Annual First Virtual Analyst Day. I'd like to remind everyone this call is going to be recorded. And at this time, I'd like to hand it over to Tom McCallum, Head of Investor Relations.
Thank you, Matt. Good morning, everyone, and welcome to our Analyst Day at Zoomtopia. We appreciate everyone joining us today for this virtual event hosted on Zoom technology. Let me do a few quick housekeeping items. First, our agenda.
Kelly Steckelberg, Zoom's CFO will discuss how Zoom's platform has changed the way people connect and work and the impact to our growth strategy. Then we will have an update from Zoom Phone and Zoom Rooms from Graham Geddes. Following Graham, we are honored to have Ryan Azus, our CRO host 2 guests for a fireside chat. Jill Korbodek, SVP of Technical Workforce at Discovery Inc. And Kevin Atkin, Director of IT at Gilead.
After the chat, Eric Yuan, Zoom's Founder and CEO will join Kelly and Ryan for a Q and A session. So we have a full schedule. We're planning on ending at 1 p. M. Pacific so you all can enjoy the rest of Zoomtopia.
We will be presenting non GAAP financial metrics, so please see the reconciliation of GAAP to non GAAP metrics in the back of the presentation, which is available on zoom dot us on the IR site and the Events section. During this webinar, we will make forward looking statements about our market size, growth strategy, our estimated and projected costs, margins, revenue, expenditures, investments and growth rates, our future financial performance and other future events or trends, including a long term framework, product roadmaps, our plans and objectives for future operations, growth initiatives or strategy, and the impact on our business from the COVID-nineteen pandemic. These statements are only predictions that are based on what we believe today and actual results may differ materially. These forward looking statements are subject to the risks and other factors that could affect our performance and financial results, which we discuss in detail in our latest 10 Q filing with the SEC. Zoom assumes no obligation to update any forward looking statements we may make on today's webinar.
And with that, let me turn the discussion over to Kelly.
Hello, everybody, and thank you for joining us today. We're excited to have you here at our first fully virtual Analyst Day. A lot has changed since we were here together a year ago. Today, the future is here with the rise of remote and digital work trends. I love these words for Marc Benioff, Salesforce's CEO, who is obviously a leader and visionary in the industry.
Thank you. There we go. For Mark, we're in a new digital world and in all digital world. The past is gone. It is not coming back.
We need to rebuild our companies, our organizations, and ultimately, we need to rebuild ourselves to be successful in this new digital future. Zoom is not the future. Zoom is the present. This is our present reality. Like Zoom, Mark is recognizing that behaviors and norms have changed and we are all quickly adapting to a new reality as to how work gets done.
This is not the work of the future, it is the present. Work Anywhere has accelerated and expanded from organizations doing business continuity planning to embracing the new normal of employees working and thriving in a distributed manner. While many offices will reopen post pandemic, we will never go back to the way we worked before. When we served our own employees, only 4% said they want to come back to the office full time. A recent analyst report from a leading bank estimates that the number of full workdays performed at home will triple in the post pandemic economy.
Flexibility will be the hallmark of being an employer of choice. Going to school this year has also been very different as learning from anywhere has become a critical part of academic programming. As many schools cannot currently hold physical in person classes, Zoom is connecting and enabling virtual learning for millions of teachers and students around the globe. Personal and social lives are changing too. While physical gathering is not possible, we have virtual happy hours, bar mitzvahs, Zoom has become a necessary platform for countless individuals to be connected anywhere and everywhere in the world.
It's been amazing to see how in just the last few months, we've had the Emmy Awards, Oprah's Life and Wellness series and the Golden Girls recreation in the Where It Happens series all via Zoom. We've also had a virtual film festival in Cannes and the F1 virtual Paddock experience also via Zoom. As the world is changing, Zoom is privileged to be a driving force, enabling As Eric outlined this morning during his keynote, we envision the future of work to be a hybrid workplace combining the best experience for both in person and virtual connections. Whether employees choose to work from home or in the office, Zoom has developed a new and exciting product enhancements and offerings to provide a safe, secure and inclusive experience. In the office, our new Zoom room and office features support safety and social distance guidelines with touchless voice commands and virtual reception.
We are also rolling out our new Zoom Room Smart Gallery for better interactions between in office and remote participants. This will help with the democratization of participation that we have all seen over the last several months as we've been working in a distributed fashion. To enable a more inclusive experience among participants for specific events, we're introducing shared meeting wallpapers and immersive scenes with custom themes and layouts. And of course, for the remote workers, we have Zoom for Home to maximize the home office environment with Zoom software and partner hardware from D10, Meet, Amazon Echo Show and Nest Hub Max. Now let me discuss how this significant change has positively impacted our business.
Operationally, Zoom has scaled our platform to meet the increased demand resulting from the shift to work anywhere, learn anywhere and connect anywhere trends. We have seen a dramatic change over the last few quarters. The initial step function increase at the start of the pandemic, the slight downward seasonal fluctuation during the summer, then the resurgence of meeting minutes reaching a run rate of 3.3 trillion in September as schools have reopened with virtual classes and distance learning. Just a quick note that annualized meeting minute run rate is an operational metric and does not necessarily correlate to revenue or bookings. As we have discussed in the past, the pandemic has impacted our gross margins as we are experiencing a higher percentage of free users and the increased utilization of public cloud.
With the uncertainty of the pandemic, it is unclear how long this impact on our gross margin will last. Incredible increase in demand and the strong execution from our Zoom employees has led to remarkable results so far this year. We had 3 55 percent year over year revenue growth in Q2, resulting in a $2,600,000,000 annualized revenue run rate. Driven by the continued trust and support of our existing customers, our net dollar expansion for customers with greater than 10 employees continued to exceed 130%. We have also experienced a significant expansion in our customer cohort with 10 or fewer employees, which currently makes up 36% of our Q2 FY2021 revenue compared to 20% in Q4 of FY20.
We're excited about the announcement this morning of on Zoom, which expands the value we bring to this customer segment. We ended Q2 FY 'twenty one with $1,500,000,000 in cash, cash equivalents and marketable securities, excluding restricted cash, resulting in a 19 times increase in year to date free cash flow as compared to the same period last year. We've had an incredible expansion of customers joining the Zoom family year over year. As of Q2 FY 'twenty one, we had a 4 58% growth for customers with more than 10 employees ending with 370,000. We had 112% growth for customers with greater than $100,000 of trailing 12 month revenue increasing to 988 and a 2 26 percent growth for customers with greater than $1,000,000 of ARR ending at 88.
We are humbled by the trust of our customers, which enabled us to deliver this remarkable set of results. Thank you to all of you for your ongoing support. Now let's take a deeper dive into the upmarket customer segment. When looking at our Global 2,000 customer cohort, we see significant opportunity to expand and continue to add new logos. Year over year, the penetration rate by revenue by recurring revenue doubled across all cohorts.
We have a 54% penetration rate for customers spending more than $1,000 of ARR, but at the $100,000 ARR threshold, the penetration rate is only 12% signifying that there is still a lot of opportunity ahead. We have seen broad adoption from Global 2,000 customers across diverse verticals as you can see here. It is incredible to note that 4 of the 5 largest U. S. Financial institutions and 4 out of 5 of the largest global transportation companies are Zoom customers today.
And beyond the Global 2000, education and government were 2 of the fastest growing segments in Q1 and Q2 of FY 'twenty one. Now let me discuss how our international business has performed as the global awareness of Zoom has increased. We see strong growth in our international markets. In Q2, we had 6 69% growth year over year for EMEA and 5 73% growth year over year for Asia Pacific, the top countries including U. K, Japan, Canada, Australia and Germany.
From last year, Japan has moved up to 2nd place from 4th and India moved to 7th from 10th. We have also seen strong traction in Latin America and other non English speaking countries with the addition of Brazil and Spain to this list. As of Q2 FY 'twenty one, approximately 30% of our business is from outside North America. We believe international can eventually become 40% of our total. The increased global awareness of our brand has also helped accelerate hiring
in international markets.
Now on to Zoom Phone. With an estimated $23,000,000,000 addressable market by 2024, it continues to be a great opportunity to expand our footprint with existing customers and to drive new logos for companies looking to modernize their legacy PBX systems. Zoom Phone is now generally available in 43 countries and territories. We have expanded our global channel partner program for Zoom Phone with 7 master agents and over 2,000 sub agents.
In the trailing
12 months, we have sold over 500,000 Zoom Phone seats. Based on recent data from Synergy Research, this ranked Zoom 2nd by global seat count for hosted PBX and UCaaS services. As of Q2 FY 'twenty one, we have over 5,800 Zoom Phone customers with greater than 10 employees, double from Q4 of FY 2020. Our Head of Zoom Phone and Zoom Rooms, Graham Geddes is here and we'll have more Zoom Phone updates for you in just a few minutes. Webinars are also another area of tremendous opportunity as demand for large virtual events has increased.
A recent Forrester report indicates that businesses expect their number of online events to increase by as much as 3 the pre pandemic environment. We have already seen this trend in virtual events as reflected in our annualized webinar minutes run rate, which increased to $42,000,000,000 in Q1 and Q2 of FY 2021 and are currently over $45,000,000,000 based on September. The new environment has expanded our market and outlook. There are new variables to our business model where historical knowledge and trends may no longer apply. As such, we want to give you a quick picture of our financial framework from a long term perspective.
We want to emphasize this is not meant to reflect guidance or objectives in the immediate future where the COVID-nineteen pandemic and the associated economic concerns remain uncertain. In the long term, we expect our gross margin to be approximately 80%. This is compared to our Q2 'twenty one actual of 72% and the previous long term profile of approximately 80% to 82%. As we have mentioned before, our gross margin is contingent upon the mix of paid customers and free users, especially from the over 125,000 ks-twelve schools who have signed up to use the platform for free during the pandemic. We remain committed to supporting the minimization of learning disruption during this time.
Our long term gross margin framework reflects the expansion of our own co located data center capacity balanced with continuing to leverage the public cloud for flexibility. Our R and D spending as a percentage of revenue is estimated to be in the range of 10% to 12% in the future as compared to the Q2 actual of 4% and consistent with our previous long term profile. We expect R and D to increase as a percentage of revenue as we invest in and diversify our engineering talent to drive innovation across all aspects of our platform. We expect sales and marketing as a percentage of revenue to be in the range 30% to 35% in the future compared to the Q2 actual of 19% and our previous long term profile of approximately 40% to 42%. This improvement is due largely to the benefit we've received from increased brand awareness and improved sales productivity over the last several months.
