On August 3, Zoom, a US-based online video conferencing software company, announced that it would cease its direct sales operations in mainland China.

Zoom's official announcement stated that as of August 23rd, no new Zoom service or upgrades will be sold directly to customers with billing addresses in mainland China. Zoom will only sell their services in mainland China through partners "who have Zoom's technology embedded in their products and who will provide better-localized service".

Founded in 2011 and headquartered in San Jose, Zoom is a "real" American company. However, the Chinese background of Zoom's founder, Yuan Zheng, has been a source of increasing skepticism since last year. In April, U.S. House Speaker Nancy Pelosi called Zoom a "Chinese entity" and a security risk.

Zoom faces the same dilemma as TikTok, both of which have come under intense U.S. scrutiny because of the U.S.-China relationship, Zoom, however, is much luckier and more responsive than the others.

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

In May, Zoom said it would no longer accept registrations from individuals and that only businesses would be able to purchase its service in the future. As of May 1, individual free users cannot initiate meetings, but they can join them. Only a paid corporate account, or a personal account upgraded to the paid version, can initiate meetings.

Now Zoom has no choice but to cut off most of its China operations as the situation continues to grow.

'Targeted', from data privacy to national security

As the epidemic spreads around the world, video conferencing software companies are experiencing explosive growth, with Zoom being one of the brightest, doubling its share price. But Zoom was ill-prepared for the sudden surge in demand.

Since March of this year, Zoom has been frequently exposed to security vulnerabilities. A former NSA researcher says more than 15,000 videos were recorded, involving online classes, corporate meetings, private conversations... A large number of them were uploaded to YouTube and other social media to be "watched" by people. The 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 overly simple and regular download addresses for video conferencing links and recorded files. Enterprise service offerings are most valued for their stability and securityZoom was caught off guard by the public outcry about the security breach, and it lost many government and corporate customers. NASA, SpaceX, Google, and others have banned employees from using Zoom at work, and multi-state education agencies in the U.S. have instructed schools to abandon it.

In addition to Zoom's self-revealing flaws, the increasingly complicated relationship between the US and China has made things difficult for Zoom.

In April, it was reported that Zoom was routing some of its outbound traffic back to ChinaLater, Yuan Zheng admitted that the company did not follow a consistent policy of routing some of its offshore traffic to two data centers in China as it increased server capacity to handle the surge in demand.

U.S. House Speaker Nancy Pelosi said Zoom is a "Chinese entity" with security concerns.

In July, Senator Richard Blumenthal, a Democrat, and Senator Josh Hawley, a Republican, sent a letter to the U.S. Department of Justice comparing Zoom to TikTok, asking for a review of the companies. "The DOJ must investigate and determine whether Zoom and TikTok's business relationships, data processing practices, and their business ties to China pose a risk to U.S. users."

The US is convinced that Zoom is "suspicious" because, even though it is based in San Jose, it has close ties to ChinaThe majority of Zoom's R&D staff is based in China - more than 700 as of January 31, 2020 - and in cities like Hefei, Hangzhou, and Suzhou, where labor costs are relatively low.

Zoom is doing this because R&D jobs in China pay far less than in Silicon Valley, which is one of the key reasons why Zoom is profitable.

Timely "fixes”

At the time, Zoom was in a no easier position than TikTok, but Yuan Zheng quickly took action when he realized the severity of the problem.

When the security breach was revealed, Yuan Zheng immediately apologized on-air and promised 90 days of no updates and corrections. When challenged that it would be controlled by the Chinese government, Zoom quickly added the ability to let paying subscribers control which data centers route their videoconferencing byIt also announced plans to open two new R&D centers in the future, in Arizona and Pennsylvania, and to hire 500 software engineers within two years.

Besides, Zoom set about assembling a government lobbying team. Zoom has hired former Trump administration national security adviser HR McMaster as an independent director, former Facebook security chief Alex Stamos as an adviser, and Josh Kallmer as head of global public policy and government relations, Kallmer formerly a member of the Committee on Foreign Investment in the U.S. (CFIUS), which is vigorously rounding up TikTok to force Byte to sell its U.S. business.

In the first quarter of this year, Zoom reportedly spent more than $4 million on hiring professionals and getting closer to the government.

These efforts were not in vain. Zoom got the government's endorsement, and with the support of the U.S. Department of Homeland Security, the Federal Risk and Authorization Management Program is authorized to allow federal government agencies and contractors to use Zoom for government videoconferencing.

These are all signs that Zoom is "moving away" from China. Until May of this year, Zoom announced that it was no longer accepting individual customer registrations, and now it has stopped selling directly in China and is only selling its services there through partners.

Staying away from China

Zoom announced the end of its direct sales business in mainland China and gave a list of three partners: Bizconf Conference, SURE Conference, and Umeet Conference.

