The State of Corporate Video 2023
After the massive growth in users for online video, virtual event, and video communications platforms during the pandemic, 2022 was a year when a lot of the key players in the industry re-examined how to continue to drive growth and increase profitability.
Online Video Platforms
In the OVP space, this remained difficult. Many of the key players failed to fully realise the opportunities offered by the pandemic. The total size of the OVP market was around US$2.57 billion in 2021 according to research by SkyQuest Technology and is only likely to reach US$7.32 billion by 2028. This is considerably smaller than the predictions, made in the mid-2010s, of the market being worth tens of billions of dollars, on which basis many of the platforms raised investment.
Kaltura Barely Survives
In an attempt to drive up profitability, one prominent OVP, Kaltura, shed 10% of its staff in the summer of 2022 and announced plans to lay off an additional 11% of the workforce in January at the cost of around $16 million.
Kaltura’s decision to downsize was driven by the company’s sluggish growth, with a predicted revenue increase of only 2%–4% year-over-year for 2022, resulting in a total 2021–2022 revenue of US$168–US$171 million. For FY2022-2023, the company predicts similarly limited growth, with revenue rising only to between US$173 and US$178 million. Despite its modest revenue growth, Kaltura has still failed to consistently make a profit.
Back in July 2022, Kaltura was the target of a takeover bid from Panopto, one of its rivals in the enterprise video space. Kaltura ultimately rebuffed the US$383 million offer—which came out to US$3 per share—as the company wanted a higher price, given that its original IPO was in the region of US$10 per share and its overall valuation around US$1.2 billion.
The problem for Kaltura in general is that, even with its significant staff cuts, there doesn’t seem to be enough growth potential in the business to ensure the company’s sustainable profitability, at least in the near-term. This will keep the embattled OVP in play as a takeover target for the foreseeable future.
Qumu Merges With Enghouse Systems
Another platform in the space, Qumu, did agree to a merger with Enghouse Systems, an enterprise software provider, toward the end of 2022. Under the terms of the agreement, a new subsidiary of Enghouse will purchase all outstanding shares of Qumu for US$0.90 per share in cash, valuing the company at US$18.0 million.
The merger, while a good sign of the start of consolidation within the sector, also demonstrates the continuing downward trend in Qumu’s value. Qumu was first acquired for US$52 million by Rimage in October 2011, and although a merger with Synacor looked likely in 2020, that failed to materialise at a much higher price point than the US$18 million paid in the current deal.
The current Qumu–Enghouse merger may not prove smooth sailing, not only due to the normal difficulties of integration, but because it remains under dispute after the law firm Kahn Swick & Foti is seeking to determine whether the deal undervalues the company.
Brighter Prospects for Brightcove?
In its Q4 earnings report, Brightcove, Kaltura’s close rival, posted revenue showing slightly higher growth of 7%, rising from US$197.4 million to US$211.1 million. But as growth in the global economic outlook seems to have stalled, the company predicts similarly modest revenue and profits for FY2022-2023.
With agreements such as that struck with the advertising platform Magnite to deliver advertising for Brightcove users, the platform continues to try to add value to existing and potential customers. Brightcove said that after analysing data from its server-side ad insertion solution, it saw an opportunity to better help customers make money from their unsold ads. This integration should give its customers a transparent view of available ad inventory and an opportunity to better monetise its video content. Helping customers generate higher CPMs and making the platform more profitable to clients should enhance its appeal.
Panopto Continues to Grow
Panopto now looks to have given up on its pursuit of Kaltura for the time being, with its last acquisition being Ensemble Video in 2021. The approach was backed by K1 Investment Management, which had already taken a majority stake in Panopto in April 2021. Panopto has secured around US$51 million of investment, including the K1 investment in April.
According to recent information, Panopto has grown 109% in the last 3 years, but the actual total revenue or profit generated is not public. Also, according to a variety of different analyses, the revenue ranged somewhere between US$10 and US$30 million last year, so despite the investment, it is still only a fraction of the size of either Brightcove or Kaltura. To gain a critical mass of customers on par with its competitors, Panopto will likely need to acquire more companies or be acquired itself.
Vimeo: Layoffs, Revenue Loss, and Subscriber Growth
In a similar vein to Kaltura and other companies in the video market, Vimeo began 2023 by announcing that it was laying off 11% of its staff, having already made 6% redundant back in July due to uncertainty about the global economic environment.
Over the last few years, Vimeo has pivoted from being a platform for all content creators to a much more business-focussed proposition, but it is still in the process of completing that transition. The company’s full-year loss will be between US$107 and US$112 million, which is a considerable increase over the US$61 million loss the previous year. But the company has shown positive revenue growth of 10% since Q4 2021.
All in all, the OVP sector, while experiencing steady growth, looks more and more like it will undergo a period of consolidation and acquisition. We’ve already seen the first round of this with the Qumu acquisition and Panopto’s bid for Kaltura, and I think in the next 12 months, we’ll see either mergers and acquisitions to build bigger online video platforms or the platforms’ acquisition by bigger companies which will neatly fold the OVP into existing offerings.
Video Communications
In the video communication field, there may be a raft of companies that will look at these potential acquisitions. Over the course of the year, companies such as Zoom began to suffer, at least in terms of their stock price, as investors looked less at growth and more at the bottom line. Platform acquisitions could create not only more revenue but also more growth in revenue per user. The overall outlook for the sector in 2023 is positive, according to Gartner, with the sector predicted to grow 20% year-over-year.
Zoom: Slowing Growth
Despite this, Zoom’s revenue growth has stalled as it continues to lose individual and small business subscribers who, as the pandemic wanes, are downgrading to free or cheaper subscriptions. This, along with currency fluctuations, masked Zoom’s double-digit growth on the top and bottom line as it continues to acquire more large business customers with total revenue for the year 2022 likely to be US$4.37–US$4.38 billion.
