Shares of Zoom Video (ZM) are slipping, underperforming the market following several reports on concerns surrounding the videoconferencing app's data privacy and security practices.
ZOOM SPIKE: Zoom has seen a surge in usage in recent weeks, as regional lockdowns and shelter-in-place mandates resulting from the COVID-19 pandemic have led people to turn to videoconferencing in droves for personal, professional, and educational purposes. JPMorgan analyst Sterling Auty said in a research note Monday that, according to Apptopia data, daily active users and monthly active users on Zoom Cloud Meetings App as of March 22 were 15.3M and 28M, respectively, representing a "staggering" 378% increase in daily active users and 186% increase in monthly active users when comparing to the same time in 2019.
NEW YORK AG: Monday night, the New York Times reported that New York Attorney General Letitia James is looking into the data privacy and security practices of Zoom, with the AG's office sending a letter to the company asking what, if any, new security measures it has put in place to handle the boost in traffic on its network and to detect hackers. While the letter referred to the videoconferencing app as "an essential and valuable communications platform," it outlined a number of concerns, noting that Zoom had been slow to address security issues such as vulnerabilities "that could enable malicious third parties to, among other things, gain surreptitious access to consumer webcams," the Times said.
The report noted that, over the last few weeks, internet trolls have exploited a screen-sharing feature on the app to hijack meetings and do things like interrupt educational sessions or post white supremacist messages to a webinar on anti-Semitism. The office of the New York Attorney General said it is "concerned that Zoom’s existing security practices might not be sufficient to adapt to the recent and sudden surge in both the volume and sensitivity of data being passed through its network,” the letter to Zoom said. “While Zoom has remediated specific reported security vulnerabilities, we would like to understand whether Zoom has undertaken a broader review of its security practices.”
LAWSUIT: Meanwhile, Bloomberg reported Monday night that a Zoom user is suing the company, alleging that it is illegally disclosing personal data. According to the suit, which was filed earlier this week in federal court in San Jose, California, Zoom collects data when users install or open the Zoom app and shares it, without proper notice, to third parties such as Facebook (FB), according to Bloomberg.
LEAKS: Tuesday morning, Vice's Motherboard reported that Zoom is leaking the personal data of at least thousands of users, including their email address and photos, and giving strangers the ability to attempt to start a video call with them through Zoom. The report also said that multiple Zoom users claim they signed up with personal email addresses, and Zoom pooled them together with thousands of other people as if they all worked for the same company, exposing their personal information to one another.
ENCRYPTION: Additionally, The Intercept's Micah Lee and Yael Grauer reported earlier Tuesday that while Zoom claims to implement end-to-end encryption, widely known as the most private form of internet communication, the company is in fact using its own definition of the term, one that lets the company itself access unencrypted video and audio from meetings. The authors said that if everyone in a Zoom meeting connects using "computer audio" as opposed to calling in on a phone, the meeting is secured with end-to-end encryption, at least according to Zoom’s website, its security white paper, and the user interface within the app. However, the service actually does not support end-to-end encryption for video and audio content, at least as the term is commonly understood, as it instead offers what is known as transport encryption, according to The Intercept.
PRICE: In afternoon trading, Zoom shares are down about 4%, trading at $144.88.