These three companies are said to be the first to develop their brand of video conferencing software based on Zoom technology.

Zoom works with companies in two ways, either by Zoom providing the underlying technology, such as the three companies mentioned above or by licensing resellers to sell Zoom's products. These dealers have external pricing rights and are also responsible for subsequent customer service and operations and maintenance.

Zoom did not mention in its statement whether it would discontinue the authorized dealer model. However, it has been reported that some dealers were informed of Zoom's intention to leave as early as July 15, and are now focusing on their products to connect with Zoom. According to TechWeb, Shanghai Huawan, an authorized Zoom reseller, wrote in an email to its customers, "We used to resell Zoom products, but after Zoom was discontinued, our company launched our conference product, zomo, which has the same function as Zoom, deploying servers in China and using Amazon links abroad."

This means that if Zoom only retains the partnership model that provides the underlying technology, users will still be able to use products with Zoom's technology embedded in them, but the Zoom brand will no longer exist in mainland China in the future.

Zoom doesn't quit completely, but it's more like a "position" reset. Zoom intensified its attack on the domestic market at the beginning of the year due to the explosion of the video conferencing market. The remote working mode has allowed hundreds of millions of traffic to flood into the country's enterprise WeChat and DingTalk software. Till the end of April, Asia Pacific generated $31.3 million in revenue for Zoom, more than tripling last year's figure and accounting for 9.5 percent of total sales, compared to 74.9 percent for Zoom from the Americas. Zoom is still back on its main battlefield.

The benefit of selling the technology alone is that "the Chinese company would have to lease the data center, build the servers, and buy the bandwidth themselves to complete the hardware investment. In this partnership model, Zoom solves the compliance issues of server localization without the infrastructure investment risk, AI Financial Services analyzed.

Zoom International was blocked in China last September because the Ministry of Industry and Information Technology (MIIT) mandated that web services for domestic companies must have domestic servers that store data in China.

This will also be a problem for global online video conferencing companies, such as cross-border communication between China and the U.S. One industry insider told AI Financial Services that both countries will have backups, but they can't split the data in two.

The divestment of the direct sales business will mean a reduction in the size of the Zoom China team but is Zoom determined to move the team out of ChinaIt's all unknown yet, maybe it's just a matter of time.

This is an article from WeChat official accounts GeekPark(ID: geekpark), written by Shen Zhihan, translated by Linda Yang.

On August 3, Zoom, a US-based online video conferencing software company, announced that it would cease its direct sales operations in mainland China.

Zoom's official announcement stated that as of August 23rd, no new Zoom service or upgrades will be sold directly to customers with billing addresses in mainland China. Zoom will only sell their services in mainland China through partners "who have Zoom's technology embedded in their products and who will provide better-localized service".

Founded in 2011 and headquartered in San Jose, Zoom is a "real" American company. However, the Chinese background of Zoom's founder, Yuan Zheng, has been a source of increasing skepticism since last year. In April, U.S. House Speaker Nancy Pelosi called Zoom a "Chinese entity" and a security risk.

Zoom faces the same dilemma as TikTok, both of which have come under intense U.S. scrutiny because of the U.S.-China relationship, Zoom, however, is much luckier and more responsive than the others.

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

In May, Zoom said it would no longer accept registrations from individuals and that only businesses would be able to purchase its service in the future. As of May 1, individual free users cannot initiate meetings, but they can join them. Only a paid corporate account, or a personal account upgraded to the paid version, can initiate meetings.

Now Zoom has no choice but to cut off most of its China operations as the situation continues to grow.

'Targeted', from data privacy to national security

As the epidemic spreads around the world, video conferencing software companies are experiencing explosive growth, with Zoom being one of the brightest, doubling its share price. But Zoom was ill-prepared for the sudden surge in demand.

Since March of this year, Zoom has been frequently exposed to security vulnerabilities. A former NSA researcher says more than 15,000 videos were recorded, involving online classes, corporate meetings, private conversations... A large number of them were uploaded to YouTube and other social media to be "watched" by people. The 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 overly simple and regular download addresses for video conferencing links and recorded files. Enterprise service offerings are most valued for their stability and securityZoom was caught off guard by the public outcry about the security breach, and it lost many government and corporate customers. NASA, SpaceX, Google, and others have banned employees from using Zoom at work, and multi-state education agencies in the U.S. have instructed schools to abandon it.

In addition to Zoom's self-revealing flaws, the increasingly complicated relationship between the US and China has made things difficult for Zoom.

In April, it was reported that Zoom was routing some of its outbound traffic back to ChinaLater, Yuan Zheng admitted that the company did not follow a consistent policy of routing some of its offshore traffic to two data centers in China as it increased server capacity to handle the surge in demand.

