HP Moves to the Cloud with Flexible Pricing Models

by Jeff Yoshimura, VP Marketing

Someone once said that the best indication of character is the friends you have; well we here at Zuora are pretty excited about what having HP as a friend says about us. HP is one of the biggest players in the technology industry, with products and services that impact customers of all stripes. To provide the billing solution to their Cloud offering is a huge honor.

On Thursday, HP Cloud Services completed a major milestone in their product life cycle.  After going into production last year with customers via "private beta by invitation", on Thursday these customers moved to “public beta.”

HP Cloud Services is billed monthly and is usage-based. You pay $.04 per hour for 1 GB of RAM and 30GB of local disk space and up to $1.28 per hour for 32 GB of RAM and 960 GB of local space. With HP Cloud Object Storage Pricing, you pay for the amount of storage you use each month (at $.12 for the first 0-50 TB and $.10 for the 950TB). Check out more of the pricing tiers here.

With Zuora, HP Cloud Services can offer all of these different pricing to their customers with a metering, pricing and billing platform that matches the business model of cloud computing with subscription and pay-as-you-go pricing models. Simply put, if you’re building shared resources in HP’s Cloud, now you’ve got the convenience and flexibility of Zuora for your billing. Pretty spiffy.

Congratulations to our friends at HP Cloud Services! 

Citrix Partners With Zuora to Grow its CloudPortal Services Manager

Jeff Yoshimura, VP Marketing 

 

Delivering and monetizing solutions in the Cloud just got a whole lot easier. Today, Zuora announced a partnership with Citrix Systems to extend the capabilities of CloudPortal Services Manager. Citrix’s Channel strategy is to aggressively grow its Citrix Service Provider (CSP) channel and Zuora will be an integral part of that, providing the billing solution for Citrix and its partners’ broad portfolio of Cloud offerings.

Not only is Citrix growing, but an entire industry of service providers are evolving to offer cloud-based solutions that meet a wide range of needs-- from line-of-business apps to legacy custom apps to core productivity apps. Every cloud provider must be able to streamline the front-end provisioning of their entire portfolio of services, and accurately meter and bill for those services on the backend.

Together, Zuora and Citrix empower today’s cloud providers with an integrated ability to build, deliver and monetize new cloud app and desktop services. That’s why this partnership is so potent: CloudPortal Services Manager is specifically designed to provide a platform for a broad portfolio of services and multiple tiers of delivery. Meanwhile, Zuora’s industry leading Z-Commerce for the Cloud solution will integrate seamlessly with CloudPortal Services Manager to provide a powerful billing and payment platform that allows cloud service providers to quickly monetize and grow their cloud services.

With the launch of Z-Commerce for the Cloud, Zuora set out to become the Cloud billing leader--- a solution for anyone who wants to build a public, private, hybrid Cloud. When we launched Z-Commerce for the Cloud two years ago, our goal was to ensure that every Cloud provider would have access to a billing system more versatile, flexible, and scalable than any on premise or homegrown system. Since that time, Zuora has become the commerce engine for HP, GoGrid, Dell, Tata Communications, IC&S, Zetta, and Ninefold.

With today's announcement, Zuora offers unparalleled options for Cloud providers to use their Cloud of choice. Whether you’re seeking to monetize, deliver, or scale your service in the Cloud, Zuora's Z-Commerce for the Cloud is the leading billing platform for service providers to capitalize on the unique opportunities of the Cloud.

“To be successful, cloud providers must be able to automatically and easily provision new accounts, empower customers with self-service, and then bill them for what they used," said Bill Burley, Vice President and General Manager of the Cloud App Delivery group at Citrix. "Service providers could struggle endlessly trying to build these capabilities on their own – or they could use Citrix CloudPortal with Zuora's Z-Commerce for the Cloud and leverage the integration developed via our partnership. Our Citrix Service Providers are always asking us to help them be more operationally efficient so they can improve their margins – partnering with Zuora is one of the ways we can accomplish that."

Zuora President, Shawn Price, will be presenting more about this partnership at an exclusive event for Citrix Service Providers attending the Citrix Summit on the morning of Tuesday, May 8th at the Westin San Francisco Market Street.

6 Reasons Why Activision Blizzard Will Beat Zynga & Electronic Arts

by Chris Holt, Marketing

 

Call of Duty. Starcraft. World of Warcraft. Prototype. These are some of the biggest gaming franchises out there, and they are all under the umbrella of mega-game publisher Activision Blizzard. Arguably one of the largest traditional gaming publishers left, Activision Blizzard owns the rights to many sought after properties, offers games across virtually every platform (mobile, console, and computer) and might be in the best position to move its products towards a new business model. Already, the company has begun to experiment with new revenue streams through in-app purchases and subscription models.

For the next generation of game developers, monetizing relationships with players over time will be the key. It’s no longer going to be about how many games you’ll ship, but how many customers you have. So the companies that best understand their customer and create the best relationship are the ones that will monetize those relationships the most successfully.

Despite fierce competition from traditional powers like Electronic Arts and upstart companies like Zynga, Activision Blizzard may be the company that wins out in the next generation of gaming.

1) Early Adopters of Subscriptions

Compared to many of their competitors, Activision Blizzard caught onto the importance of subscriptions early on. They broke through into the Massive Multiplayer Online (MMO) genre in the early 2000s, far before the term “social game” became popularized. Everyone else has been playing catch-up since.

