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Zoom Video’s First Consumer Hardware Effort Doesn’t Make Much Sense

Zoom Video Communications (NASDAQ: ZM) recently revealed its first consumer-oriented hardware device, the DTEN ME, a 27-inch smart screen sporting three wide-angle cameras, eight microphones, and a touchscreen display. The $599 screen, developed by Zoom's hardware partner DTEN, is currently available for pre-order and slated to ship in August for U.S. customers.

Zoom previously collaborated with DTEN to develop the D7, an interactive whiteboard for Zoom Rooms which comes in 55-inch and 75-inch versions, for enterprise customers two years ago. Those were pricey niche devices, but Zoom and DTEN apparently believe there's enough market demand for a cheaper, consumer-oriented version for home offices.

Zoom became a household name during the COVID-19 pandemic, and it likely believes it can leverage that clout to sell hardware devices. Unfortunately, the DTEN ME could be dead on arrival for three simple reasons.

The DTEN ME smart screen.

Image source: DTEN.

1. Zoom already runs on multiple platforms

Zoom serves an audience of over 300 million daily active-meeting participants across multiple platforms, including iOS, Android, Windows, Linux, and macOS.

Most consumers probably won't spend $599 on a dedicated device for an app that already runs on their phones and PCs, especially as the pandemic and other macro headwinds curb the spending power of the average consumer. Most remote workers also probably don't need separate smart screens for their home offices when they have easy access to other screens.

The DTEN ME's larger screen, extra cameras, and extra microphones might improve the quality of a user's video, but those improvements could easily fade over slower internet connections.

2. There are much cheaper alternatives

Consumers who want a dedicated smart screen for video chats already have plenty of cheaper devices to choose from.

Facebook's (NASDAQ: FB) Portal screens, which recently expanded their group calls to 50 people, cost $129 to $279. Amazon's (NASDAQ: AMZN) latest Echo Show only costs $180, and Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google Nest Hub costs $130.

Facebook's Portal smart screen.

Image source: Facebook.

All these devices offer smaller screens with fewer microphones and cameras as the DTEN ME, but they're likely sufficient for most users. Consumers can also buy a high-end tablet or a mid-range phone or laptop for the same price as the DTEN ME. Those devices offer far more features than a dedicated smart screen, which only runs Zoom on DTEN's proprietary OS.

3. A weaker supporting ecosystem

Facebook, Amazon, and Google all launched smart screens as extensions of their sprawling tech ecosystems.

Facebook's family of apps -- including its eponymous platform, Messenger, Instagram, and WhatsApp -- reaches nearly 3 billion people per month. Amazon is one of the world's largest e-commerce companies, with over 150 million Prime subscribers, and Google processes over 1 trillion searches annually.

Even with the support of those massive ecosystems, companies only shipped 125 million smart speakers and screens worldwide last year, according to Canalys, compared to 1.37 billion smartphone shipments.

That market is small but saturated. Amazon rules the U.S. smart speaker and screen market with a 53% share at the beginning of 2020, according to Voicebot.ai. Google ranks second with a 31% share, and the rest of the market is fragmented among smaller players like Apple and Facebook.

Zoom has a growing user base, but it's doubtful it can crack this cutthroat market flooded with cheaper devices tethered to larger ecosystems.

The key takeaways

DTEN ME's success or failure probably won't affect Zoom financially, since DTEN will likely shoulder most of its development and marketing expenses. However, it highlights Zoom's desire to stay competitive against well-funded challengers like Facebook's Messenger Rooms, Cisco's Webex, and Google Meet as more people return to work. It also reveals the challenges of expanding a popular software platform onto dedicated hardware devices.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Amazon, Apple, Cisco Systems, and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, and Zoom Video Communications and recommends the following options: short January 2022 $1940 calls on Amazon, long January 2022 $1920 calls on Amazon, and short August 2020 $130 calls on Zoom Video Communications. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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