We plan to increase sales capacity to continue to capitalize on market opportunities. And in a post COVID world, we would expect G and A as a percentage of revenue is expected to be consistent at around 8% to 10% compared to Q2 FY 'twenty one actual and our previous long term profile of of approximately 8% to 10%. This will lead to non GAAP operating income of approximately 25% compared to Q2 'twenty one actual of We continue We continue to stay focused on investing to drive top line growth, taking market share and doing what we can to minimize disruption in communication and learning during this pandemic. As such, it is uncertain when we will achieve this long term profile. I also want to announce our philanthropy and sustainability program.
Zoom cares for our community, our customers, our company, our teammates and ourselves. We strive to make a positive impact by delivering virtual connections to the global community and committing to build a sustainable future for our environment and society. In the past, our Zoom Cares Tailor Program has been donating to education and social equity causes. Now the program is extending its value of care beyond philanthropy with the development of a comprehensive sustainability program. In summary, Zoom has grown so much this year and we have firmly established a leadership role in the new work from anywhere worlds.
Navigating this process has been a humbling learning experience giving us a newfound appreciation for what we have achieved thus far and most importantly, a renewed commitment to work harder to better serve our customers and communities. Thank you to the entire Zoom team for everything they have done and continue to do. Now, let me turn the presentation over to Graham.
Thanks, Kelly. So everyone excited to join today and share some updates for both Zoom Phone and Zoom Rooms. So we'll get right into it here. First, I want to really take us back to where we were at last year's Zoomtopia. So this is an actual slide that was shared as part of Eric's keynote, really indicating the big shift that we're seeing in the market around this convergence of video and voice into a single video first platform.
And while the convergence alone isn't something that's necessarily new, it's the fact that video is taking a much more prominent role in the decision making process with our customers is the part that we find extremely important. We met with a lot of industry analysts at the time last year and the comments were that this is definitely a trend, but it's going to take some time to come to fruition. Now here we are a year later, no one could have ever predicted what has happened, but suffice it to say, we've seen a dramatic acceleration in the convergence of these two lines. And also a shift in our customers, making sure that they're choosing a platform that's been built from the ground up video first, which I think is really important as we start to talk about Zoom Phone today. So just a quick recap of what Zoom Phone is that for those that may be new to the space, Zoom Phone is a fully featured cloud native phone system.
It allows our customers to simplify their worker productivity and collaboration all into a single app, while also providing a single point of administration for all of their collaboration across their entire organization. All of this is built on the same Zoom infrastructure that was built to support the needs of the largest and most demanding customers globally. And so it's really interesting to look back at this past year and look at all that we've accomplished. We've delivered over 400 features to the platform. So the innovation engine is definitely going full speed.
We'll actually talk about some of these here in a few, but we are continuing to accelerate and deliver the capabilities that our customers need. In March, we actually expanded our master agent program. We launched our master agent program to expand our routes to market with Zoom Phone. At launch, we launched with Intelisys, Avon, Polaris and Pax8. And then as recent as September, we continued with our expansion internationally to service both EMEA and the ANZ markets by partnerships with Nevias, ScanSource and Tradewinds.
So it's just been really exciting to see the partnerships. And as Kelly mentioned, we've seen over 2,000 sub agents register to sell Zoom, which is tremendously exciting. We've also been working extremely hard, expanding the geographies where we can offer a local PSTN replacement, now at 43 countries and territories globally. We'll talk a little bit more about this here in a moment. And then most recently, we actually announced our Global Select plan, where Zoom, we pride ourselves on making things simple.
And we had heard from our customers that they were tired of the complexities of managing multiple different PSTN services and plans across the globe. So we announced a simplified way to purchase and manage global telephony at a single plan, a single price point that's extremely competitive in market that allows unlimited domestic calling and this is available in 42 countries globally. So we're really excited about this offer. So speaking of the international expansion, this was a question that we got quite a bit last year at Zoomtopia. This slide shows just how much hard work we've been putting in over the past year.
Last year, we had service available in just a handful of markets with a plan to expand to more. And fast forward, we're now able to deliver full PSTN replacement. And it is important to keep in mind that this isn't virtual numbers or some of the other ways that some of our competitors may count locations. This is full PSTN replacement, including emergency services support in the markets that do support it for over 43 countries and territories, which does put us ahead of most of our competitors and we're not done. Actually this week, we're announcing our 44th, where we're adding South Africa and we're going to continue to expand to make sure that we can meet the needs of our global customers as well as our customers within these local markets.
And speaking of growth, it's been amazing to see the traction that we've seen with Zoom Phone over the past year. I know Kelly mentioned a few of these stats, but I do want to take a moment to go over them again. So over 500,000 seats sold in the past 12 months, putting us again in the number 2 position for net new seats sold according to Synergy Research. And this is really proving the point that we mentioned earlier about this shift in the industry and the convergence between voice and video with Zoom in a great position of strength to continue to drive this transformation. We have over 5,800 paying customers with greater than 10 or more employees.
Our phone traffic has increased over eightfold since last year. And we also see that 22%, so this is, call it, close to 1 in 4 customers are new to Zoom, meaning they're buying the entire platform, both meetings and phone together. So in Kelly's notes, Kelly mentioned the significant growth of our business with more than 370,000 customers now using Zoom with 10 or more employees, representing a huge opportunity for us with Zoom Phone. But we're also seeing lots of traction and success with customers that are entirely new to Zoom as a whole. So it's not just about the upsell opportunity.
This is really about transformation that's happening within this $23,000,000,000 market. A few more stats to share. We've seen great strength across the globe, predominantly here in the Americas. But with our international expansion, we're starting to see traction in EMEA and APAC as well. A great example of this is a recent win with Rakuten in Japan, which is now our largest Zoom phone customer to date.
And actually, Eric will be doing an interview with Harari san from Rakuten as part of our APAC keynote this evening at 8 pm. But overall, great to see the strength and traction that we're experiencing internationally. From a customer size perspective, we've seen 62% of our bookings come from mass market, which we define as customers with 1,000 employees or less, but we're also seeing tremendous strength and traction in the upmarket space. Our great customers who are on with us here today, so Gilead and Discovery will be joining us for a fireside chat, are great examples of this upmarket success as well. We're also seeing a really great traction across a wide range of verticals, so retail, healthcare, financial services, and we do see some sectors growing significantly quarter over quarter like education.
Now this week, we do have a number of exciting announcements. I'm not sure how many of you were able to attend this morning's keynote, but on stage, Oded Gal, our Chief Product Officer, was did highlight a few of these. He highlighted our nomadic E911 service. So this is an amazing capability. Not only does it help our customers comply with emergency services regulations like Megan's Law or Ray Balms Act, but for a lot of companies, they've had to purchase 3rd party solutions that work in tandem with their voice services to provide this level of capability.
So we're providing tremendous value for our customers by adding these feature sets right into our native offerings. And we're also pushing the boundaries of these capabilities by integrating them seamlessly into our platform, extending alerts and notifications to digital signage and chat, just as an example. We're also really excited about the powerful capabilities with TMMS and also how we're going to be using artificial intelligence to combat spam and robocalls for a better experience for our end customers. We've also seen a lot of great traction with our customers as they look to respond to this new work from anywhere environment amidst the global pandemic. Now these are just a couple of sample quotes from a recent TechValidate survey we did with our Zoom Phone customers and a few that I want to highlight.
This first example, we implemented the solution right before COVID. Zoom Phone has made it possible for our firm to transition employees to a remote work environment within 24 hours. Another here, Zoom Phone has allowed us to operate remotely for the past 6 months without any impact to the company. So a great testament to what Zoom phone can help them with and it really is a solution to help modernize their infrastructure while also providing a better employee experience. Now, as I mentioned, we have some 2 amazing customers that will be joining Ryan here for our fireside chat later.
But we also have a number of customers joining us for breakout sessions as part of this week's events. There's actually one that's happening right now. So you can definitely go back and watch the recording. But we have that one is actually tailored more to our mass market audience. And we have great examples, Zoom phone customers like Brotherhood Mutual, Holly Troxell Law Firm, National Wildlife Federation and Environmental Lights, who will all be participating in that.
We also have a session directly following this one at 1 pm Pacific, talking about Zoom Phone in the enterprise. We're going to be joined from customers like ServiceNow, Quinnipiac University, eBay and ViacomCBS. So it's always great to hear from our customers directly. Definitely welcome you to attend those live streams. And now we'll switch focus a bit, jump into Zoom Rooms.
And in a similar fashion, it's been a jam packed year for Zoom Rooms, really starting with our launch of the Zoom Room appliances at Zoomtopia of last year. Our appliance model has really taken off and we've seen amazing growth and adoption from our customers. We'll actually touch on appliances more in a later slide. We've seen some major software enhancements with a big release in December, where we were able to launch some first to market features. Then in July, we launched our hardware as a service program, which was an exciting opportunity for us to really provide a full solution that's from Zoom, inclusive of the hardware, all for a single monthly price with no CapEx upfront requirements.
And then most recently here in this past August, as Kelly mentioned, we announced our Zoom for Home category of devices. We started with the D10me and quickly expanded to a growing list of smart displays. So there's a lot of excitement around the Zoom for Home. I think it's even more exciting when you couple it with this morning's announcements about our on Zoom marketplace as well. So speaking of Zoom Room appliances, we're very excited to announce this week's new hardware solutions that are coming for 2021.
The portfolio is growing extremely fast and really highlights the strength of our open hardware ecosystem. We have some really innovative and core factors now that we're seeing and our customers can really be assured that we have a device that's going to solve their needs for a wide range of different spaces. Now, similar to Zoom Phone, we have seen a shift due to the global pandemic and we've responded from a Zoom room perspective really with an opportunity to help our customers as they reenter the workplace. So lots of customers are talking about hybrid work environments with some people in the office and others remote. And this week, we announced a great new list of capabilities to help our customers with these challenges from the Zoom room kiosk mode that allows for a great virtual receptionist experience to the ability to control a Zoom room right from your desktop or mobile device or even automate it with voice commands.
