This story, originally published in Forbes’ May 2020 issue, has been updated to incorporate breaking news involving Zoom.
Zoom CEO Eric Yuan’s kids finally care about what he does for a living. Sure, they were there that morning in April 2019 when Yuan, the founder of the world’s most popular videoconferencing company, rang the opening bell at Nasdaq, with Zoom’s stock-market debut making him a billionaire. But it wasn’t until a Monday in mid-March that Yuan’s eighth-grade daughter, forced by the coronavirus to go to school remotely, finally had a question about her father’s work. “My daughter had never asked what I’m doing,” Yuan says, beaming. “For the first time, she stopped by to say, ‘Dad, how do you raise your hand in Zoom?’”
Yuan’s son, a college freshman, has become an emergency Zoom user, too. “I told my son, ‘I finally realized why I was working so hard,’ ” Yuan says. “I realized, ‘Maybe I built these tools just for you to use in your online class now.’ ” This newfound respect still wasn’t enough to stop either kid from battling for the family’s WiFi with Dad, jokes Yuan, 50.
Welcome to the new work-from-home family life: conducted, increasingly, over Zoom. As the coronavirus ravages the planet, leading to quarantined cities, states sheltering in place and schools and universities closing down worldwide, Zoom has emerged as one of the leading tools to keep businesses up and running, students learning and people connected through virtual birthday parties, happy hours and yoga classes. It’s also one, that, as security and privacy concerns about Zoom have mounted, is under more scrutiny than ever before.
Eric Yuan On Zoom’s Record Traffic And Growing Privacy Concerns.
On the last Saturday of March, nearly 3 million people globally downloaded the Zoom app on their mobile devices for the first time—a record for the company, bringing the number of downloads since its April 2019 IPO to more than 59 million, according to mobile intelligence firm Apptopia. Zoom recently ranked No. 1 among all free apps on Apple’s App Store, ahead of Google, WhatsApp and even Gen Z favorite TikTok. None of that accounts for the millions who tune in via laptop or desktop computer. On April 1, Zoom said it had reached 200 million daily users in March, up 20x from its 2019-best of 10 million at year’s end.
All of this pushed Zoom, based in San Jose, California, into a new financial stratosphere. As recently as Monday, its shares were up 143% since the IPO and 44% in the last month—a time when the S&P 500 fell 11%—giving the company a market cap of $42 billion and Yuan a net worth of $5.5 billion, making him one of the richest self-made newcomers on this year’s Forbes Billionaires list, being released next week. Even before the spread of COVID-19, Zoom was on a tear, with at least 81,000 paying customers, including Samsung and Walmart. It posted revenues of $623 million and net profits of $25 million through its fiscal year ending January 2020, up 88% and 234%, respectively.
Zoom also became a social-media phenomenon almost overnight. On Twitter, TikTok and elsewhere, Zoom went viral—quite a feat for a piece of business software. “Just got an email from a prof: ‘As a reminder, you are required to wear clothes during Zoom meetings.’ Rules are made when they become necessary, not before,” one Twitter user quipped, getting more than 85,000 likes. Joked another, to 21,000 likes: “Lol you thought you were better than me cause you went to Harvard??? We’re all attending Zoom University now.” (The real Harvard is conducting all of its remaining classes on, what else, Zoom.)
Inside the company, Yuan and his employees had two concerns: keep Zoom running, and make sure it was in the hands of those who needed it most. When parts of China went into lockdown, Yuan opened up Zoom’s base-level free accounts, usually capped at 40 minutes per meeting, to run for 24 hours. In mid-March he expanded the offer to all K-12 schools shut down, first in the United States, Italy and Japan, and later to 19 more. By early April, more than 90,000 schools were using Zoom. Add them to the millions more taking advantage of Zoom’s “freemium” model to use it for work or personal reasons.
Zoom CEO Eric Yuan, seen using his videoconferencing tools in his San Jose office in 2019, has faced security and privacy concerns as daily users have swelled to 200 million.
