Zoom is “disappearing” from China

On August 3, Zoom, an American online video conferencing software company, announced that it would stop direct sales in mainland China.

Zoom’s official announcement stated that from August 23, it will no longer directly sell new Zoom services or upgrade services to customers whose billing address is in mainland China, and only sell services in mainland China through partners. “These partners’ products are embedded With Zoom’s technology, they will provide better localization services.”

Zoom was founded in 2011 and is headquartered in San Jose. It is a “real business” American company. However, the founder of Yuan Zheng’s Chinese background has made Zoom more and more questioned since last year. In April of this year, the Speaker of the US House of Representatives, Nancy Pelosi, called Zoom a “Chinese entity” with a security risk.

Zoom and TikTok face the same dilemma, because Sino-US relations are subject to strict scrutiny by the United States. However, in contrast, Zoom is much luckier and more sensitive.

Zoom previously had three sales models for the Chinese market: direct sales, online subscriptions, and sales through partners. The online subscription model was also cancelled previously.

In May of this year, Zoom stated that it would no longer accept individual user registrations, and only companies can purchase its services in the future. From May 1st, individual free users cannot initiate meetings, but can join meetings. Only paid corporate accounts or personal accounts upgraded to the paid version can initiate meetings.

With the development of the situation step by step, now that Zoom has cut off most of its Chinese business, it has become a helpless move.

“Targeted”, from data privacy to national security

With the global spread of the epidemic, video conferencing software companies ushered in explosive growth, and Zoom became the most eye-catching company, with its share price doubling. However, in the face of the sudden surge in market demand, Zoom’s preparations are obviously not sufficient.

Since March this year, Zoom has been frequently exposed to security vulnerabilities. A former researcher of the US National Security Agency said that more than 15,000 videos were recorded and streamed, involving online classes, corporate meetings, private conversations… a large number of them were uploaded to YouTube and other social media and were “surrounded” by people. Zoom user data on iOS will be shared to Facebook, including usage time, device model, etc. Zoom has been criticized by the industry for not adopting end-to-end encryption technology, resulting in too simple video conference links and download addresses of recording files and there are certain rules.

The most important thing for enterprise-level service products is stability and security. Public opinion about the security breach caught Zoom by surprise, and it lost a large number of government and corporate customers. NASA, SpaceX, Google, etc. prohibit employees from using Zoom at work, and multi-state educational institutions in the United States instruct schools to abandon Zoom.

In addition to the product defects exposed by Zoom itself, the increasingly complicated relationship between China and the United States also makes Zoom not well.

In April, it was reported that Zoom was routing some foreign traffic back to China. Later, Yuan Zheng admitted that the company did not follow a consistent policy in increasing server capacity to cope with the surge in demand, routing part of overseas traffic to two data centers in China.

The Speaker of the US House of Representatives, Nancy Pelosi (Nancy Pelosi) said that Zoom is a “Chinese entity” with a security risk .

In July, Senator Richard Blumenthal, Democrat of the U.S. Congress, and Senator Josh Hawley, Republican, sent a letter to the U.S. Department of Justice, equating Zoom with TikTok and demanding that The two companies reviewed, “The Department of Justice must investigate and determine whether Zoom and TikTok’s business relationship, data processing behavior, and their business links with China pose a risk to Americans.”

The reason why the United States firmly believes that Zoom is “problematic” is that even though Zoom is based in San Jose, it still has close ties with China. Most of Zoom’s R&D personnel are in China. As of January 31, 2020, there are more than 700 people, and they are in cities with relatively low labor costs such as Hefei, Hangzhou, and Suzhou.

Zoom will do this because the salary of R&D positions in China is much lower than that of Silicon Valley, which is one of the important reasons why Zoom can be profitable.

“Fix” in time

At that time, Zoom’s situation was not easier than TikTok, but Yuan Zheng, who realized the seriousness of the problem, quickly took measures.