And then we have smart gallery view, which you see here on the right hand side, allowing us to capture all of the faces within a room of all of the participants and allow our remote participants to have the full gallery view that they've come to expect while everyone has been remote. We've also seen some really great adoption of our whiteboarding capabilities, especially with the strength that we're seeing in verticals like education. And so we've announced a number of exciting whiteboard capabilities this week, things like sticky notes and whiteboard templates to infinite canvas and persistent whiteboarding. So you can always go back to where you left out off. And we have a great list of Zoom room breakout sessions this week as well for those that are interested.
So with that, that's it for me. Excited to pass the baton over to Ryan Azuz, our CRO, who will be leading us off for our fireside chat. So Ryan, over to you.
Thank you, Graham. Really appreciate that. Lots of exciting things and news that's being announced and a lot as always, lots of innovation coming here from Zoom. I'm really honored and excited to be able to kind of host this chat, fireside virtual chat with 2 great technology leaders from 2 amazing companies. Let's bring up Will from Gilead, Kevin Atkin and from Discovery, Jill Porjorovic.
Thank you for joining us, Jill and Kevin. Welcome. For starters, why don't we go ahead and just maybe give just a little bit about your background, your company and just maybe high level, help the group understand your organization. Jill, why don't you go first?
Sure. Jill Porybovic, I know that last name is crazy, but you guys both did a good job trying to say that. So, listen, I was raised in a small farming community in Kansas, and I think that gave me the basis for my sense of community and humanity that I've carried with me and it's what I leave with today. So that's an important part of who I am. I moved to the East Coast about 33 years ago, got into IT 30 years ago.
I've always been sort of crazy about data and analytics and strategy and crisis situations. So IT is sort of the perfect fit for me. I'm married and I have 2 amazing children and I've been with Discovery for 13 glorious years. When we talk about the company, we are the leader in real life television. We're in about 2 20 countries and territories.
We have about 20% of the share of women in the U. S. Watching during prime time. And when you think about Discovery, a lot of people think of Discovery Channel, but it's much bigger than that. And some of the flagship channels we have are Food Network, HGTV, Eurosport own network, the Oprah Winfrey network, science, animal planet on and on and on and on.
So it's definitely bigger than it seems. Organizationally for me, I have about 250 people in 32 countries. We support anything from an enterprise perspective when it comes to what you've touched, the software you have, the collaboration tools you have, anything really, that touches the business. We are the first line support for everything. I always say, I can't fix it if the toilet doesn't flush, but you can call me and I'll help you get to the person that can fix it.
Thank you, Joe.
And how about you, Kevin? Tell us a little about yourself and Gilead.
Absolutely. Good morning, Ryan. Thank you. My background is fairly straightforward. I spent a lot of my time in beginning of my IT career in consulting, working for any number of different companies from Safeway to Ford Motor Company, in both those instances delivering on real time applications.
After that, we moved on to Kaiser Permanente where I was part of a large multi $1,000,000,000 program to upgrade the infrastructure across all the 1,000 buildings at Kaiser. So that was a fantastic experience. Moving on from that, went to Disney for a short period of time and then have been here at Gilead for about 3 years. In terms of Gilead, right, so we're a research based biopharmical company, biopharmaceutical company that discovers, develops and commercializes its innovative medicines in areas of unmet medical need. The company does strive to transform and simplify care for people with life threatening illnesses around the world.
We do operate in 35 countries and that includes all aspects of the business, including manufacturing.
Great. I mean, 2 really important companies these days with especially with everything going on in the world, Joe, your company helping keep us entertained and educated and enabling people even to travel when they can't leave their homes and see lots of unique places and stay connected. And Kevin, your company literally helping come up with hopefully vaccines to help with COVID. And so really, really important companies in the world right now. Let's talk a little bit about your Zoom journey.
If we rewind the clock back a couple of years, like how did it land at your company? Where did it first enter? What was it replacing? Kevin, why don't you go first?
Absolutely. Our journey started in 2018. Ultimately, we had an end user experience problem. So we had at the time, we had 3 separate conferencing platforms and then a 4th conference room management platform. So we had 4 different platforms.
Ultimately, we had 2 different populations and one population preferred one of the platforms and the other population preferred the other. And they both those populations and those platforms operated differently. And often as they had to involve and engage with each other across those platforms, there were challenges. And then there were challenges with the conference rooms. It was just It was just the overarching user experience was not positive.
And so and that's where the Zoom journey came in and that's where we started to look at Zoom and look at that frictionless experience, right, across all that. So it's not just the conferencing platform, but because Zoom had the conference room and the Zoom room capabilities, we really saw that as a huge advantage for us.
Awesome. And how about for you, Jill? What was that journey like?
It was quite a journey, let me tell you. So we used a platform called econo prior to Zoom. And econo, the reason we chose it is because it has superior audio and video quality as a media company that was super important to us. But we had our problems with it, right? So we knew in 2018, 2017 that we needed to move.
It was an on prem platform. It had been bought by Cisco, so it was bound to be decommissioned. And really from a usability perspective, it wasn't something we could roll out globally. So early 2018, we acquired Scripps Network. They were using Zoom.
And day 1, just imagine, right, everybody's coming together, 50 people in conference rooms to talk. And picture the YouTube video of the most horrible experience ever for video conferencing and that was playing out in spades. And so it was one meeting with the C level telling me what they felt about conferencing. And after that meeting, I decided it was Zoom. There's about 6 folks in the company that manage the AV for us.
And they are hardcore AV people. I'm talking one person was at Woodstock and met Janice Joplin. So they have a very specific opinion. And when I told them we're going to Zoom, it was about an hour of no inside voices being used. And but I was positive that was the solution.
I knew that it met about 95% of our use cases. And that 5%, although very important for our networks to be able to collaborate, we were just going to have to hug it out with them because I needed that usability piece. So we fast forward, moved to Zoom very quickly. And it was not the easiest of experiences initially, but by far and I've been forgiven by the way by the AV team, we never could have done what we did today on that old platform.
It's great to hear. And we should thank those folks at Scripps. And then how about, you think about since then we've had a broader agreement, we've moved on to multiple services, things like Zoom rooms and phone, webinars. Can you talk about how you go from meetings to other services and what that was like for yourself at Discovery?
Yes, we always knew that we would do Zoom rooms. So Zoom rooms and user licenses was a thing. And Zoom phone, we talked about actually at Zoom was the was the use of phone period, the legacy telephony services, are starting to trail off. Mobile was big for us. But what we found with the implementation of Zoom, especially within Discovery, is that we were a video first company, right?
When I share with my team, my they know the expectation is everybody's going to video share. I need to see you and feel you. So what we saw happening is people were reverting to Zoom video as their platform to discuss and see and not so much just a phone. So we talked about moving to Zoom Phone because we did have a virtual or a cell phone already in place. We had legacy platforms in place on prem systems because of all the M and As that we've done.
So in January of this year, we decided that's it. We're getting rid of all the old stuff. We're moving to Zoom Phone. And that was in January. Cue the pandemic.
And the plan we had to roll out Zoom Phone over the course of 2020, the pandemic was actually super useful. We pulled that all in. I had no users that could say to me, but I need my desk phone. No, you don't. You've not been in the office for 2 months.
I'm taking that baby away from you. Have a nice day. So for us, Zoom Phone was really one of the great things that we were able to execute quickly on that we thought we would have a really long ramp for.
There are some lonely desk phones in the office.
No more. We tripped them out.
There you go. Good. And then how about on your side, Kevin, kind of the journey of expansion, what does that look like for you?
Absolutely. So it was our plan from the very beginning and our strategy was a cloud first strategy. So that's been there for a number of years. And in terms of strategically also looking to move down and consolidate our platforms. So as I said before, we essentially had 4 platforms to manage our conferencing.
We have 3 different phone platforms and then a streaming service as well. So the design from the very beginning was collapse all 8 of those platforms down to a single platform, take advantage obviously from the simplicity of it, the operational efficiencies and certainly financially and looking at the cost aspects. So we were all in from the very beginning. And it proved to be very true in terms of where we started. So back in 2018, when we started the journey, and as it relates to the Zoom room story, we had about 220 conference rooms, all of different makes and sizes.
And as our standards change, we didn't do a good job of going back and revamping because they were expensive to do. With Zoom in our initial rollout, we were able to go and replace those, double it and now we've even doubled that since then. So we have we went from 220 video enabled rooms to well over 1,000 now. And at the same time, we tweaked all our standards. So now every conference room is a Zoom room.
So there's no exception where in the past that wasn't the case. We sprinkled some video enabled rooms throughout a location. So it's been extremely transformative from that perspective. And we use everything. So right now webinars, I've got my stats right here.
So in the last 12 months, we've done over 1600 webinars. Webinars are critical to our operation. And what's amazing is after we've delivered webinars to everybody, they're finding new ways to use it, both internally and externally as we engage our customer base. And now we're moving on to the Zoom Phone story. We actually rolled out Zoom Phone just under, not holistically, back in May.
And now what we're doing is now we're moving all our sites in which is a little bit more complicated process. But now we're looking at rolling out Zoom Phone throughout the remainder of this year and then into next year.
That's great. And a couple of questions for you then on that. First off, you mentioned having multiple platforms on video, multiple platforms on phone and consolidating, I think, you said 8, if I heard you right, out of those platforms down to 1. All those platforms, what's that legacy? What causes that when you look back into your business as far?
Yes. Some of those are through acquisitions, similar to Jill, right. So we brought on some legacy platforms with always the plan to move them over. And so while some of those plans were we did engage on and work on, some of these we're waiting because we wanted to see the plan come together. And again, our plan was always move to Zoom as the underlying platform.
So and the challenge some of the platforms were change management related. So we ended up with 2 core conferencing platforms, 1 on prem, 1 cloud. And the reason how we got into that is we didn't manage the change management process in the best way. We changed all that. We learned from our lessons.
We engaged we had obviously full buy in on the IT side and we engaged the business. We had full buy in from the business. We created business change champions globally because that was the other thing. We're a global company. We're in 35 countries, we're all over.
So I think keys to success and keys in our learning from the problem that we had was obviously the platform had to work. It had to meet the business need. It had to have the end user experience that we're looking for and Zoom did. And then our approach changed. We had to make sure and get buy in and support from the business in terms of the rollout.
That's awesome. And then on the rooms you were talking about going from I think around 200 to 1,000, was it just the technology was simpler? Is it did the business need around rooms change? I'm just trying to understand that's a pretty big multiple. I'm assuming you can build 5x the conference rooms in your business.
Talk to us about that.