ETHAN PINES FOR FORBES
Just a week ago, it appeared Zoom’s biggest challenge was ensuring that its systems didn’t crash under the weight of millions of new users, with the brand well on its way to becoming the generic term for videoconferencing of the stay-home era, much like Xerox, Kleenex and Google are for their categories.
What Yuan didn’t account for: with new heights of popularity, Zoom has experienced a wave of growing pains and concerns that have shifted the conversation around its video tools drastically in just a few days. Some schools were already hesitant to offer Zoom to their students. But instances like “Zoombombing,” in which hackers and online trolls crash other users’ Zoom meetings, grew so prevalent that the FBI had to release guidelines on Thursday on preventing them. The New York Attorney General’s office sent a letter asking Zoom to respond to security concerns. And Zoom has been rocked by other reports of sending data to Facebook, sharing LinkedIn information even for users appearing under pseudonyms, and other vulnerabilities. It was enough to make SpaceX join NASA in shunning internal use of Zoom.
On Wednesday night, Yuan and Zoom apologized in a blog post, vowing to freeze development of new meeting features, set up weekly public security-focused town halls, and devote its engineers’ focus to privacy and security for the next three months, among other steps. “I am committed to being open and honest with you,” Yuan wrote. It did little to quell fears as investors continued to sell, pushing its stock down 20% in three days.
In an exclusive new interview on Thursday night, Yuan says that he’s proud of the numbers of people that Zoom has recently helped. He takes personal responsibility for what’s gone wrong and says he won’t stop until he’s regained users’ trust. “We take it very seriously,” Yuan says. “I really want to build something to make the world a better place.”
The son of mining engineers in China’s eastern Shandong Province, Yuan grew up fascinated by entrepreneurs like Bill Gates. After graduating from Shandong University Science & Technology with a degree in applied mathematics in 1991, he decided to head to America. Before his departure, U.S. Customs asked for an English-language version of his business card. It listed Yuan as a consultant, and he was misunderstood to be a part-time contractor. His visa was denied. For the next year and a half, the now-skeptical immigration services would deny him seven more times.
Kindergarten teacher James Baldwin reads a children’s book to his students (below right) from his home in Brookline, Massachusetts, a Boston suburb.
Yuan refused to give up. He eventually made it to California and got a job at Webex, an early player in web-conferencing and videoconferencing applications. It was acquired by Cisco in 2007, and Yuan left four years and four months later, disillusioned by the quality of the service. He started to build Zoom and began offering to hook up some in-need organizations and institutions, such as the University of San Francisco, for free. Offering Zoom for free was key to Yuan’s business, too: the year before Zoom’s 2019 IPO, the majority of its largest customers started out as unpaid users, the company reported in its S-1 filing.
Now that altruistic impulse is taking on global importance as Zoom has become vital for the work-from-home economy. But it’s far from the only company stepping up to meet this trend—and standing to profit later. Google and Microsoft also announced they were opening up more free features for their own classroom and videoconferencing tools. RingCentral, a Belmont, California–based cloud communications company, and Newsela, a New York City–based ed-tech firm, are two of a host of lesser-known players doing the same.
Kindergarten students listen to teacher James Baldwin (above left) reads them a children’s book over Zoom.
But likely no other company has signed up so many new users, so fast. How can Zoom possibly keep up? “Is your platform prepared for practically every college class in America to be using it? Simultaneously? Asking for a whole lot of friends,” said Adrienne Keene, an assistant professor of American studies at Brown University, via Twitter. “It’s unrealistic to expect we can just transfer class to a Zoom call and things will be fine,” she later emails Forbes, noting that some students live internationally, have spotty Wi-Fi or have no quiet space at home. “However, I am looking forward to seeing their faces and hearing their voices.”
