By Jon Swartz
For weeks, Zoom Video Communications Inc. basked in the glow of a surging share price, enthusiastic research reports and insatiable demand among consumers and enterprises.
In recent days, however, the one-time darling of Wall Street and Main Street has faced a backlash from regulators and politicians. Hackers have targeted the videoconferencing service because of its popularity, leading to a warning to consumers from the FBI about so-called “Zoom-Bombing” incidents. And a lawsuit filed Monday in California claims Zoom /zigman2/quotes/211319643/composite ZM -4.13% allegedly gave users’ personal data to Facebook Inc. /zigman2/quotes/205064656/composite FB -1.15% and other outside companies without fully informing customers.
What a difference a week makes.
The backlash prompted Zoom Chief Executive Eric Yuan to address some privacy criticisms in a blog post late Wednesday. Zoom currently has “a much broader set of users who are utilizing our product in myriad unexpected ways,” he said, while acknowledging that the company has “fallen short of the community’s – and our own – privacy and security expectations.”
See more: Zoom says it topped 200 million daily participants in March as CEO addresses privacy concerns
Yuan said that Zoom has patched up flaws recently identified by a security research, clarified its privacy and encryption policies, and altered education-oriented Zoom plans so that, by default, instructors are the only ones who can share their screens.
Zoom is “enacting a feature freeze, effectively immediately, and shifting all our engineering resources to focus on our biggest trust, safety, and privacy issues,” according to the blog post.
The latest commentary from Yuan didn’t do much to help Zoom’s stock, even as he provided a new data point on Zoom’s user growth — the company had more than 200 million daily meeting participants in March, compared with a prior record of about 10 million as of December. Zoom shares plunged 11% Thursday, tied for the second-worst daily decline in the company’s history, and completed their first four-day losing streak since the end of January. The stock was on track for its worst week on record, according to FactSet.
The stock slide deepened April 6, with shares slumping more than 7%, after Credit Suisse analyst Brad Zelnick cut his rating to underperform from neutral on Monday and Yuan acknowledged in a CNN interview broadcast Sunday that the company had taken “missteps.”
“We should have done something to enforce password and making room and double-check every Zoomer’s settings on -- over the past one week and two weeks we ought to have took actions to fix those missteps,” Yuan told CNN.
Zoom’s rash of problems in some ways parallels those of Facebook: Highflying companies whose popular services have access to mountains of personal information that have made them both high-valued stocks as well as targets of lawmakers and scammers.
See also: Zoom, Microsoft cloud usage are rocketing during coronavirus pandemic, new data show
Ironically, the COVID-19 pandemic seems to have now both helped and hurt Zoom.
“People who found the ease of Zoom as a new toy may change their opinion in 10 days when all this bad news sinks in,” John Durham, chief executive of Catalyst, a brand-strategy firm that works with tech companies, told MarketWatch in a phone interview prior to Yuan’s latest blog post. “And today, in this social-media climate, it’s harder to regain trust. Some Zoom customers might shift to known and trusted brands like Microsoft /zigman2/quotes/207732364/composite MSFT -1.06% or Cisco Systems” /zigman2/quotes/209509471/composite CSCO -0.13% for videoconferencing tools, he said.
Reached prior to Wednesday’s update, Durham said he was giving Zoom “mediocre to poor” marks for how it handled events of the past week.