Zoom, is “disappearing” from China.

On August 3, Zoom, the US online video conferencing software company, announced that it would stop direct selling to Chinese mainland. Zoom’s official announcement said that from August 23, new Zoom services or upgrades will no longer be sold directly to customers with Chinese mainland billing addresses, and only through partners that sell services in Chinese mainland, “these partners embed Zoom’s technology in their products and will provide better localization services.” “

Founded in 2011 and headquartered in San Jose, Zoom is a “real” U.S. company. Yet founder Yuan Zheng’s Chinese background has led to increasing scepticism about Zoom since last year. In April, House Speaker Nancy Pelosi called Zoom a “Chinese entity” with security concerns.

Zoom, like TikTok, faces a dilemma that has come under intense scrutiny from the United States because of its relationship. Zoom, by contrast, is much luckier and more responsive.

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

In May, Zoom said it no longer accepts individual user registrations, and only businesses will be able to purchase its services in the future. As of May 1, individual free users will not be able to initiate a meeting, but they can join the meeting. Only a paid business account, or a personal account upgraded to a paid version, can initiate a meeting.

As things unfolded, Zoom now cut off most of its Chinese operations and become helpless.

“Targeted”, from data privacy to national security.

As the epidemic spread around the world, video conferencing software companies saw explosive growth, with Zoom becoming the brightest company and doubling its share price. However, in the face of a sudden surge in market demand, Zoom’s preparation is clearly inadequate.

Zoom has been frequently exposed to security vulnerabilities since March this year. According to former NSA researchers, more than 15,000 videos have been recorded and flown out, involving online classes, corporate meetings, private conversations… A large number of people have been “watched” on social media, such as YouTube. IOS-side Zoom user data is shared with Facebook, including usage time, device model, and more. Zoom has been criticized by the industry for not using end-to-end encryption, resulting in video conferencing links and download addresses for recorded files being too simple and regular.

The most important thing for enterprise-class service products is stability and safety. The public opinion about security vulnerabilities caught Zoom off guard, and it lost a large number of government and corporate customers as a result. NASA, SpaceX, Google and others prohibit employees from using Zoom at work, and multi-state educational institutions in the United States have instructed schools to abandon Zoom.

In addition to Zoom’s own product flaws, Zoom’s increasingly complex relationship with the U.S. and China has made Zoom less difficult.

In April, it was reported that Zoom was routing some of its overseas traffic back to China. Later, Yuan admitted that the company had failed to follow its usual policy of routing some of its overseas traffic to two data centers in China as it increased its server capacity to cope with the surge in demand.

Nancy Pelosi, the speaker of the Us House of Representatives, called Zoom a “Chinese entity” with security implications.

In July, U.S. Senator Richard Blumenthal, D-Md., and Senator Josh Hawley, Republican, wrote to the U.S. Department of Justice comparing Zoom and TikTok to a review of the companies, “the Justice Department must investigate and determine whether the business relationships with TikTok, their data processing practices and their business ties to China pose a risk to Americans.” “

The reason the U.S. believes Zoom is “problematic” is that Zoom, even though it is based in San Jose, still has close ties to China. Most of Zoom’s research and development staff are in China, with more than 700 people as of January 31, 2020, and are in cities with relatively low labor costs in Hefei, Hangzhou, and Suzhou.

Zoom will do so because China’s research and development jobs are paid far less than In Silicon Valley, which is one of the big reasons Zoom is profitable.

Timely “correction”

At the time, Zoom was in a much easier position than TikTok, but Yuan Zheng, who was aware of the severity of the problem, quickly took action.

When a security breach was exposed, Yuan zheng immediately broadcast an apology and promised a 90-day non-renewal and rectification. When questioned by the Chinese government, Zoom quickly added the feature that allows paying users to control which data centers route their video conferencing. It also announced plans to open two new research and development centers in Arizona and Pennsylvania, usa, and hire 500 software engineers over two years.

In addition, Zoom set out to form a government lobbying team. Hire hr McMaster, a former national security adviser to the Trump administration, and Alex Stamos, the former head of Facebook security, as an adviser, and Josh Kallmer, who is a former member of the U.S. Foreign Investment Commission (CFIUS), and CFIUS, which is aggressively surrounding Tik Tik to force Byte Dance to sell its U.S. business.

In the first quarter of this year, Zoom is reported to have spent more than $4 million on hiring professionals to close its relationship with the government.

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

These are all harbingers of Zoom’s “stay away” from China. Until May this year, Zoom announced that it no longer accepts individual user registrations, and now it has stopped direct selling to Chinese mainland, selling services only through partners Chinese mainland.

Away from China.

While Zoom announced the discontinuation of Chinese mainland direct sales, it gave a list of three partners: Bizconf conferences, high-profile meetings, and Shangyang Umeet meetings.

It is reported that the three companies are the first to develop their own brand video conferencing software based on Zoom technology. “Now, attention is providing Zoom users with a consistent meeting experience that is more suitable for Chinese users with high-quality cloud video services and assurance services,” he said. “

Zoom works with businesses in two ways: Zoom provides underlying technology, such as the three companies mentioned above, and authorized resellers to sell Zoom products. These dealers have external pricing power and are responsible for follow-up customer service and operations.

Zoom did not mention in its statement whether to stop the authorized reseller model. However, there are media reports that some dealers as early as July 15 to receive Zoom has the intention to withdraw notice, and now all the energy to research products, in order to do docking with Zoom. According to TechWeb, Zoom authorized reseller Shanghai Huawan wrote in an e-mail to customers, “After our agent Zoom product, Zoom canceled the agent, our company launched its own conference product snr (zomo), which, like Zoom, deployed servers at home and used Amazon links abroad.” “

This means that if Zoom retains only the collaborative model that provides the underlying technology, users will still be able to use products embedded in Zoom technology, except that Zoom’s brand will no longer exist in the Chinese mainland market in the future.

Zoom doesn’t exit completely, but it’s more like a “location” reset. At the beginning of the year, Zoom stepped up its attack on the domestic market because of the explosion of the video conferencing market. Online office let hundreds of millions of traffic into the domestic enterprisewechat, nail and other software, according to First Financial reported that yuan Zheng mobile phone in the United States was also blasted, “almost everyone wants to talk to me about telecommuting.” “In the fiscal year ended April, Asia Pacific generated $31.3 million in revenue for Zoom, more than three times last year, accounting for 9.5 percent of total sales, compared with 74.9 percent of Zoom’s revenue from the Americas. Zoom is still back on its main battlefield.

The benefit of simply selling technology is that “Chinese companies have to lease data centers, build servers and buy bandwidth to make their own hardware investments.” In this collaborative model, Zoom addresses both server localization compliance issues and no infrastructure investment risk. AI Financial Seiner said.

Last September, Zoom International was blocked in China after the Ministry of Industry and Information Technology stipulated that domestic companies must have a domestic server to store data in China.

‘It will also be a problem for global online video conferencing companies, such as cross-border communication between China and the U.S., where both countries have backups, but can’t split the data in two, ‘ an industry source told AI Financial.

The divestiture of the direct sales business means that Zoom China will shrink, but will Zoom be determined to pull the team out of China? All this is not yet known, perhaps only a matter of time.