Yes, it's a little bit all
of the above, right. And we so they are simpler. They are less expensive than our previous standards and the quality was better. But more importantly, the engagement and end user experience was better. So in terms of the it all centered around the Zoom meeting controller.
And as we went down this journey, we knew we had a lot of choices in terms of how we could implement these rooms. We made a choice in the very beginning. We had some of the legacy equipment that we had. We could have converted over as Zoom rooms. But we made a very distinct decision to have the meeting controller be identical in every single room.
So we actually ripped out everything because we wanted to have the end user experience be the same. So whether you were in a conference room in France or Germany or in the U. S, it didn't matter where you were, you knew exactly how to use it. So that was we stuck to our guns, we're able to do it and now that's part of our standard. So we have literally the same exact meeting controller in 1,000 rooms, which in IT there's a lot of we operate on noise often and the noise is gone.
So we don't have any more noise about conference rooms and people going into conference rooms and not knowing how to use them.
Thank you. Jill, you mentioned crisis earlier, I heard you say when you were talking, being prepared for crisis, I think. And let's be real, with 2020, you had certain plans, I'm sure, before COVID. And so what were those plans? What did it look like for you and for Discovery pre COVID like for digital transformation, for communication?
And how did this crisis that we're all in, how did that change
things? What's interesting is, we're not that big as a company, but we are very tech forward. So in 2016, we started pushing to the cloud. We were totally out of our data center in Maryland by 2017. We were the 1st media company to push all of our intellectual property to cloud.
So when you start pushing that envelope that early, everything else has to fall through. On prem wise isn't going to be a thing if you don't have a data center. So we started leveraging and using those collaboration tools and SaaS products very early on. So when I think about we got to the pandemic situation, I know in February because I have people all over the world that in Spain, I know what's going to happen, right. So it's getting everybody together, daily meetings starting in February about the logistics of equipment and offices closing and humans and how to take care of them and all those things.
It was more about the leadership of this exercise than it was about the technology because we were pretty set from a technology perspective. And we've not stopped any of the programs that we'd intended to put in. The Olympics stopped. That was helpful. I have to say, though now we're bunched up for the next 2 years to execute on the summer and winter games.
But that was the only thing that stopped. We are moving from Microsoft to Google. That hasn't stopped. We started pushing that out in August. So everything we had planned to do, we're still doing.
We just had to regroup on how we execute on that.
It sounds like you're definitely prepared for it. It makes it less of a crisis, right?
Yes.
And Kevin, similar, different, how about on your side?
Very similar to Jill's experience. We were had a cloud first approach and strategy. And at least from this kind of platform perspective, we were already there, luckily, right? We had just completed our migration to Zoom in May of last year, finally turning off the other platforms in July. So we were actually from fantastically prepared for this.
But what COVID did do for us is it helped pull Zoom Phone forward. So while Zoom Phone was in the strategy, the plan was not to do it now. The plan was to do most of it in 2021 2022. But we realized the amazing capability that Zoom Phone provides and the ability to have enterprise voice anywhere, anytime on any device. And now that our users were at home, home 100% and then soon going to be home and office and have this transition for quite some time.
So we really see the business value of having Zoom phones. We're pulling that forward and trying to get that out to users as quickly as we can.
Awesome. And then let's talk about use cases a little bit. Of course, you're using for meetings, you're using it for events, making calls, but tell us more behind what's happening in those meetings, in those events, in those calls. I mean, you're both at pretty unique well known brands, but also different companies. So like on your end, Kevin, what's really happening?
We know it's a meeting, but tell us the truth, what's IMAG?
Literally everything you can think of. Obviously, we're a pharmaceutical company. So there's science happening. There's conversation not actual physical science, but the conversation about science and keeping everyone informed. Sales, marketing, every aspect of the business, as well as how do you do inspections, right?
So these situations where we'd have inspectors come online and we had to figure out
a whole new way, how do
we continue to do business and how do we do inspections in a way that met our business requirements previously, but in a complete virtual way. So it's yes, I mean, it's amazing what happens in each and every business type and webinars. So we really didn't do webinars previously. And now we're doing 7,000 person webinars. And everyone had to change a little bit.
And I think that was kind of the amazing thing here for me is all users had to change. They had to look at it differently. They had to take personal accountability for their technology and their experience. And they did and everyone rose to the occasion. So pretty, pretty incredible.
Awesome. And how about for your side, Jill? What are some of those unique or specific use cases?
There's a couple of things that come to mind for When we launched Zoom, our broadcast team came to us and said, listen, we think we can use Zoom to do remote editing. So in our industry, what typically used to happen is you'd fly in the producers and everybody, you'd get into a pretty swanky editing pod and you would sit there jointly and edit that program to get it to a final cut. And proactively, the teams were like, listen, we think we can do this remote. And so they started doing that in 2018, 2019. They kind of finalized it.
There's some people that weren't so keen on it. But guess what happened in 2020? Everybody's doing remote editing because you're not flying in to do that. So they were kind of ahead of the game. I think one of the other really important things, just like Kevin said, is webinars.
We only had 3 webinars last year. We've had 250 this year. And again, that's like 6 guys working from home helping with those webinars. And it started with our CEO having town halls each week. And I think back to March, which seems like a lifetime ago, and we would get together and they would talk to us on such a human level.
And they would bring in speakers like Madeleine Albright and Oprah and Mike Rowe and some of our talent to sort of give us, I'm going to say hope, right? Like we would talk about the company and everything else, but then you would have this insightful discussion, real life discussion that sort of kept us going. And our executives have vowed that we're never doing the town halls with the big setup and thank God because that was like holding your breath constantly to make sure those things went well. So we are done with the full on come in to the room town halls that's changed forever. And when I think about our external use of Zoom, as a media company, there's something that's called upfront that happens each year where everybody gets together and you try to sell all your marketing your advertising spots.
Obviously, that's not happening. We've done upfront in a different way, in a more intimate way with our agencies. And so that's gone well. There was a poker tournament hosted by I can't even remember Mount Sinai. And our CEO and some of his executives participated in that and raised $1,200,000 for frontline workers.
And again, the sauce behind that, it's one of my guys at home on a Saturday with headband on like jamming. It's amazing. So those are some of the highlights of the use cases we've had that are not normal from just the regular old meetings.
That's great. We have some unique speakers that come into Zoom for all hands on lots of diverse folks and CEOs, but we haven't had over yet.
That's what I can do.
Yes, I have to see what we can do.
We have Kareem Abdul Jabbar come in.
So that's fun. Now that's cool. That's cool.
A little easier when it's working, right?
I mean, that's one thing.
What we're seeing is people's accessibility changes quite a bit when they can pop in for their part of the time, whatever it may be. Let's do this. Let's I have a few more questions, but let's open it up to the audience too. Matt, are you out there?
Yes, I'm here.
All right. Let's see if we get a couple of hand raises. Matt, if you want to call on a couple of folks. And Jill and Kevin will both raise to
that, allow some audience questions. Let's hear them.
Certainly. We have one question. First question is going to be from Rishi Jaluria from D.
Hey, John, Kevin. Thanks so much for taking the time. Really appreciate all the insights and this is really useful for us. Wanted to ask one question to each of you. Jill, at the beginning of your remarks, you talked about how there's Zoom was ready for 95% of use cases.
I was wondering if you could give you a little bit more specific, what are those 5% of use cases that maybe the AV folks felt Zoom wasn't ready for? And in your opinion, what needs to be done to get Zoom there be it as new features or customization? And then I'll ask a follow-up for Kevin after that.
Sure. Well, that was 2018, so that feels like a lifetime ago. And again, because we're a media company and because we have sports, pixelization is a thing, right? So top quality video and audio are a must. And that's where Zoom didn't have that same quality as Hekano.
So when I talk about the 5%, and it was a very important 5%, I'm talking about the head of the networks, right? If you're in LA and you're trying to share content with somebody that's in Maryland and I don't have that top quality, it's going to be a problem. I always say I have to hug it out with those folks no matter what level they're at. So we know that this is going to be a problem for them and we proactively went to them and said, look, here's what's going to happen. This is going to be this is going to hurt for a little bit.
But we trust our partner and we know that they're going to come up to speed and get this quality fixed. So we worked with Zoom. They actually helped us get some very specialized things in place so that we had better quality. That 5% has been solved. We're no longer in that space, so we're at 100 percent.
No problems with our initial 2018 lows.
Great. That's helpful. And then, Kevin, given that you're in arguably one of the most heavily regulated industries out there, just wondering, as you adopted Zoom and kind of consolidated onto one platform from many, what did you need to do or how did Zoom maybe help you maintain compliance and make sure that you're in line with regulations, just given kind of the transition? Thanks.
Absolutely. Luckily, in terms of most regulations and the regulatory activities, right, it's not a GXP platform. So we didn't have too many situations around regulatory. But we certainly we took security and privacy very seriously and we managed and developed the platform upon initial release in such a way that we maintain that consistency throughout.
Great. Thank you.
Thank you. And thank you, Rishi.
Matt, any other questions out there?
Yes. We do have one more from C. T. Panagrahi from Zuho Securities.
Thanks for taking my question. And Kevin and Jill, I just wanted to ask your decision to switch to Zoom phone, mainly cloud phone. So what did you have before and what made you what are the factors that And
then I have a follow-up for Ryan.
And then I have a follow-up for Ryan.
For us, we had again, M and As give you a little splash of everything, right? We were also one of the first companies to move to an E5 license and do Skype PBX. And because we're moving to Google, that was obviously one thing that we wanted to change. And when we looked at kind of the scope of where we were with on prem equipment and again, statistically looking at the data on who's making calls, etcetera, For us, it made sense to move away from it. We had Avaya.
We had Cisco, the most expensive phones you can have, of course, the video phones. And we had Skype PBX. And then internationally, a smattering of other things. And so it was what we've done is we've reduced down to just Avaya, just to one Avaya core. We need that for some situations that we have to have in each office where there's kind of a landline as an Alaska Shepherd if there's any kind of issues.
Yes. And for us, we have 3 platforms. Our parent platform was Cisco, kind of traditional on prem. We also had through acquisition Mitel and RingCentral. So the decision is actually pretty straightforward.
It wasn't a hard one. Our Zoom experience for audio on meetings is so fantastic. Why would you introduce anything extra? And certainly, as we look at the end user experience where our users were are comfortable, they like the Zoom experience, they like the client, they like the client on all their devices and they already know how to use it. Layering on Zoom Phone is very easy as opposed to rolling out another client, comms, change management, all the activities that would happen along with that.
