Zoom could be the next great video chat app, but rampant security concerns have left room for Microsoft to swoop in

• Video conferencing app Zoom has exploded in popularity over the past month as people have been looking for ways to stay in touch virtually while social distancing.
• But a number of security issues have come to light in recent weeks, including a new form of harassment known as "Zoom-bombing."
• This recently caused the NYC Department of Education to shift away from Zoom as a tool for distance learning. The government of Taiwan also banned Zoom in official settings.
• Zoom faces a number of competitors in the market, but some analysts think Microsoft is in a strong position to win over customers that may be turning away from Zoom.
• Microsoft's Teams chat software, which also supports video calls, has a strong advantage thanks to its deep ties to the company's Office 365 software.
• Visit Business Insider's homepage for more stories.

Video-conferencing app Zoom has surged in popularity over the last month as about 90% of Americans are under orders to stay home - meaning people are increasingly turning to virtual tools to hold work meetings, attend classes, and socialize.

But with that newfound popularity has come a deluge of concerns surrounding the quality of Zoom's privacy and security measures. Hackers have infiltrated private meetings and classrooms in "Zoom-bombing" attacks; data was apparently sent to Facebook and routed through China; and reports surfaced that the app potentially exposed user email addresses to strangers and didn't encrypt messages end-to-end.

The company was dealt another blow this past week when the New York City Department of Education banned Zoom usage for remote learning and instead instructed teachers to use alternatives like Microsoft's Teams software. Zoom shares were down as much as 9% on Monday after surging to an all-time high in March.

These moments are crucial for the ascendant company, and as pressures have mounted, the company's slow response may be leaving the door wide open for other services like Teams to swoop in and pick up Zoom's pieces.

Zoom has many competitors: Microsoft Teams, Google's Meet and Hangouts, and Cisco Webex are among the biggest, but RingCentral, a smaller cloud-based messaging firm, also launched its own video conferencing alternative just last week.

Still, some analysts think Microsoft is in a strong position to serve as an alternative to Zoom should other companies and organizations take steps similar to the New York City Department of Education's.

"They've got a good solution with Microsoft Teams," Alex Zukin, a senior research analyst covering enterprise software for RBC Capital Markets, said to Business Insider. "So I think that's the one vendor that's going to have the largest amount of benefit."

But Zukin said he doesn't believe the recent security concerns will steer consumers and clients away from Zoom. Similarly, he doesn't see the recent incidents as having a meaningful impact on Zoom's business. The company has also worked to increase security and allay concerns, working with Facebook's former security chief and a team of other consultants.

If companies and organizations were to leave Zoom, however, the existing giants are likely to benefit. Microsoft Teams, in particular, has deep integration with Microsoft's widely used Office 365 software, which might play to its advantage for remote learning and work communications.

"Microsoft's perception is secure, broad, and you're already using them in other places," Zukin said. "So why not add [Teams]?"

That lines up with recent thoughts from a group of Credit Suisse analysts led by Brad Zelnick, which wrote in a note on Monday that Microsoft Teams could be Zoom's biggest threat in the long-term.

Other than Teams' easy connection to Microsoft's existing productivity software, Microsoft's size plays to its advantage since it has the resources to reach customers at scale, according to Mark Bowker, a senior analyst for research firm Enterprise Strategy Group.

When Zoom CEO Eric Yuan addressed the various security concerns that have emerged on his platform in recent weeks, he noted that Zoom was originally built to serve enterprise customers and businesses with IT departments. Zoom wasn't expecting it would suddenly be used to host weddings or an entire school district's classes, and it wasn't prepared to handle the massive uptick in consumers and new use cases that have surfaced, he said.

Tech's old guard might be better suited to weather this storm, according to Bowker.

"Microsoft and Google also have the backbone of infrastructure, credibility, and business scale to meet the current needs of the world," Bowker said via email.

Zoom has become the teleconferencing app of choice during the coronavirus pandemic, in which nonessential businesses have closed in cities across the United States, forcing many to work from home. In March, Zoom hosted 200 million daily participants, shattering the record it held as of December 2019 of 10 million daily participants. The company has also been working with 90,000 schools across 20 countries as classrooms remain closed in areas impacted by the pandemic.

But that popularity hasn't come without controversy and scrutiny. Over the past month, Zoom has been faced with a wave of security and privacy concerns.

Among the most notable is a recent practice known as Zoom-bombing, where intruders infiltrate a virtual Zoom conference and spam it with offensive content. The Boston bureau of the Federal Bureau of Investigations said it received reports of two such incidents occurring in virtual Massachusetts school classrooms hosted over Zoom.

Other security issues have also emerged; the company has been hit with a class-action lawsuit over accusations it shared some analytics data with Facebook without properly alerting users. Zoom also said on April 3 that some callers outside of China were mistakenly routed through systems in the country. Taiwan's government then banned officials from using Zoom.

Zoom has since laid out the efforts it's taking to improve security and privacy throughout its platform, which include enacting a feature freeze so that it can wholly focus on security, conducting a security review with third-party experts, and committing to publishing a transparency report including information about data requests.

Zoom's growth has undoubtedly exploded during the pandemic, but it had been gaining traction before then as well. In September 2019, market research firm Gartner designated Zoom as a market leader in the meeting solutions industry alongside Microsoft and Cisco. Such a move signaled that Gartner viewed Zoom, which is less than a decade old, as on par with the established forces in the industry.

To put that into context, Gartner categorized other rivals like Adobe and Google as challengers rather than leaders, which suggests these companies may offer popular services today but don't have as firm of a grasp on where the market is going as Cisco, Microsoft, and Zoom might.

In addition to well-known incumbents like Microsoft, Cisco, and Google, there are a number of smaller players that may be better-positioned for external collaboration or tighter security, according to Raul Castanon, a senior analyst specializing in workforce collaboration for S&P Global Market Intelligence. These include services such as CafeX Communications and LoopUp.

And while Cisco may have an advantage over Microsoft from a technical perspective - it has a longer history in the teleconferencing space - Castanon agrees that Microsoft's integration with other services gives it an important edge.

"If you're already using, like most people do, their productivity and Office suite, it gives you different advantages because there are synergies between all of these products," Castanon said. "So I think they're in a really good position."

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