Yuan may not have predicted all the ways Zoom would facilitate a social-distancing lifestyle. But the company started to brace itself for huge changes when COVID-19 first disrupted business in China beginning in January. At that time, customers such as Walmart and Dell reached out with concerns, Yuan says, wondering if their local employees would be able to move full-time to communications through Zoom. In the run-up to going public, Zoom had trained its staff on responses to natural disasters, though the company didn’t anticipate that the disaster en route would be a pandemic.
Zoom’s Latin America team enjoys a virtual happy hour.
Zoom’s 17 data centers were designed to handle traffic surges of up to 100x, Yuan says. “The beautiful part of the cloud is, you know, it’s unlimited capacity, in theory,” he says. And with engineering teams across the globe, including in China and Malaysia, Zoom has the technical chops to be able to remotely monitor its systems around the clock.
Still, some Zoom users noticed dips in video quality, or had difficulty connecting in the first place. Zoom’s online help center is experiencing the dreaded “longer wait times than normal.” On March 23, Zoom’s service page acknowledged that some users of its free service were reporting problems with starting and joining meetings. That’s not surprising, given that daily active mobile users jumped 610% in the last two months, per Apptopia. It’s not just Zoom’s challenge. The internet as a whole is straining from so many people now living entirely online, says Morgan Kurk, CTO of communications technology firm CommScope. His recommendation: Schedule your Zoom—or any virtual meeting—roughly 15 minutes past the hour to avoid the virtual rush.
Then for Zoom’s more recent, and more pressing, concern: security and privacy issues. In late March, Vice Media’s tech-news site, Motherboard, revealed that Zoom was sending data to Facebook, even if users didn’t have a Facebook account. Zoom said the outflow was limited to metadata—what type of device you were using, the size of your screen, what language and time zone you were in. One day after the news broke, Yuan wrote an apologetic blog post explaining that the program had allowed users to log in via Facebook, and that code was removed.
What about protecting users from hackers? On March 30, the office of New York Attorney General Letitia James sent a letter to Zoom outlining several privacy concerns, including whether the surge in users made the platform more vulnerable to hackers. “During the COVID-19 pandemic, we are working around the clock to ensure that hospitals, universities, schools and other businesses across the world can stay connected and operational,” Zoom said in a statement sent to Forbes. “We appreciate the New York attorney general’s engagement on these issues and are happy to provide her with the requested information.”
Apology and clarification blog posts have become too common at Zoom in recent days. Yuan admits that “Zoombombing” and other hacks or pranks of Zoom meetings are something he never anticipated. “I really didn’t understand why hackers would want to hack into a classroom,” he says. “Are they going to learn algebra? Maybe calculus?”
Much of the problem, Yuan insists, stems from Zoom’s historical primary usage: for work. Employees who shared explicit images or otherwise pranked Zoom meetings with colleagues wouldn’t last long in the job. It’s different with public meetings, and in classrooms turned virtual. Yuan says that when schools started closing, his instincts were to help. But in hindsight, Zoom moved too fast. It would’ve been better served hosting a day or two of training sessions for teachers before opening up shop. Some security best practices like passwords and locking participants’ screens were already available, he says; Zoom’s mistake was not to make them the default. “I think this is my fault. We should’ve done more to train them,” Yuan says. “We did not do a good job, because we wanted to give them free access and we assumed they had good IT resources to configure security settings.”
Other much-maligned practices or vulnerabilities in Zoom’s software also stemmed from its naïveté about how it would work outside the enterprise. A now-removed attention tracker was meant for corporate training, according to Yuan; a tie-in with a LinkedIn product that shows a user’s job information wouldn’t seem sinister on a corporate call. Some mistakes were fully avoidable, like marketing Zoom’s tools as end-to-end encrypted when the reality was they weren’t that. (On Thursday, digital rights group Fight For the Future launched a campaign calling for Zoom to go further, and make its tools truly encrypted end-to-end.)
