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Can Verizon build a Zoom killer after acquiring its own video conferencing app?

April 17, 2020, 1:45 PM UTC

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There may never be a hotter trial by fire than the one currently burning up the video conferencing market. With businesses, schools, and just plain people around the world on lockdown due to the coronavirus pandemic, meeting live on video is one of the only ways available to interact safely.

That’s been a headline-generating boon for leading player Zoom, though obviously in ways both good and bad for the company’s future. Going from 10 million users a day to 200 million in the span of a few weeks without any major hiccups is an incredible testament to the reliability of Zoom’s platform. Did I say no major hiccups? Perhaps that doesn’t give enough credit for adding the term “zoombombing” to our daily lexicon.

But the user boom has given the company a huge lead on the competition—and Wall Street has noticed. Zoom’s stock price closed Thursday at just over $150, doubling since the end of January while most of the rest of the market has cratered.

My Fortune colleague Michal Lev-Ram is out today with a deep dive into Zoom’s development. CEO Eric Yuan, an engineer who’s been working in the video streaming market for decades, says that he’s deeply embarrassed about the privacy and security glitches that have arisen. “I’m ashamed,” he tells Lev-Ram. “I blame myself.” Zoom has halted development on new features to fix the issues with its current code.

Yuan needs to act fast. Already Microsoft and his former employer, Cisco Systems, are nipping at Zoom’s heels with their own video platforms. Now BlueJeans Networks, one of Zoom’s peers among smaller, more focused video companies, is getting a huge boost. Telecom giant Verizon paid somewhere under $500 million to acquire BlueJeans on Thursday, adding the well-regarded if market-trailing video technology to its array of services and applications.

Half of a billion dollars is a pittance compared to Zoom’s almost $40 billion stock market value. But Verizon CEO Hans Vestberg could take a page out of the playbook of former Cisco CEO John Chambers. The ceaseless dealmaker was famous for snapping up technically advanced but under-marketed products, strapping them to Cisco’s vast corporate sales force, and watching sales take off. Vestberg and Tami Erwin, CEO of Verizon’s business unit, could easily do the same with BlueJeans, which is currently bringing in revenue at only about a $100 million annual run rate.

It should be quite the battle. Gartner analyst Mike Fasciani, who follows the video conferencing market, tells me BlueJeans has excellent underlying technology, maybe the best, but hasn’t spent as much time perfecting its usability and customer experience. It also hasn’t ever offered a free version—plans start at $20 a month. BlueJeans oversees its network from an operational command center that reminds Fasciani of a telecom carrier, and he predicts a good fit for the company inside Verizon.

Now Verizon can provide plenty of cash for funding a free version, if it so desires. But the telecom giant doesn’t necessarily seem like the place you go for great user interface design. Apple and others have proven over and over again how the easier-to-use product can often beat more full-featured or technically superior rivals. So the race is on: Can Yuan fix what’s ailing Zoom before Vestberg and crew can launch BlueJeans into orbit?

Aaron Pressman

@ampressman

aaron.pressman@fortune.com

NEWSWORTHY

Calming the waters. Some interesting tidbits from Apple CEO Tim Cook's virtual all-hands meeting on Thursday. Cook said he'll keep R&D spending strong despite the weak economy and played down concerns about possible layoffs, noting Apple's strong finances and long-term approach. The award for the most intriguing tidbit comes from COO Jeff Williams who said the company's health product work isn’t "limited to the wrist."

Listen to them, the children of the night. Left for dead by some original participants, Facebook's Libra digital currency project is revivifying. The multi-company Libra Association which oversees the effort announced plans on Thursday to create an infrastructure for multiple cryptocurrencies and said it was in talks with Swiss regulators for a payments license. In more tangible fintech news, Stripe raised $600 million of additional backing in a deal that valued the payments startup at almost $36 billion.

Hard stop. Speaking of the walking dead, ICANN's controversial deal to sell the .org Internet domain name registry to private equity firm Ethos Capital for $1 billion is looking shakier by the day. On Thursday, the California attorney general's office weighed in with a letter saying the sale “raises serious concerns that cannot be overlooked.” ICANN's board postponed a decision until May 4. 

Do not pass go, do not collect $200. On Wall Street, Uber was the latest tech company to acknowledge the damaging power of the coronavirus outbreak. The company withdrew its financial guidance for the year and said it would write down the value of investments in other startups by about $2 billion. Uber's shares, down 9% in 2020, jumped 6% in pre-market trading on Friday.

FOOD FOR THOUGHT

Some years ago, two scientists made a bet. University of Alabama professor Steven Austad wagered with his friend University of Illinois professor Jay Olshansky that someone born in 2000 will live to the age of 150. They likely won't know who's correct until the year 2150, but each scientist put a small sum into an investment account that could reach $1 billion as a payoff for the winner's heirs. On Thursday, the pair had dueling essays in the Wall Street Journal. I prefer Austad's world.

We have to stop thinking about age-related diseases as independent entities. Diseases associated with aging have extensively overlapping causes, so that a treatment (like rapamycin) affects most or all such ailments. Treating aging itself thus can dramatically change the mortality rates currently seen in our later years. If we could freeze the age-induced mortality rate at age 50 so that one faces no increased odds of falling sick, life expectancy soars to more than 125 years. Hundreds of life-extending animal experiments show that what we previously thought of as “limits” can be burst through with the right treatment.

FOR YOUR WEEKEND READING PLEASURE

A few long reads that I came across this week:

How China’s “Bat Woman” Hunted Down Viruses from SARS to the New Coronavirus (Scientific American)

Wuhan-based virologist Shi Zhengli has identified dozens of deadly SARS-like viruses in bat caves, and she warns there are more out there.

An MIT Lab Is Building Devices to Hack Your Dreams (One Zero)

From improving your mood to focusing your creativity, scientists at MIT’s Dream Lab want to prove the power of dreams.

This Man Owns the World's Most Advanced Private Air Force After Buying 46 F/A-18 Hornets (The Drive)

The owner of Air USA talks about his incredible private aircraft purchase and the future of his adversary business.

A Rich (Very Rich) History of the Jewish Dairy Restaurant (New York Times)

In a new book, the writer and illustrator Ben Katchor celebrates the places that have fed New York’s craving for blintzes, matzo brei, and other delicacies.

IN CASE YOU MISSED IT

Researchers working on ‘contact tracing’ say they welcome Apple and Google’s help By David Z. Morris

Streaming church, Zoom seders: How coronavirus has pushed Easter and Passover services online By Robert Hackett

Facebook gives users a way to take a break from notification hell By Danielle Abril

From NBA2K to eNASCAR, are e-sports the new, well, sports? By Chris Morris

Dean of Stanford Medicine: How virtual care can make medicine even more human By Lloyd B. Minor

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BEFORE YOU GO

I know some newsletters provide almost daily updates about squid, and that's never been our strength. But I couldn't pass up the story of the six-foot-long Humboldt squid that scientists say communicates via backlit patterns on its body resembling the e-ink of e-books. There's even video. Have a healthy, relaxing, and hopefully killer-squid-free weekend.