Okay. Thank you. And Ryan, so you joined a year ago when Zoom had maybe around 74,000 business customer and now in last two quarters itself, you guys added like 290,000 customer. So tell us how has your go to market strategy achieved after March, maybe in terms of self serving or in terms of partnership? And how are you planning to penetrate further with more users into this, that new 290,000 customer and even to increase their spend even above 100,000?
Great question, Citi. I mean, I think it's a very similar playbook, but it's more of it and faster if you really step back from it. We've always had vast teams that focus on customers. We've definitely had to increase the size of those as you'd imagine. And we have a variety of services like Zoom Phone as you can hear from Kevin and Jill.
They're having that success and making sure we're penetrating into that along with, I think you mentioned partners, leveraging partners where appropriate to make sure we're expanding
our reach.
Thank you.
Sure.
Matt, I think we have a question. I see a hand up, Alex Zukin. Hopefully, I said it right, Alex. You did. All right.
You
did. Thanks, Ryan.
All right.
My question for the panelist is how much of the decision to move to Zoom Phone was driven by cost? And if you can compare kind of the incremental cost that you had to pay for that functionality versus your other platforms? And in general, as you think about the continued innovation out of the company, what other features do you feel like would be logical for you to add over time that you're currently seeing from other vendors?
I can try that one out first. So the cost is was part of the obviously part of the decision making and the costs work out. And what we were faced with is actually a full migration and a full uplift of our infrastructure. So we were in a lifecycle management situation as well. So weighing those two costs, the lifecycle management of our existing solutions as well as the change management.
So I think we when we look at IT, we look at licensing costs, hardware costs and that's a lot of what we talk about. What's missing is the change management costs. The 100 of 1,000 if not 1,000,000 and especially for us 35 different countries, languages, etcetera. And the successfulness of that because that's an ongoing thing. So when you bundle all it up, the economies were there certainly for Zoom Phone.
Absolutely. Same for us, I mean, I mentioned before, we're kind of very aware of financials and always trying to reduce the cost of that per user cost. So when I look at the analytics around that and really labor cost was a big part of it. You don't think about just the labor needed to maintain those on prem platforms. And I don't even think I recognize the scope of it until I start putting all the data together, like how much I'm paying for the platform for the licenses for those on prem platforms.
Who do I have that's supporting the MACDs associated with that, turning up, turning down, etcetera, etcetera. And so when I did the initial chart, it's like if we did I call it the do nothing approach, right, that's like this. And then the do something approach, which was like that, it was about $1,000,000 a year in savings. And I don't think I would have thought that to be the case, but adding in the labor costs there that really helps condense the story down to like a must do story.
Got it. And maybe just as a follow-up, Jill, for you, I mean, it's interesting, because you're also moving from Microsoft to Google, which has a communications platform as well. What was the reason that you wanted to segregate certain functionality between the two platforms?
Well, we're a creative company. So it's crazy town, right? 20 fourseven for us like how many people load TikTok and allow we have to allow for things that most companies can't allow for. And in that creative environment, our users drive us to the best in breed. If I think about Zoom in general, it was actually a user initially that started using Zoom, right?
And then we were already looking at it. So we have to take into account the creativity in our company and what works for them. We're a big Slack shop. I don't think there's a chance you could ever pull that away from the teams at this point. You can pull Zoom away.
So the business drives us with their creativity to these different platforms. And the hope is always, well, as a company, we're going to make a decision and it's going to be this platform. But realistically, we're going to go with the best in breed and what our business needs. Every time I join another conferencing platform, I'm like, oh my god, this is horrible, right? I mean, literally, and we're all paying each other on the side like, oh, my God, thank God we're not doing this.
So I think it is best in breed. Are the other platforms going to rise to the occasion? I just watched the opening keynote. I don't think so. I don't think so.
Thank you. And then I think one more question from the audience.
Yes. Our next question is from Alex Kurtz.
Yes, thanks. Thanks for doing this today. Really appreciate it. A question for Jill and Kevin, not a phone question, but just about the platform and specifically about the webinars. Jill, you mentioned that webinar growth has been very strong at the company and I'd love to hear Kevin's view.
Like what would you want more from the webinar platform? It seems like one of the most powerful tools that we've all been interacting with over the last 6 to 9 months. So I'd just like to hear your views on where they could take it and how it would be more impactful to your organizations.
I can tell you when I'm watching a webinar, I always want a heart or a thumbs. I always have a desire to heart or thumbs up when they're talking about something that resonates so that you can see of the topics that are being discussed, what is it that's really resonating with your audience, I'd love to see that. I'm sure if I consulted my team, there's plenty of things from a webinar management perspective that they'd like to see, as well as changing up how the webinar itself looks and your ability to maybe brand, etcetera. But
not I
mean, it works. That's the most important thing. I'm sure we could spend all day with features and functions if we thought about it.
Yes. And our view on webinar is similar. I think the end user experience is great. Most of the things around webinar are around the production side. So we've got similar to Jill, right, I've got a whole team of professional production folks that went from on prem, highly controlled, multifaceted, 7 different camera angles.
Now we're trying to recreate that in a virtual way. So of course, they've come to me with thousands of different things, right? So what we're doing is trying to be intelligent. We're partnering with Zoom, trying to layer in some of these capabilities and functions. I think some were announced here today, which are going to go a long way into improving that experience.
And that's the goal, right? We want to continue to improve the experience and really reflect the end user experience that all our customers, our internal customers are looking for. Thank you.
Great alignment on that, Kevin. And that's I mean, we're all about delivering happiness, of course. And one of the ways we do that is working with customers like both of you, hearing those needs and understanding.
And then, of course, what
we don't have today, we will have tomorrow. Engineers and innovators are product managers are working hard on many of the things that you're talking to today. Let me do this. Let me have let me do one last question I'll walk through. And then if I think about just maybe in general, like post pandemic, there's been definitely a major focus on this work from home environment and it's been somewhat forced in the sense that it's not been much of a choice like we all have to.
And I heard both of you talk about new ways of working, new ways of getting things done, new ways of everything that you were prepared for in your companies, but probably fast forwarded. When you look ahead, what do you see post pandemic from your company? What are the key enablers? And what is that going to look like for your company and how people are going to work?
I mean for us, we have a lot of agile offices. So we were already sort of when we talk about what conference rooms look like for us, it could be a phone booth for 1 person, for 2, for 3, for 5. It could be a conference room. It could be anything, right? So there's that aspect of it.
We aren't dying to get back into the office. Of course, we have our offices. We will have that back to work plan, but we're equally going to work on kind of full time work from home positions. It's clear based on the surveys we've done as a company, there is a strong desire for that. I think myself of the how many years of my life
I wasted commuting 3 hours a day, right?
So I think there's that collaboration is going to be huge, right, the need for that to grow and expand. But when I collaboration is going to be huge, right, the need for that to grow and expand. But when I think about enablers, the thing I think that is most critical is leadership, right? You need strong leaders to lead out a crisis and all those things. But your job as a leader becomes so much more than just about the job, right?
One reason I demand my team to video share is because I can feel them. I can see them and I know if they're struggling. And they're going to get a call from me after the meeting because the health of our company depends on the health of our employees and there's so much mental pressure on them. As leaders, we have to be aware, doing more and kind of being prepared to support our workforce on a bigger level. It's not just about your work and getting work done.
The health of those employees is important. And there's here's one example of the crazy that goes on for us. We post COVID hair is a thing, right? So one of the guys had really long hair. He looked like a hippie.
We're giving him a hard time. So he joins one day with a headband on, a red, white and blue headband. And at QMI team, right, the next meeting everybody's got red, white and blue headbands. So we join and we all are mimicking him with the red, white and blue headbands. So the spirit of lightness, right, you have to do more than just lead and do the job.
You have to make it a little bit light and connect people in a different way. I feel like leadership is the thing that we've got to nail across the board.
Awesome. How about you, Kevin?
Yes. I mean, I'm looking at
it probably a little bit more tactically in that. Now that we have the platform, and I believe we were successful at delivering this platform, now we're trying to get more out of it. So I think that the future for us is obviously maintaining that stability for sure, right, making this a solid service that everyone can trust, but now adding upon it, delivering all the new capabilities that Zoom releases almost seems like weekly basis, right? How do we do that effectively? So that now we're stepping up to that challenge.
How do we communicate and maintain that communication with our user base globally?
The other thing that's come out
of the woodwork for us are new ways to use the platform, API integration from a variety of different areas. So now we're actually building some API management so that users can get to Zoom, utilize Zoom, as well as the Zoom data, right, for various different processes. So it's really using every aspect of the Zoom platform in the best way we can.
Thank you. Definitely a hard one for myself. Speaking of leadership, we are definitely our leader. Eric, I think you're here. You want to say a few words?
Yes. Thank you, Ren. First of all, I want to say, Joe and Kevin, thank you so much for your time. With customer like you, I can tell you life is great. We truly appreciate that for your support.
Your advice, always try to help us give us a feedback. We just cannot thank you enough. Thank you again for your time. Thank you. Thank you for being a great partner.
Thank you.
All right. With that, I think we'll head over to our 3rd part of the day for Q and A. If you want to go ahead, I think me, Kelly and Eric, and there we are, a virtual, it's a quick switch.
Yes. And our first question will be from Ittai Kidron with Oppenheimer.
Hi, guys. Thanks for hosting the event. And again, thank you for being available in this last 6 months, not only making work available, but my son's bar mitzvah was over a Zoom as well, global event. And so thanks for making that happen. I do have a question, Kelly.
One of the slides that you mentioned was talking about your penetration into the G2K accounts. And I think correct me if I'm wrong, you talked about how only 12% of the G2K are $100,000 customers at this point, which on one hand, let me surprise. I mean, clearly, this is a very big opportunity. On the other hand, how come they're not there already, right? So help me understand, first of all, do you think that all of the G2K customers, companies can be $100,000 that's just from a big picture standpoint?
And if so, what is taking them so long? Why is that so hard? What perhaps needs to change about your go to market in order to move them over?
Thank you, Ittai. I ask Brian these questions every day. I'm
just kidding, Brian.