Zoom insists it only collects user data only to the extent it’s absolutely necessary to provide “technical and operational support”—in other words, to ensure your meeting’s audio and video are working smoothly. One school in Colorado says it won’t use Zoom, citing concerns about how its data would be used and who controls it long-term. Zoom does not have the ability to monitor anyone’s conversations or meetings in real time, says global risk and compliance officer Lynn Haaland, who recently joined the company from PepsiCo.
On Thursday morning, Yuan held an all-hands meeting for Zoom from his temporary headquarters, his home office in the San Jose, California-area, running on two hours of sleep. The past few days have been tough, he says, representing the worst crisis he’s faced in his career. Usage, now in the hundreds of millions, keeps going up. “I want to raise the bar,” he says. “I told the team, let’s double-check, triple-check the privacy and security, to not let any of our users down.”
Just a week before, Yuan appeared different when reached over Zoom — not just because he was using another virtual background. Then, he’d attended his first virtual happy hour with other CEOs; he talked about new features in the works, from Snapchat-like features for users to “embrace the fun side of Zoom” to settings for college-sized lecturers. Some were half-built, some essentially finished when Yuan froze all new feature development on April 1.
Yuan says Zoom will likely take other decisive measures, too, besides what it shared in its blog post. Yuan says he will “probably” strip all tracking and cookies from Zoom’s website. A bigger deal: Zoom’s CEO says that “down the road, very soon you’ll see” all meetings conducted over Zoom require password protection. The company will double-down on its bug bounty program, he says, and welcomes all criticism and feedback. And if Yuan can’t turn Zoom into the “most secure platform in the world,” in the next several years, he says he’ll even consider open-sourcing Zoom’s code for others to try.
“I feel like Zoom is not a part of Zoom anymore. Zoom belongs to the world now,” Yuan says. “So I need all others to help us. Together, let’s build a much better, most-secure platform in the world, that the whole world can benefit from.”
What happens to Zoom after the pandemic passes? Analysts who saw the virus as a “wakeup call” for businesses that will save on rent and commuting time by shifting more permanently to work-from-home still see Zoom’s influx of users converting to more paid subscribers over time, even after “the first concentrated set of news that has not been overwhelmingly positive,” says JP Morgan Research’s Sterling Auty, who remains bullish on the stock. “Zoom has a culture of wanting to make things better and the actions they are taking demonstrates it,” he adds.
And the recent doubts about Zoom aren’t shared by its paying customer base, says RBC analyst Alex Zukin. Even before Zoom went public, CIOs and customers knew about Zoom’s security set-up and limitations, says Zukin, and had studied its architecture before. They were fine with it. “I think that Eric is in an impossible situation. I don’t think they built this product with this ever in mind,” says Zukin, who believes that Zoom fell victim, temporarily, to its own popularity and hype. “There’s a lot of rabbit holes you can go down that are not monetizable, that are distraction prone. When you do Zoom for birthday parties instead of Zoom for enterprises.”
Yuan acknowledges that much of these problems are of his own making. “I think we made a mistake, but the intentions were good,” he says. Chastened by the boom and bust of life atop the App Store ratings, Yuan is looking forward to a day when Zoom can get back to its bread-and-butter, business customers. “If I have a choice, for sure I will go back to the b2b business,” he admits, “For now, it’s a totally different game.” For Zoom’s many millions of recent new users, however, Yuan vows: “We need to work 10 times harder than before to win trust back.”
These are intense times, made more so by the fact that they are unfolding in his home, under the gaze of his family. A week ago, Yuan said his mother, who lives in the house, asked him why he was always late to eat lunch. Now she wonders why Yuan stays holed up in his home office, barely pausing to sleep. The days of Yuan’s kids asking for customer support using Zoom, meanwhile, may be over for now. Yuan says he hopes he’s setting a good example for his kids on perseverance in adversity. “I told my kids, ‘we are going through this very, very tough time. I’m not going to talk to you a lot, and I’m so sorry. But one day in the future, you will understand why I was so crazy busy for now.’” Until then, Yuan will do all he can to keep the world’s physically isolated people connected.
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This article first appeared in www.forbes.com
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