In a January 2023 interview with Bloomberg, Zoom president Greg Tomb says the collaboration software business has held up in the face of widespread layoffs and competition. “It doesn’t mean people don’t fine-tune here or there when they come up for renewal,” Tomb explains, “but it has not been a big impact.”
Zoom’s key focus for the year will be to reverse slowing growth by expanding its offerings for business users. As part of this strategy, Zoom unveiled email and calendar services at its annual user conference in November. If it can get existing customers to use services outside of video calling, that will allow it to chase segments of the market which use Microsoft Teams as part of a suite of Microsoft products.
Microsoft Teams: Deep Integration
Microsoft Teams’ key advantage over competitors has always been its deep integration with Office 365. For organisations already subscribed to Microsoft 365 Business, Teams is a free add-on instead of a separate cost.
Teams managed to retain the users gained in the pandemic and has grown considerably since. In 2022, Microsoft announced that Teams boasted 270 million active users, making it by far the most popular business communication platform, vastly outperforming Slack’s 18 million active users.
However, some features are now being moved onto Microsoft Teams’ Premium paid offering, including live translation options. Whether these changes will garner more revenue or alienate users will be interesting to see, particularly as platforms such as Zoom look to add features to chip away at Microsoft’s overall combined offering.
Meta’s Workplace
One of the smaller suppliers in the space, Workplace by Meta, had 7 million subscribers in May 2021. Since the app is not broken out as a separate entity in Meta market statements, it is hard to judge how much that figure has grown in the last 16 months. There is likely to be some significant growth; with the acquisition of clients such as McDonald’s in the intervening time, the userbase is likely to have increased by at least 2.5 million.
The video elements of the platform still look like they are being undersold, and there is a Slack-like focus on collaboration and messaging with the familiarity of the interface being a key differentiator.
Virtual Event Platforms
Almost all of these video communications platforms include some element that offers virtual event functionality. The virtual event market was expected to grow from US$10.37 billion in 2021 to US$12.09 billion in 2022, and it’s projected to reach US$30.09 billion by 2030.
However, with all the video comms platforms having some offering in this area, how well are the dedicated platforms doing? Hopin, one of the leaders in this space, had a bumpy year in 2022 due to the widespread return to real-world, in-person events. Like other platforms, it went through two rounds of redundancies, losing 12% of its staff in February and a further 29% of its workforce in July.
The company’s revenue stands roughly around the US$100 million mark, but to date, Hopin has released no official figures.
An article in The New Statesman, which features interviews with some of those Hopin employees who were made redundant, paints a bleak picture of the platform’s performance. The article states that the revenue from Hopin’s core product, the virtual events platform, started falling last autumn, and client retention has dropped significantly since.
It’s difficult to independently verify this information, but Hopin’s Explore platform fell from a peak of featuring around 15,000 events to just a few hundred. A Hopin spokesperson did say, however, that the Explore site was not a focus and that it still hosts thousands of private events each month.
The former Hopin employees also suggested that revenues from the company’s US$250 million acquisition of StreamYard, a live-streaming service, have helped to offset the drop in revenue from its core product, but revenues from the non-core products are only growing slowly.
Webex, which straddles the virtual event and video comms space, is also trying to diversify, including offering more support in terms of interoperability. The collaboration section of Cisco, which includes Webex, showed 3% growth in FY2022, amounting to around US$4.47 billion of total revenue.
Webex by Cisco VP and chief design officer Travis Isaacs states that Webex will bet on interoperability for meetings in 2023 and beyond. “When we talk to our customers, a majority of them use multiple tools and multiple providers for meetings calling and messaging,” he says, “so we’re taking a position that interoperability and being compatible is better for our customers, and we will continue to invest in that area.”
Outlook for 2023
Across the board, it looks like 2023 will be one of slow but unspectacular growth from most of the main platforms in all three areas. In the video platform space, we will see some growth this year, but there will definitely be some acquisitions. Kaltura is the OVP most likely to be acquired; it may just be a question of by whom and at what price.
This may not be the last element of consolidation, as the real path to growth and—more importantly—sustained profitability for many of these platforms will be through acquisition. Even with substantial cost cutting, with a global economic downturn on the horizon, it is unlikely that any of these platforms can achieve the rapid growth to reach profitability without acquisition.
In terms of the video communications platforms, we’re likely to see slow and stable growth, but given the scale of most of the players, this shouldn’t be a problem. The real battleground will be seeing how the various services will differentiate themselves in a competitive market.
Teams’ addition of another subscription tier may give some of the other platforms a chance to compete on a cost level. There is, however, likely to be more differentiation between smaller customers switching to low-cost, bundled, or free subscriptions, with larger organisations doubling down on more complex, and therefore more costly, subscriptions.
These video communication platforms branching out with event capabilities will begin to squeeze some of the virtual event platforms like Hopin, which will have to weather that pressure along with an increase in the number of real-world events post-pandemic. The positive side of the predicted economic downturn for those platforms will be the accompanying reduction in the number of costly and higher-risk on-site events, which may drive customers back to them for virtual events. However, in a competitive market, I believe there will also be a need for customers to make a distinction between these events, and that may lead to a move away from more generic platform offerings and toward bespoke and heavily integrated solutions.
We shouldn’t forget that the pandemic has rapidly accelerated the understanding and use by corporations of all these types of platforms, which means they are definitely here to stay. The platforms will inevitably evolve, and this development and innovation—along with cost—might dictate which companies dominate the sector in the years to come, as the lines between different product types begin to blur and dominant players emerge which can offer all of these features in one solution.
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