When the security breach was exposed, Yuan Zheng immediately broadcasted an apology and promised not to update and rectify it for 90 days. When it was questioned that it would be controlled by the Chinese government, Zoom quickly added features that let paying users control which data centers route their video conferences. At the same time, it announced plans to open two new R&D centers in Arizona and Pennsylvania and recruit 500 software engineers within two years.

In addition, Zoom set out to form a government lobby team. Hired the former Trump administration’s national security adviser HR McMaster as an independent director, former Facebook security chief Alex Stamos as an adviser, Josh Kallmer as the head of global public policy and government relations, and Kallmer was a former member of the Committee on Foreign Investment in the United States (CFIUS) , And CFIUS is vigorously encircling TikTok, forcing ByteDance to sell its US business.

It is reported that in the first quarter of this year, Zoom spent more than US$4 million in hiring professionals to close relations with the government.

These efforts were not in vain. Zoom received the government’s endorsement. With the support of the U.S. Department of Homeland Security, the Federal Risk and Authorization Management Program authorized federal government agencies and contractors to use Zoom for government video conferencing.

These are all signs that Zoom is “away” from China. Until May of this year, Zoom announced that it would no longer accept individual user registrations. Now it has stopped direct sales in mainland China and only sells services in mainland China through partners.

Far away from china

When Zoom announced the cessation of its direct sales business in Mainland China, it also gave a list of three partners: Huichang Bizconf Conference, Suijian Meeting and Shangyang Umeet Conference.

It is reported that these three companies are the first companies to develop their own brand video conferencing software based on Zoom technology. Sui Rui Zhanmu then said, “Now Zhanmu provides Zoom users with a consistent meeting experience, which is more suitable for Chinese users with high-quality cloud video services and guarantee services.”

There are two ways for Zoom to cooperate with enterprises. One is that Zoom provides the underlying technology, such as the three companies mentioned above; the other is to authorize dealers to sell Zoom products. These distributors have external pricing power and are also responsible for follow-up customer service and operation and maintenance.

Zoom did not mention in the statement whether to stop the authorized dealer mode. However, there are media reports that some dealers received the notice of Zoom’s intention to withdraw as early as July 15th, and now all their energy is transferred to self-developed products in order to connect with Zoom. According to TechWeb reports, Shanghai Huawan, the authorized dealer of Zoom, wrote in an email to customers, “We used to be an agent of Zoom products. After Zoom canceled the agency, our company launched its own conference products (Zomo), Zoom and Zoom. It’s exactly the same, deploying servers in China and using Amazon links abroad.”

This means that if Zoom only retains the cooperation model that provides the underlying technology, users can still use products embedded with Zoom technology, but the Zoom brand will no longer exist in the Chinese mainland market in the future.

Zoom did not completely exit, but it was more like a “position” reset. At the beginning of the year, due to the outbreak of the video conference market, Zoom increased its attack on the domestic market. Online office has caused hundreds of millions of traffic to flood into domestic companies’ WeChat, DingTalk and other software. According to a report by China Business News, Yuan Zheng’s mobile phone in the United States has also been blown up. “Almost everyone wants to talk to me about remote office work. This matter.” In the fiscal quarter ending in April, the Asia-Pacific region generated $31.3 million in revenue for Zoom, more than three times last year, and accounted for 9.5% of total sales, compared with 74.9% of Zoom’s revenue. From America. Zoom has returned to its main battlefield.

The advantage of simply selling technology is, “Chinese companies have to lease data centers, build servers, and buy bandwidth to complete hardware investment. In this cooperation model, Zoom solves the compliance problem of server localization without the risk of infrastructure investment. “Analyzed by “AI Finance Agency”.

In September last year, the international version of Zoom was blocked in China because the Ministry of Industry and Information Technology stipulated that domestic companies must have domestic servers to store data in China to provide network services for domestic companies.

An industry insider told the “AI Finance News Agency” that this will also be a problem faced by global online video conferencing companies, such as cross-border communication between China and the United States. Both countries will have backups, but the data cannot be divided into two.

The divestiture of the direct sales business means that the scale of the Zoom China team will be reduced, but will Zoom be determined to withdraw the team from China? All this is still unknown, maybe it is just a matter of time.

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