Zoom is skyrocketing, but now it's feeling the strain. The solution? Facebook should buy it.
- Resolved: Facebook should buy group video-chat app Zoom.
- Zoom has gone meteoric due to COVID-19, but now it's struggling under the strain of growth and security scares.
- Facebook has almost two-decades' experience of growing social platforms and weathering thorny scandals.
- An acquisition would boost Facebook's consumer-facing products while also providing new benefits to Zoom users.
- It would also help grow Workplace, Facebook's business-focused product.
- But there are some major challenges that would need to be overcome.
Zoom never predicted any of this.
Once just a firmly corporate-focused video chat app, the service has gone gangbusters in recent months - boosted by unprecedented demand sparked by the pandemic, and the resulting human lockdowns across the globe. In the space of four months, it has soared from 10 million users to 200 million, hosting quiz nights, karaoke, virtual happy hours, and a million other unanticipated uses.
As CEO Eric Yuan wrote in an open letter to users at the beginning of April, "our platform was built primarily for enterprise customers - large institutions with full IT support ... we did not design the product with the foresight that, in a matter of weeks, every person in the world would suddenly be working, studying, and socializing from home."
It has risen to the challenge, but the strain is clear. It's facing numerous security scares, and organizations from Google to NASA have banned workers from using it, sending the company into damage control.
But an unconventional solution presents itself. Zoom should consider allowing itself to be acquired by another company that is experienced in growing services rapidly, well-versed in the social web, and no stranger to weathering controversy: Facebook.
Hear me out.
First, there's the question of cost. As of this writing, Zoom's market cap is around $34.7 billion. There'd be a significant premium on that for any buyout, but it's still eminently doable for Facebook, which had $54.9 billion in cash on hand as of the end of 2019, and a market cap of almost $500 billion. (Facebook's also not afraid of splashing the cash: It spent almost $22 billion to acquire WhatsApp in 2014.) But what's the upside of absorbing Zoom?
Well, it makes total sense for Facebook.
Acquiring Zoom would help it stay on top of how people are interacting online today, giving it direct ownership of what is suddenly the hottest new social networking app on the planet. Facebook could funnel these users back into its other services, while enriching Zoom with its sophisticated augmented reality filters, video-chat games, and other features that fall outside of Zoom's traditional expertise.
Similarly, buying Zoom would give Facebook its excellent underlying video-conferencing technologies, which the merged companies could then implement elsewhere.
Zoom would also provide Facebook with an extraordinary boost to Workplace, its work platform targeted at businesses. Every corporate Zoom subscriber could be given access to new tools, growing Facebook's userbase and in turn (theoretically) enriching the business users' experience. And the acquisition would help further build out Facebook's enterprise sales team, lessening the company's still-overwhelming reliance on advertising revenue, a model that has been shaken by the pandemic.
There's also a clear benefit to Zoom. For years, growth has been Facebook's north star. While Zoom has held up extraordinarily well over the last few months' growth, all things considered, Facebook's experience in growing services to the point of billions of users is almost unparalleled. The much larger company could share invaluable lessons with Zoom. Facebook has also learned the extremely hard way about the underbelly of the internet - from hacking and data misuse to failures of content moderation - and it could help Zoom avoid the same mistakes.
It's not a perfect match, of course.
Facebook, like other big tech firms, is already facing increased antitrust scrutiny - and snapping up a $30 billion company would only intensify this. Facebook might decide the potential fight isn't worth its time right now, especially as it focuses on coronavirus-related initiatives and manages existing projects like its ambitious "pivot to privacy."
But the fact that Zoom isn't a traditional social networking firm means its purchase would set off fewer alarm bells than if Facebook were to buy another consumer app like Snapchat. Facebook is nowhere close to dominant in the enterprise software space where Zoom originated. And Facebook would still face weightier competitors in that space, such as Cisco and Google.
There are also redundancies with what Facebook is already building, and the company might view that duplication as outweighing the value Zoom could bring to the company.
Also, Facebook has been battling scandals for years, from Cambridge Analytica to its role spreading hate speech that fueled genocide in Myanmar. It might simply decide that it doesn't want to unleash any self-inflicted demons right now.
If Facebook decides it's up to the challenge, though, it would be one of the most audacious tech deals of the decade - and one that could propel both firms to new heights.
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