Zoom to halt direct sales of products to users in China and switch to partner-only model

Key Points
  • Zoom said on Monday it will no longer sell new or upgraded products direct to customers on the Chinese mainland.
  • Instead, it will be offering its video conferencing services via third-party partners.
  • Zoom has faced scrutiny from the U.S. regarding its links to China. Past incidents included routing data through servers there.

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Zoom CEO Eric Yuan speaks before the Nasdaq opening bell ceremony in New York on April 18, 2019.
Kena Betancur | Getty Images

Zoom said Monday it will stop selling new or upgraded products directly to customers in mainland China, and will instead only offer its video conferencing services via third-party partners.

"Dear Customers, thank you for choosing our services. We wish to inform you that we will be selling services in Mainland China only through our partners. If you have a need for online video conferencing, you may reach out to our partners," the company said on its Chinese website.

Zoom started notifying customers in China on Monday about the change, which will come into effect on Aug. 23, 2020, according to a letter seen by CNBC. A spokesperson confirmed the date. 

"In the past, our go-to-market model in China has included direct sales, online subscription, and sales through partners. Two months ago, we stopped offering online subscriptions," the letter said. "We are now shifting to a partner-only model with Zoom technology embedded in partner offerings, which will provide you better local support."

"Users in Mainland China may continue to join Zoom meetings as participants," a spokesperson for the company added. 

Its China-based partners — Bizconf Communications, Suirui Zhumu Video Conference and Systec Umeet — are the three that Zoom recommends customers to switch to. That means clients will no longer be able to buy services directly from Zoom. Instead, they will have to buy products offered by these third-parties which are using some of Zoom's technology. 

It's unclear what prompted Zoom's move in China.

In May, Zoom made changes that only allowed corporate customers to sign up. That meant free users were not allowed to host meetings but could join those initiated by such customers. 

Scrutiny on China ties

Zoom is one the companies that has come under fire for its ties to China. The company admitted earlier this year that it had mistakenly routed some meetings through servers in China. 

In June, the company shut down the account of an activist who was holding an event on the video conferencing platform to commemorate China's Tiananmen Square crackdown — a politically sensitive topic for the central government.

Following the incident, Zoom said it would not allow requests from the Chinese government to impact anyone outside of mainland China.

Zoom is a U.S.-founded company and its founder Eric Yuan is a Chinese immigrant who is now an American citizen. However, the company's development team is "largely" based in China, according to Zoom's regulatory filing from earlier this year. 

Technology firms with any links to China have been in the crosshairs of lawmakers in Washington.

Social media app TikTok, which is owned by Beijing-based ByteDance, has in recent weeks faced accusations from Washington that it's vacuuming up American user data to send back to the Chinese government. TikTok has repeatedly denied those allegations.

President Donald Trump threatened late Friday to ban TikTok in the U.S. and now, ByteDance is in discussions with Microsoft over a partial acquisition of the widely popular social media app.