I think that one of the other stats that was on that slide, right, is that 54% of the Global 2K are spending $1,000 with us of ARR right now. And I think that's a great indication to show that there's interest there. They might be testing it, but they haven't yet gotten to the point of a significant rollout. And absolutely, there's no reason that they can't all be spending $100,000 at some point in time. And this part of the reason that we started talking about this is because there's a huge initiative in the organization where we monitor every single week the progress that we're making towards the Global 2 ks.
So Brian and his team have a great dashboard where we look at the progress that we're making. And so this is one of the key initiatives that we're driving to drive the sales team forward and continue our expansion in the upmarket. Ryan, do you want to add anything?
I mean, I think right on, we've seen a lot of success there, but so much more to go. And one thing we do see is, quite often to get a full deployment. It probably does come in a couple of steps. Quite often, you'll get a foothold in department or division of these extremely large companies, improve the success through a pilot and then kind of grow through expansion. So depending on where you are, and then honestly, the product is amazing, that works fast, sometimes the paperwork in the process is actually going through all the logistics of the company is one of the longest parts of the sales cycle with some of these extremely large companies.
Is the availability of phones important in that type of a customer tier?
Say that again, is availability of
Phones, important in that type of a customer tier?
Yes, very much. I mean, lots of companies are looking for a unified communications or at least picking 1 to 2 platforms, kind of like you heard today, especially companies of that size with acquisitions, they have a variety of different tools. So consolidating their communication, their video, their collaboration stats to one platform or even quite often a couple, but having those be their primary or something that we're seeing quite a bit of.
Very good. Thank you.
Our next question is going to be from Brad Zelnick with Credit Suisse.
Excellent. Thank you so much. And it's so nice to see everybody. Congrats on such an amazing event and all the innovation that we are hearing about today. My first question is, I guess, for Graham, if he's still around or Kelly, and then I have a follow-up for Eric.
But my question is on Zoom Phone. At this point, what does it take to see accelerating adoption? And is it fair to think that the pandemic in and of itself is an obstacle for customers to deploy phones and even rooms in offices and that there could be pent up demand as economies eventually reopen?
Graham, do you want to take that? I think he's here, but he might not. Yes.
If not, Olivia, it's perfect.
Go ahead, Graham.
You're on mute.
Graham, I think you might have a physical mute button on.
I can jump in real
quick. Brad,
a couple of things. So yes, there's an opportunity for some pent up. I mean, part of it is getting the word out, which we're very aggressively working on. As you heard from the customers we just heard, we are seeing a lot of success with Zoom Phone. One thing I will say that changed a little bit with COVID is people understanding their phone footprint, meaning whatever it was pre COVID, it might not be the same.
And that's because a lot of workers worked in different ways than they had expected to and people are also trying to understand what their future workforce looks like. Like, is it work from home? Is it remote? Is it a hybrid? And in that, it is definitely an opportunity, but also getting down to those details has been something that we do see customers are trying to figure out as they're working through the Zoom phone
journey. Okay. Thank you.
And from the point of acceleration, I don't know if there's anything in particular. I know, Kelly, in the past, you've talked about China and India coming along, which I think we're still expecting by the end of this year. But is there anything else in particular that we think can be or we should look out to as a driver for accelerating phone adoption?
Certainly, international availability has been one
of the key hallmarks that you're referencing and
we've been talking to. So, excited to say that as of today,
Internet Internet are still on the list of the goal. Graham can update us if I'm wrong, but I think for it's targeting still for the end of the year. And that's really important. I think when you think about that goal is okay, the reason that's so important is because of the multinational customers that we have, They want if they want to be able to do a full end to end native deployment, they we need to be in all of those markets. So that's why we've been so excited and so focused on getting international availability as quickly as possible.
Yes. Brad, just quickly to add on to what the Kelly side, I think when the industry or the customers realized video and phone are the same thing, I think we will see the acceleration. Quite often people say, oh, this is a separate service phone. It's not. Video and phone are converged into one service.
But similar to what we did before when we did a Zoom, the public will say, hey, what's the difference between this and other solutions? There's a huge difference because of architecture, right? That's why for some of the customers after they test the Zoom realize, wow, it's just a feature. It's just another way to launch a Zoom meeting with a phone number at a shorter
card. Eric, that's actually a good segue into my next question for you. Your approach to developing the technology was very innovative from the start along many dimensions. And over the last couple of weeks, I believe NVIDIA recently announced Maxine. And I'm wondering your view on what this does, if anything, to democratize video conferencing for software developers and the impact of the overall video conferencing and communications market?
Yes, this is a great question, Brad. Back to the reason why we're seeing a and video same thing, because we have a greater customers like Teo and Canon. They give us feedback. They mentioned, video is great. We already have voice.
Why do I need to have another service, right? That's the exact reason. Back to the media announcement, I can tell you tomorrow, I'm going to have a fireside chat with Jensen. And I think there yes, Jensen Huang, right, the CEO of NVIDIA. I think that first of all, I think we are the number one company in the artificial intelligence.
And their cloud GPU is the best of the best. I think we are going to talk about how to leverage that. But to scale your video content like this, today we have 500 people in the video meetings. I think it's really hard to leverage a cloud. So that's why we needed to talk about how to sometimes the computing should be done on the client side, sometimes should be done on the server side and how to start this kind of hybrid.
There that's where the innovation comes from. But we are going to work it together, right? I think let's see. For now, it's too early to tell.
Excellent. Thank you all so much. I truly appreciate it and continue to have a great conference. Thank you, Brad.
Our next question is from Sterling Auty with JPMorgan.
Yes, thanks. Hi, guys. So in terms of Zoom Phone, the large customers that have not yet adopted that I talked to and I asked them what are some of the hurdles that you're looking at, the two things that they bring up is getting comfort with the stability of the platform and then secondly, the management tools necessary to administer and manage a very large deployment. So my question is what's on the roadmap to help those large customers get comfortable with those 2 issues?
So, let me take that. Stability, to be clear, hasn't been an issue. And so that's just awareness and comfort and walking through with those customers. And then on the management tools, we're doing very rapid adoptions of tens of 1000, 30s of 1000 and being able to do that. Some of that historically, there's been large professional services in that world.
And we also are working through partners, which is part of that process where appropriate. So for people that do want a certain level of handholding or across different geographies or going into offices, whatever it may be, being able to offer our own or also being able to use partners. That said, one thing that's different about Zoom Phone is because of the platform that we've built it on
and the
scalability, using material professional services isn't the same requirement here as it is with many other platforms and services in the market.
Got it. Thank you.
And our next question is going to be from Walter Pritchard with Citi.
Hi, thanks. Question Kelly for you and any thoughts Eric might have on just how you're thinking about monetization of some of these new technologies. For example, with on Zoom, there are things there that are super high value, maybe worth more than somebody paying $15 or $30 a seat per month. So I'm curious how you're thinking about monetizing that. You've been foreshadowing this product, I think, for a while, but would love to understand what view gives us into how you're thinking about monetization differently than in the past?
Yes, there's going to be a couple of different models attached to on Zoom. There's a portion of a rev share and also a way for whoever's hosting it to generate tips as well. And we're in very early stages of this. So we don't expect to have it for it to have a material contribution now as we're just working on it, but we're excited about what it can look like in the future.
Okay. Thank you.
Walter, just briefly to add on to what Katy said. First of all, thank you, Citi. I gave Citi a great award for being a great partner this morning. I think think about the on Zoom is part of the overall shared economy, something similar to what Uber and Airbnb offers. It's a knowledge sharing platform.
That's why it's a huge opportunity, I think.
Okay. Meaning that has higher value, knowledge has higher value than an interaction?
Yes.
Okay. Thanks. Our next question is going to be from Meta Marshall with Morgan Stanley.
Great. Thanks. Maybe a question for Eric. You seem to have kind of 2 parallel paths in feature development, features that make the experience more like in person and features that make it more productive, whether that be translation, takeaways, etcetera. Like what are your customers asking you for today, going forward?
And how do you kind of keep adding features on both of those parallel sets and still keep it easy to use?
So that's a great question. So I think it's not because of dynamic crisis, I think the journey is pretty complex because essentially we have 3 things in parallel, not 2. One is for our very important large enterprise customers. The second one is sort of those online buyers or free users or consumers. The third is about developers.
It's something we have a B2B, B2C and B2D. The good news because of this pandemic crisis, the line between working from home and working turned to blank. That's why when we developed this product, quite often the feature developed for say business customers or live enterprise also can be applied to consumers as well and vice versa. And inside of that, I think number of important things we got to spend time on talking with our customers and understand their pinpoint and solicited feedback. And then we take those feedback back and then quickly develop some features like the features we announced this morning.
All of them, we got feedback from our installed base. That's why essentially you look at our engineer team, I would say I do not call that as 3 different team, it's still one team now.
Got it. And then maybe just a follow-up question for Ryan. Just on you clearly have a brand that doesn't require a lot of channel presence, but channel is kind of important, particularly with phone sales. So just how has thinking evolved on channel development, particularly in the U. S, understanding you're building it out extensively internationally?
Yes, great question, Meta. A few things, the brand is very popular, as you know. It definitely helps. At the same time, the market was already big. And honestly, the recent times we've had has showed us that the market is even bigger than many of us all already thought.
And so and that's where channel partners come in. I mean, they have different varieties of value, but part of that is just there are so many customer potential customers and prospects to get to, how do we get there faster? And channel definitely helps with that. Quite often, I think as you know, especially on the phone side, they probably bought that system or it's managed by somebody that was on the channel. And so leveraging those relationships, leveraging that knowledge, leveraging that service, and that's globally in the U.
S. Of course, but especially in places you might go to like a Japan or Latin America, other geographies where channel will play even it's playing a role everywhere, but even probably outsized in certain geographic markets.
Great. Thanks guys.
And our next question is going to be from Kash Rangan with Bank of America. Kash, are you there? No worries. We have a backup. Nikolay Beliov with Bank of America.
Hi, thanks for taking our questions. My first question is going to be around competition. We did an extensive UCaaS survey recently and surprisingly Microsoft Teams came really strong. And we also heard from one of your panelists that they're using A5. Question both, Eric and Ryan, how do you protect yourself from Microsoft Teams sneaking up on you as more and more customers use E3 and E5?
And how do you view your relationship with Microsoft Teams? You also clearly announced the integration for Zoom Phone with Microsoft Teams.
I can start. Ron, feel free to chime in. I think, first of all, given the mix of history and product portfolio, I think almost every enterprise customers for sure they use something, right, from Microsoft. I think that's given. And plus, I think the Microsoft culture is getting much better after Satya, he took over the CEO position.
