job of asking why it was hard to get into a call, but it hasn’t asked why you’re in the call in the first place.
If Zoom is widely used because “it just works” and because “my company uses it”, what might come next in defining “instant communication" for both 1:1 communication and groups of people? And will Zoom evolve to meet this challenge?
Instant Communication is the Endgame
Today’s instant meeting is Zoom. It’s become a verb. We use Zoom interchangeably with other kinds of software that also provides meeting. But it was not long ago that other methods were better, faster, cheaper, or more available. (Remember WebEx, Placeware, BlueJeans, and others? Lost to history and M&A.)
Zoom is having a moment when the need for its services is spiking. But so are the demands for privacy, security, and high availability. Scaling a telecommunication service to serve the entire world is daunting: ask Skype how this turned out in the wake of their huge popularity after being purchased by Microsoft. The initial amazing quality of the service dipped for a while until the service was effectively rebuilt for the new job to be done.
Michael Porter’s 5 Forces describes competition with this lens:
The threat of new entrants (who will enter the market next)
The bargaining power of suppliers (what inputs in network capacity, camera hardware, or software will change the game)
The bargaining power of customers (will customers prioritize speed, cost, or utility)
The threat of substitutes (what else could customers use in place of this motion)
And the existing competition from industry players (who has incentive to match Zoom)
Put another way, people will look to replace Zoom when it becomes ugly, slow, expensive, and bloated in terms of system resources. (Or perhaps when they inevitably add a feature to create Zoom Stories - just kidding). This means that a Zoom replacement must be beautiful, fast, inexpensive or free, and relies on a leap in storage capacity, network bandwidth, compression, or computing. It probably will also need to have a privacy breakthrough to be trusted.
The Next Zoom
I don’t know what the next Zoom will be - but I do know that it’s probably already launched today in the technology that already exists. Advances in 5g technology, holographic storage, and caching probably mean that at least in areas with high network availability, you can imagine an always-on conferencing capability that works equally well on your phone, tablet, or television.
You can also imagine a Zoom alternative that is dedicated only to fun. Think about the world of Apple’s Memoji, Snapchat’s filter, Phil Libin’s Mmhmm app, and Tiktok and you can see a world where we inhabit our own TV talk shows. Zoom seems slow, corporate, and stodgy next to those experiences.
Zoom will fail when it stops thinking about the 1st time user experience, and when it stops considering how to make the ancillary parts of the call (amazing video, audio effects, and intro/exit) better.
How can Zoom be the “next Zoom”?
1st mover advantage is real. Zoom has an excellent opportunity to build a category leader for a generation, not just for a moment in time. Here are three things Zoom can do to build a sustainable moat:
1) Build hardware that just works, and give it away for free. Look at what the Facebook Portal is doing, and copy that. If Zoom becomes a literal appliance that just works with your TV and with your computer, you’ll never pick another vendor. (Look for Apple to consider a camera extension for the Apple TV or HomeKit).
2) Build an ecosystem for fun. Baseball Players have walkup songs - why can’t we have entry music for small conferences? For the consumer market, isn’t there an opportunity to combine Jackbox and Zoom? When we use Zoom as a streaming platform for instant availability and shared experience, there are lots of opportunities for expansion.
3) Create a fanatical focus on performance, and a way to pay for better speed. For business users who want the best streaming possible, or for production crews building talk shows or charity auctions, you need a way to make that performance feel like live TV.
What’s the takeaway? Zoom’s in the lead right now. But a moat needs to be built over time with capabilities the competition doesn’t want to build or cannot mimic, while delivering the fastest, slickest version of shared video there.
We’d like to know …
Putting aside the ability to hear Rick Astley (or maybe not), would you consider having a signature song when you enter Zoom calls?
Click the tweet to vote.
Links for Reading and Sharing
These are links that caught my eye.
1/ Collaborate on queries - PopSQL is a service that lets you collaborate on database queries with a team. This is interesting because you can take advantage of the snippets other people build and move faster and more effectively as a team.
2/ Our world is changing fast - It’s sobering to see the progress of tree loss in the Amazon. This dataset shared by FlowingData demonstrates with disturbing clarity how forests are disappearing.
3/ Video content is short, punchy, and quirky - Ravi Mehta at Reforge writes about the value of video and why just copying existing formats does not confer success. Expecting short-form video to “just work” misses the point because the interest in user-generated content often comes from our interest in the creators, not just what they are creating.
On the Reading/Watching List
I was looking for an escape this week, so I picked up High-Rise, a dystopic novel by J.G. Ballard that is apparently also a rather lousy movie with Tom Hiddleston. There’s no bigger message here, so I hope it’s fun.
Enola Holmes is an absolute joy of a movie - starring Millie Bobby Brown as Sherlock Holmes’s sister - and is worth your 2 hours on Netflix. This sharply written movie has great stunts, a compelling mystery, and is a fun mind experiment on how to expand an existing universe.
What to do next
Hit reply if you’ve got links to share, data stories, or want to say hello.
I’m grateful you read this far. Thank you.
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The next big thing always starts out being dismissed as a “toy.” - Chris Dixon