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Good ideas are recession-proof. Few firms prove that notion better than WebEx Communications, led by Chairman and CEO Subrah S. Iyar. The company grew revenue nearly 900 percent last year by allowing businesspeople to talk to one another over the Internet.
The companys Web site allows businesses to hold meetings over the Internet. And while conference calls and videoconferencing are good alternatives, WebEx also allows participants to make presentations, exchange and edit documents, or even view, record and play back videos online.
“People have become more comfortable with meetings that are online rather than in person,” said Mark Levitt, research director for collaborative computing at market research firm IDC. And WebExs surge in revenue reflects, in part, an eagerness to cut travel costs during the economic downturn. “Whenever you can have an online meeting rather than a face-to-face meeting and not sacrifice benefits, in most cases, it will be an opportunity to cut costs,” he said.
Some WebEx users claim to have reduced their travel budgets by 80 percent or more. About 3,200 companies have used WebExs services. The company charges 45 cents per minute per user with additional charges for teleconferencing.
So how will WebEx protect its market share? The company said it will do so by upgrading its technology and through advertising.
WebExs competitors face a significant barrier to entry because they will have difficulty emulating WebExs data switching system, said Praful Shah, WebExs vice president of strategic marketing. He said the company has patented many of its technologies, and it has deployed some 300 specially built switches on communications networks around the world to ensure that WebEx users will be able to use the sites interactive data sharing capabilities. “We have invested five years of work in developing this infrastructure and communications backbone,” he said.
But Shah said continuing the companys rapid growth will require a change of behavior among businesses and ongoing readiness to use new technologies like those offered by WebEx. That means advertising and marketing to potential users. And that will be expensive. In 2000, the company spent $50.8 million — two times its total revenue — on sales and marketing. In addition, itll have to fend off competitors like PlaceWare, which offers some of the same services.
Cash reserves are also a concern. Although WebEx expects to be cash-flow positive by December, it raised $21.5 million by selling 2 million shares of stock May 21.
Despite those challenges, Levitt predicts WebEx will continue to thrive, even if PlaceWare manages to steal some of its customers. Thats because he believes the market will continue to grow, and grow fast. “They dont have to beat the other out to win,” Levitt said. “The market is still emerging. The pie is growing, so its not necessary to fight over each slice.”