We are a very good partner in Microsoft. Quite often, you look at some of our installed user base and they deploy both Teams and Zoom. The reason why is Hassam realized they wanted to deploy the best of bridge solution. And Teams for I'm for file sharing or maybe next generation of SharePoint, then Zoom specifically for video for meeting, large webinar for the phone as well. Those 2 work together very well, right?
That's why I think that also price market is huge opportunity. Like 2 weeks ago, if you wanted to use a solution from Van Vrinde for everything, guess what, if you have outage, you cannot work on anything. Your e mail is done, your office, everything is done, right? That's why customers like to have 2 solutions, especially for enterprise the company. And again, I seriously, I really do not look at the Microsoft as everyday think about they are our top competitor.
We always think about how to partner more with Next. That's our direction.
And this is the question that Kas wanted to ask. What do you think of Zoom exhaustion and tools to rejuvenate users?
Ryan?
Yes. I had something we were talking about this the other day. I was in a networking group with other chief revenue officers and most of them are Zoom customers and they were joking about Zoom fatigue and of course this event was on Zoom and we kind of joked and then one of the other CROs said, well, it's not really Zoom fatigue, that's not fair, it's meeting fatigue. And I kind of drove back like, it's really work fatigue,
I mean, at the end
of the day. So it's not necessarily about the tool and Eric is always innovative and his team will come up with creative things. I think we saw something in the keynote today from Arianna Huffington kind of to step back. We see companies that are ending meetings on the 25 minutes or the 55 minutes and just doing little things because you're missing that maybe you kind of catch your breath between running from one conference room to another, even though you probably show up late. You just kind of click from one to the next.
But I think some of that fatigue, it's probably not about the tool from at least where I come from. It's really about the work. It's just about our environment, which is kind of different for most of us and how we're adjusting to that.
Thank you.
Our next question is from Alex Kurtz with KeyBanc.
Yes, thanks. Another question for Ryan. We often talk about Microsoft as a competitor for a lot of obvious reasons. But Cisco doesn't come up much, right? But obviously, their share in the Global 2,000 is dominant.
And I just wonder where you are today relative to maybe a year ago as far as strategy about going into large Cisco accounts that buy 30, 40, 50 products and how you have the sales organization kind of navigate that process?
Yes, we're pretty active on that one. We do see a lot of success in those competitive engagements and that's from first off from a product, the innovation, the value that we're able to deliver. That's also our people, like Eric talked about, like caring, really understanding what customers want, how we try to differentiate, we want to win on product, but we also want to win on people and process, are definitely some of the ways that we're seeing success. And then there was a question from Meta earlier about channel, that's another way. A lot of those companies have bought those products through channels.
A lot of those partners are also now working with Zoom. And it isn't only Zoom. Most partners, as you know, they will sell and have multiple products and services. But as the Zoom brand has grown and Zoom success has grown, they definitely want to be part of that and they don't want to be on
the other side of that.
And so what we're seeing is many partners from Cisco, but also many other places are now coming and at least adding Zoom to their portfolio to be part of the opportunity and the success that we're seeing and hope to have going forward.
Our next question is from Tom Roderick with Stifel.
Hey, Tom, you're on mute. You're on mute, Tom. Careful.
The beauty of Zoom, you can do this from all over the place. So thank you for taking my question. I'm actually in the car, so we're doing this in real time. So thank you. It's great.
Eric, let me turn the question to you here. Again, a lot of question by users with Zoom fatigue, but would love to hear a little bit more about how your employees are working, culture is so important to you. Tell us a little bit more about how the work from home environment is working, how you're collaborating and how culture is sustaining at Zoom?
Tom, that's a great question. First of all, thank you so much for giving us a tour, being a driver. Thank you. So yes, over the past several months, I can tell you one thing. Looking back, I truly believe the company's culture and value are the 2 most important things.
If not because we invested a lot to accompany the culture and value, I can guarantee you the service was already done for many, many times and many, many oddities already. A lot of employees might have quit already because it's just so much work, very hard work. And back in April May, I mentioned it this morning, I had more sleepless nights. The reason why is we had to add capacity, right? We needed to do so many things, right, because we have a huge job in terms of traffic.
And our employees, 1st of all, they all work very hard. Nobody complain. They all realize this is a great opportunity to have the world, to have people stay connected. Everyone is working extremely hard. However, at the same time, for everyone to work from home for such a long time indeed very difficult because like new employees' orientation, the unemployed mental health, right, sometimes anxiety, depression, indeed a big challenge.
That's why we took a step back, really look at everything from our employee perspective, what we can do more, right? To think about employees like they can take PTO, no meetings, no internal meetings on Wednesdays, we give the cash bonus, some stock, a lot of things. I think this is a great the company. I feel very proud of our employees. Like this morning, the Zoom topic, our marketing team worked so hard day and night.
It's prepared very well. They are so passionate about the new portfolio. That's why as the CEO of the company, I just feel very fortunate to have so many great teaming.
Tom, the only other thing I'd add is just that we all know we're doing something important, especially at a time like this. And so people are definitely working hard, but we also feel that our customers, they're counting on us at the end of the day and whether that be to learn, to educate, to socialize, whatever that might be. And so there is definitely a feeling of like we need to be there for our customers to make sure that they're able to do things they're trying to do, especially these days.
Outstanding. Maybe I could ask one quick follow-up question just with respect to the global workforce. There's been a lot of talk and maybe some political pressure about where some of the traffic goes. You obviously have a fantastic R and D presence in China, but would love to hear about where you think you can expand the R and D workforce and if there's any sort of political pressures that are forcing that expansion. Tell us a little bit more, Eric, about your thoughts on the current R and D geographic footprint and where you might take that going forward?
Yes. So first of all, our core technology, we have a core engineer team in downtown San Jose here. And also over the past several months, we announced we are going to hire more and more engineers in Pittsburgh, in Phoenix, right? And we are going to double down on our engineer hiring here in Heidelberg as well. In addition to that, we also opened up a big office in Bangalore.
A lot of the dev ops engineers, business intelligence engineers also will be hired there as well. Also, we just started to open up an office in Singapore as well. I think given that everyone can work from home remotely, now I think give us a great opportunity. We can hire more and more engineers in other places. I think that's the best plan.
That's why I think the risk is relatively very low. Even if we do have some engineers in other countries like China, here we are establishing a very, very good, very strict code review process. That's why we feel very comfortable down the road no matter where we are going to hire engineers anywhere. I think that's a trend. Almost every company, they thought to hire engineers all over the world because you have great engineers.
They do not live in Silicon Valley anymore. They can move to any other part of the world. They still can contribute.
Outstanding. Thank you. Appreciate it.
Great job. Well, simply Tom. Thank you.
Matt, this is Tom McCallum. I just want to let everybody know if you could just keep it to one question, we have a lot of people want to ask questions and want to keep moving along. I also want to point out that we didn't put in our safe harbor about driving while Zooming. So our legal team does not agree with that.
And our next question is going to be from Philip Winslow with Wells Fargo. Yes,
that was actually going to
be my suggestion to add an accelerometer feature in there to stop Tom. It's in Zoom, so maybe add that to the list. But we heard a lot today about the synergy that you get with having Zoom video and Zoom phone together. I wanted to focus in on Zoom chat too, because obviously you have 1 on 1 chats, your group sessions. What is it how do you think of a chat and sort of the whole sort of unified communications platform of Zoom going from a group chat to a phone session to video all at one click?
Yes. So first of all, look at our customers see the mood from other solutions, Zoom solution like the phone, Zoom, sometimes before I call you Phil, I want to send you a chat message and then we start either video call or phone call. That's why we have to have that feature built in. We already have that for many, many years, but we do not talk about that much. The reason why is our chat is more like a UC centric chat.
Take this morning like ExxonMobil for example, they do use it in chat for video and voice and as well. I think at the same time, I think especially for engineers, for large enterprise customers, it's very hard to let them standardize on one platform. That's why we really interpret integrate very well with Slack, with Teams. We give customer flexibility. When it comes to UC, we our chat is specific UC chat, the customer like that experience, right?
That's why we are taking a very open minded approach. We are not going to specifically say, we want to build our own chat to compete against others. I do not think we need that because video and voice, that's our focus. Chat is part of that. The goal is to make sure improve our overall UC experience.
Our
next question is from Heather Bellini with Goldman Sachs. Heather, are you there? Okay, no worries. All right, cool. Our next question then is from Patrick Walravens with JPM.
Great. Thank you. Hi, everyone. This is Greg. Eric Chichi says, hi.
So my question is sort of what you mean, Eric, when you talk about a platform, right? So when you want when you talk about how you want Zoom to be a
platform, what's
some of the functionality that's not in it today that you would like to see in it
someday? That's a great question. First of all, I can tell you, your daughter has a lot of huge fans at Zoom. They all love her. Yes.
I asked her if there's anything else that you guys need to work on. She said, no, tell him he's doing a good job. He said, tell him my friend, Petra and I both think he's doing a good job. So now you're good for the moment.
Thank you so much. You minimized DTV. Thank you. So back to platform, we should believe ultimately it boils to 2 things. 1 is about the people another about the product, right?
Today we launched on Zoom. Essentially that's the people part of the platform, Meaning, everyone, they can especially for those not only workers, they can make a living on Zoom platform, You see, you know how to cook, right? You can be a great hit a cooking class, right? You can make a living. I can easily discover those events.
That's why it's becoming a platform. You can sell knowledge, you can share knowledge, that's why. On the product front, David announced and when it's customizable SDK, right? You can leverage our API. You can embed Zoom into our application.
That's a traditional SDK. We keep innovating on that front. Also what's more important is that when Zoom becomes a people centric platform, take today's Zoom user interface for example, we can allow all other third party applications to embed their interface into Zoom interface. Within this interface, I can easily have a document open it up, we can talk about that, we can send that. A box or Dropbox, we have a mental health app, this is not a part of our platform.
It's a product driven platform. So that's why I think Aecom's platform, I think that's a huge opportunity. We are going to trickling down our platform. Thank you. Thank you, Patrick.
Our next question is from Alex Zukin with RBC.
Thanks. Thanks, Ryan. And Eric, Kelly, thanks again for doing what you do. Eric, I want to ask you kind of similar vein question, but and work in a financial angle there as well. But if you think about, yes, you've successfully transitioned what many people thought was a commodity into a utility.