U.S. House Speaker Nancy Pelosi said Zoom is a "Chinese entity" with security concerns.

In July, Senator Richard Blumenthal, a Democrat, and Senator Josh Hawley, a Republican, sent a letter to the U.S. Department of Justice comparing Zoom to TikTok, asking for a review of the companies. "The DOJ must investigate and determine whether Zoom and TikTok's business relationships, data processing practices, and their business ties to China pose a risk to U.S. users."

The US is convinced that Zoom is "suspicious" because, even though it is based in San Jose, it has close ties to ChinaThe majority of Zoom's R&D staff is based in China - more than 700 as of January 31, 2020 - and in cities like Hefei, Hangzhou, and Suzhou, where labor costs are relatively low.

Zoom is doing this because R&D jobs in China pay far less than in Silicon Valley, which is one of the key reasons why Zoom is profitable.

Timely "fixes”

At the time, Zoom was in a no easier position than TikTok, but Yuan Zheng quickly took action when he realized the severity of the problem.

When the security breach was revealed, Yuan Zheng immediately apologized on-air and promised 90 days of no updates and corrections. When challenged that it would be controlled by the Chinese government, Zoom quickly added the ability to let paying subscribers control which data centers route their videoconferencing byIt also announced plans to open two new R&D centers in the future, in Arizona and Pennsylvania, and to hire 500 software engineers within two years.

Besides, Zoom set about assembling a government lobbying team. Zoom has hired former Trump administration national security adviser HR McMaster as an independent director, former Facebook security chief Alex Stamos as an adviser, and Josh Kallmer as head of global public policy and government relations, Kallmer formerly a member of the Committee on Foreign Investment in the U.S. (CFIUS), which is vigorously rounding up TikTok to force Byte to sell its U.S. business.

In the first quarter of this year, Zoom reportedly spent more than $4 million on hiring professionals and getting closer to the government.

These efforts were not in vain. Zoom got the government's endorsement, and with the support of the U.S. Department of Homeland Security, the Federal Risk and Authorization Management Program is authorized to allow federal government agencies and contractors to use Zoom for government videoconferencing.

These are all signs that Zoom is "moving away" from China. Until May of this year, Zoom announced that it was no longer accepting individual customer registrations, and now it has stopped selling directly in China and is only selling its services there through partners.

Staying away from China

Zoom announced the end of its direct sales business in mainland China and gave a list of three partners: Bizconf Conference, SURE Conference, and Umeet Conference.

These three companies are said to be the first to develop their brand of video conferencing software based on Zoom technology.

Zoom works with companies in two ways, either by Zoom providing the underlying technology, such as the three companies mentioned above or by licensing resellers to sell Zoom's products. These dealers have external pricing rights and are also responsible for subsequent customer service and operations and maintenance.

Zoom did not mention in its statement whether it would discontinue the authorized dealer model. However, it has been reported that some dealers were informed of Zoom's intention to leave as early as July 15, and are now focusing on their products to connect with Zoom. According to TechWeb, Shanghai Huawan, an authorized Zoom reseller, wrote in an email to its customers, "We used to resell Zoom products, but after Zoom was discontinued, our company launched our conference product, zomo, which has the same function as Zoom, deploying servers in China and using Amazon links abroad."

This means that if Zoom only retains the partnership model that provides the underlying technology, users will still be able to use products with Zoom's technology embedded in them, but the Zoom brand will no longer exist in mainland China in the future.

Zoom doesn't quit completely, but it's more like a "position" reset. Zoom intensified its attack on the domestic market at the beginning of the year due to the explosion of the video conferencing market. The remote working mode has allowed hundreds of millions of traffic to flood into the country's enterprise WeChat and DingTalk software. Till the end of April, Asia Pacific generated $31.3 million in revenue for Zoom, more than tripling last year's figure and accounting for 9.5 percent of total sales, compared to 74.9 percent for Zoom from the Americas. Zoom is still back on its main battlefield.

The benefit of selling the technology alone is that "the Chinese company would have to lease the data center, build the servers, and buy the bandwidth themselves to complete the hardware investment. In this partnership model, Zoom solves the compliance issues of server localization without the infrastructure investment risk, AI Financial Services analyzed.

Zoom International was blocked in China last September because the Ministry of Industry and Information Technology (MIIT) mandated that web services for domestic companies must have domestic servers that store data in China.

This will also be a problem for global online video conferencing companies, such as cross-border communication between China and the U.S. One industry insider told AI Financial Services that both countries will have backups, but they can't split the data in two.

The divestment of the direct sales business will mean a reduction in the size of the Zoom China team but is Zoom determined to move the team out of ChinaIt's all unknown yet, maybe it's just a matter of time.

This is an article from WeChat official accounts GeekPark(ID: geekpark), written by Shen Zhihan, translated by Linda Yang.