And now you've launched both a marketplace and an app store at the same time. So dream the dream. There wasn't a lot about on Zoom or Zaps in the Analyst Day deck, but dream the dream for us because usually marketplaces and app stores can become as big as the product itself for a lot of companies. What do you think how long does it take for us to see these two products really take off in a way where you start allaying some of the investor concerns, which is how do you comp this exceptional growth year that you've had during the pandemic? And this kind of for Kelly as an extension, when do we start and when do investors start seeing these or potentially start seeing these 2 products play into the growth and be a driver for growth incrementally for the business?
Yes, Alex, I can start. That's a wonderful, it's a great question. So it is back to the platform part. Essentially, today, you take a step back, look at our on Zoom new service, the people centric path and also our new Zaps. We should believe the platform features even much bigger opportunity.
However, if you really think about those 2, down the road, those 2 will be converged essentially the same thing. The reason why when I teach, let's say, yoga class, I put the yoga class event, say, 100 people register. And also within that Zoom interface, I can do so many things. I can embed all kinds of other I can import a special customized virtual background. I can select different applications as well.
Essentially, those 2 are same thing to offer a platform. I think it itself, I think it's video communication is just an app. A platform does unleash the huge power. We even don't know what's the future look like because this is the huge opportunity. Today, which I think we just launched that, it's too early to tell when and how we can capture that platform opportunity.
Yes, I agree, Eric. I think Alex, in terms of the overall contribution, this is something that we would be prepared to at least give you some insight when we at Q4 when we give FY 'twenty two guidance. That's the first time that I think we would even consider how overall these are contributing to the long term growth of the company.
Perfect. Thank you, guys.
Thank you, guys.
Our next question is from Matt Stottler with William Blair.
Hey, guys. Thanks for doing this and thanks for taking the question. Just wanted to, I guess, ask another question on the chat piece. Obviously, starting with the strong video communication side, adding phone and then chat and kind of message based collaboration being the 3rd piece of that. I thought the team SMS and MMS capabilities you guys talked about in the keynote today were pretty interesting, especially with allowing transfers and will look like persistent chat, persistent group chat.
So I'd like to better understand, I guess, how you think about the roadmap for further development in terms of message based communication and beyond that maybe integrating into kind of systems of record or other business applications would be helpful?
Yes, Matt, so as I mentioned earlier, I think chat is very important functionality for our overall UC portfolio because otherwise you have to use a certain other the chat functionality to launch a video call, launch a phone call. So first of all, I think that the core I think the top priority is still how to further improve the integration between chat, video and voice, make sure they're the same experience. That's 1. 2 is look at our persistent chat feature. We already have a lot of features, a lot of customers are already using that.
I think we are going to priority invest more in terms of priorities. 1 is more and more integrations like our Zaps, right? I think we can do something similar as well, right? Zaps can be used before the meeting, right, can be part of a chat, that's 1. 2 is more like integration with like with Box, Dropbox, how to further simplify that experience, more like with that, you see the user interface, right?
And also another level integration of the back end design. I did not see the user interface, but also more like AI based. I want to see the sales report, one click and get all the information. I think both from front end and back end side, integration with other applications, I think that's priority and for us to focus on down the road.
Our
Our next question is from Will Power with Baird.
Yes, I just want to come back to Zoom phones. This is probably for either Ryan or Graham perhaps. Just as you think about the upmarket opportunity, it sounds like you're already generating nice success. As you think about kind of 10,000 seat plus type organizations or even anywhere above the 1,000 seat threshold, what are the barriers to even quicker adoption? Are there any feature sets that some of those biggest customers are still awaiting?
Or is it more just about go to market, feet on the street, expanding international? And then part B of this is part of the same question, Tom. As you think about that $23,000,000,000 addressable market you laid out in 2024, what percent of that do you think you'd get to? Can you get to 25%? How do you think about that?
Yes. So William, I'd answer the question around upmarket with we have been investing over the past year, 1.5 years around the needs of our enterprise customers and helping around whether it be migration issues that they may have or specific feature sets. And so I think a notable example, knowing that a lot of our customers, they might do business in 1 150 different countries globally, our bring your own carrier option, providing flexibility for them where we can provide native services in some countries, being the 43 that we have today, but we can allow them to bring have an option to bring their own carrier in those other markets, providing tremendous flexibility or we even have some enterprise customers that have spent the last 10, 20 years building out their footprint of PSTN connectivity and so they can just replace their PBX with Zoom Phone and still leverage that same investment that they have. So a lot of it has been in the flexibility of how we've designed and architected the solution as well as investments to allow for kind of simplified and seamless migration as they move because you don't flash cut 100,000 phones overnight. So allowing for seamless migration between the old to the new, I would say are kind of key areas that we've been investing in that have helped us see the success that we're seeing in the market space.
Okay. Any thoughts on ability to penetrate that $23,000,000,000 TAM in 2024?
What do
you think is achievable? Would you be disappointed if you didn't get to?
Yes, I guess I'll turn it over to Kelly on that one. But I would just say that we see tremendous acceleration. I did share a number of those statistics of kind of where we're at with regards to over 500,000 paid seats sold in the past 12 months and the trajectory is very high. So definitely have aspirational goals, but we'll defer that to Kelly.
Yes. In terms of more specifics around Zoom Phone and Achievement, we saved those for the anniversary date. So we'll talk about that when we come up on the 2 year anniversary of that.
Thank you.
Our next question is from Rishi Jaluria with D. A. Davidson.
Hey, everyone. Eric, Kelly, Ryan, really appreciate the time and definitely you've made the pandemic at least workable for many of us here. So really appreciate that. I want to ask just one high level philosophical question, which touches on stuff that's been said here and the keynotes and the conference, which is around the future of work, right, Kelly, the topic of your part here. Just we've seen a lot of different approaches from companies, some talking permanent remote, some talking hybrid, some like Dropbox talking virtual first.
From what you're seeing with customers, how are you thinking about how in a post pandemic world whenever that happens, what that nature of work is going to be and how you can help shape that even shape that dialogue in the 1st place with as you can continue to expand your capabilities and continue to expand your features? Thanks.
Eric, you want to talk about that or you want me to?
Yes, you go ahead. Thank you, Katy.
Yes. Rishi, I think one of the things that we've seen this morning that I was most excited about was the Zoom Rooms technology. I think what we've seen is that employees love the flexibility that we're getting in this environment. Employers want to keep their employees safe. And they've also seen this can be very effective.
I think what everybody is concerned about is this has worked so well because we're all at home right right? There's this clear like I talked about in terms of democratization, right? When you look on the screen, we're all the same size. How do you keep that positivity, that sense of democratization when we start going back and some people might be in the office and some people might be working from home. And that's why I'm super excited about the technology we're starting to see, which allows you to have the same experience really.
It's like I'm sitting in my sister's house, right, but you're sitting in the office. How do we have that same experience? And that's really what people are striving for. And I think that's what Zoom and Eric and the team are striving for is to keep creating that so that we can have the best of both worlds coming together, which is what where I think we're moving towards.
All right, great. Thank you.
Our next question is from Richard Valera with Needham.
Hi, all. Thanks for taking my question and for holding this great event so far. So I have a couple part question on Zoom. First, I haven't heard you put any kind of sort of number on that in terms of a TAM. Have you thought about the online event marketplace, how big that is today in a post COVID world and how much maybe incremental TAM there is?
I know the business model is evolving, but I was hoping you could take a crack at that. And then secondly, Kelly, I think in your prepared remarks, you said you thought on Zoom was particularly helpful to the sub-ten cohort. I'm just wondering how you think that could affect that cohort in terms of churn or monetization relative to historical levels? Thank you.
Yes. Thanks, Richard. So we're at early stages, as Eric said earlier, and I don't think anybody really understands what the of communicating of communicating and living and buying services, frankly. So we don't know what it is yet, but this is the area we've talked a lot about this cohort over the last couple of quarters. We've seen it grow dramatically from 20% to 36% of our business.
And it was the area, frankly, that pre pandemic, we didn't really focus on as much, right? We were focused a lot more on our enterprise customers and now really listening to them and trying to think about, we've talked about this disparate experience that consumers and also businesses have been having and that's what on Zoom is trying to bring together now. So you don't have to go one place to like pay for your yoga class and another place to get your Zoom links, right? Starting to bring this all together and also create an opportunity for exposure of those experience. And that's what I think you're going to see how we're going to bring more value.
We're just simplifying and streamlining the experience for both the consumer and the small business owners as well. And then I think you're going to continue to see expansion, not just small business users only using this platform, but big, awesome experiences that you're going to see in the future as well.
Great. Thanks, guys. Look forward to seeing that happen.
All right. And we have time for just one more question, and that's going to be from Ryan McWilliams with Stephens.
Thank you, Matt. Hey,
so much has changed in the year, right?
I mean, 80,000,000,000 annual run rate minutes last year to 3,000,000,000,000 annualized this year.
And I would say that's quite the growth.
But Kelly, just on the long term margins, I think it's certainly unfair to make comparisons last quarter. But would you mind just adding a little more color on the change from 20% plus to 25%? And then maybe what are the things that drive upside for the long term? Thanks, guys.
Yes. I think we talked about this on the Q2 earnings call, but just as a reminder, the reason that the margins, the operating margin was so high in Q2 was due to that severe acceleration of revenue and it happened more quickly than we were actually able to keep up from a hiring and a spending and investing perspective. But it's just not sustainable. You can ask Ryan, like his team has killed it. They've been amazing.
I mean, our whole Zoom employee base has been doing everything they can to keep our product up and running, keep our platform stable, supporting our customers, our prospects. But we need to ensure that we're continuing to build that
capacity for longer term growth and
that we don't as Eric talked a lot And that's really why you're going to see an expansion of spending And that's really why you're going to see an expansion of spending in sales and marketing and especially in R and D. R and D at 4% of revenue last quarter is frankly, it's just too low. We and that's why we're focusing on adding engineers in other locations so we can accelerate that hiring, diversify the town pool, so we're not limited in that capacity. And those are some of the reasons that you're going to start to see that operating margin come down from 40% plus to we think longer term the 25% -ish.
Thank you very much, Kelly. Thank you, Eric. Thank you, Ryan. Thank you, everybody for joining us. I hope you can enjoy some more of Zoomtopia.
Just have a wonderful day.
Thank you.