And if you think that Activision Blizzard didn’t learn a thing or two about customer relationships, flexibility, and monetization through these experiences, think again: World of Warcraft has been the top of the MMO heap for nearly 8 years. The game has gone from a simple subscription model ($15 a month) to offering additional revenue streams such as in-app purchases.

2) The Most Profitable Subscription Game is Activision Blizzard’s

World of Warcraft has 10.2 million subscribers as of December 2011, a world record. In April of 2008, World of Warcraft was rumored to hold 62% of the MMO market. To say that World of Warcraft is a colossus is a bit of an understatement. Published by Blizzard, WoW wasn’t just a groundbreaking game achievement, but a groundbreaking business achievement. Like many MMO games, WoW is subscription based. But with multiple pricing tiers and now a freemium model to draw in new customers, WoW is often cited as the future of video game monetization.

While WoW’s monthly-subscriber base has declined (many point to its height at 12 million and its recent low at around 10), its impact on the industry hasn’t waned. Many, many massively-multiplayer online role-playing games (MMORPGs) have sought to replicate WoW’s success since the game’s 2004 launch partly because people recognize the potential of its business model for future successes. Blizzard is able to lock in revenue every month, has a vibrant and vocal community, and a huge database of knowledge of its customers. With this information, Activision Blizzard is better equipped than any of its competitors to replicate its success with future offerings.

3) Activision Blizzard’s Games are Built for Longer Life Cycles

In order to have a recurring revenue, you need a product or service that players will want to return to time and time again. The issue that casual games run into is one of depth: since the gameplay experiences are shallow, the lifecycle of a game is ultimately short. That’s not a problem for games like Call of Duty: Modern Warfare 3 and Starcraft II which take hours to complete their single player campaign and have an even longer lifecycle thanks to their multiplayer components which are then constantly updated with downloadable content.

True, very few of Activision Blizzard’s games are built for subscriptions or in-app purchases. But they are built for longer play sessions and longer life cycles. With this content, it’s all a matter of monetizing the continued relationship with the player.

4) Refined Sales Cycle

One issue that nearly every business insider highlighted in their dissection of Zynga’s failings: Zynga didn’t create enough new games last year. Activision Blizzard doesn’t have that problem. One advantage of being part of the “old guard” is that you get accustomed to churning out titles on a regular basis despite delays, budget issues, and other development problems. You can count on Activision Blizzard putting out a headline-grabbing, million plus seller first person shooter every Fall. You can set your watch to Holiday releases, announcements at E3, and early fall launches. These are standards of the “core” industry, and while new competition from places like Zynga have challenged them on many fronts, understanding the development cycle is something that Activision Blizzard, Electronic Arts, and others simply know better. Zynga and casual developers may have shorter development cycles, but so far they’ve mastered their calendars the same way the old guard has.

5) Call of Duty, Other AAA Titles Can Be Further Monetized

The Call of Duty franchise are some of the biggest money makers in entertainment media. Every title has topped the previous; Modern Warfare 3 had sales in excess of 6.5 million copies on launch day alone and grossed $400 million in the US and UK alone in its first 24 hours... making it the biggest entertainment launch of all time. Millions of people bought pre-sales or premium offerings. And this is only one game in Activision Blizzard’s quiver.

Activision Blizzard has the benefit of owning some of gaming’s biggest names. And while most of its revenue comes from a single-purchase approach to business, Activision Blizzard has already begun to convert some of its most popular multiplayer games to subscriptions and in-app purchases. By locking in customers for longer commitments and monetizing their services, Activision Blizzard is moving to more flexibly react to customer demands with downloadable content (DLC), updates, and fixes. The best example of this is Call of Duty: Elite, a paid annual subscription with DLC available to the most dedicated of Modern Warfare 3 players. Activision Blizzard has stated that 7 million people have signed up for the service and there are 1.5 million paying subscribers as of February 2012. We’ll likely see more programs monetizing dedicated fans of certain games in the future. CoD: Elite is only the beginning.

6) Project Titan

While World of Warcraft is on the decline and many other MMOs have sought, somewhat successfully, to replicate WoW’s monetization strategy, that doesn’t mean Activision Blizzard will be left out in the cold in a few years. Long rumored Project Titan is in development and about the only thing we have confirmed about it is that it’s supposed to be a next generation MMO. Rumors have swirled about it being free to play, being more casual-focused, and even whether it’s a continuation of another Blizzard franchise (likely Starcraft). All of these rumors could be so much hot air, but when Blizzard puts out a new game, you’re automatically looking at a blockbuster. Virtually all of Blizzard’s franchises are big players in the market, and so far they’re one of the only developers capable of creating compelling subscription-based best-selling games.

If there’s ever a game that might actually be the “next World of Warcraft,” it’s likely Project Titan.

 

[To see our discussion on Zynga's future, check out our previous posts.]

 

The 4 Reasons Why Zynga is Doomed

by Chris Holt, Marketing

What’s the fastest growing segment of the entertainment industry? And what industry has increasingly become the focus of not only the media, but Hollywood actors and technology giants? The answer to both questions is the video gaming industry, and like many industries, it’s in the midst of transformation thanks to the subscription economy.

For decades, the video game industry has utilized the conventional single-purchase model. Customers buy $59 retail games, and your profits are measured by your units shipped minus your cost of development. But with the advent of the Internet, games shifted from being single purchases to subscribable services. While most game publishers still operate under the old model, several pioneers have already leveraged the superior customer relationships afforded by the subscription model to very lucrative enterprises.

Zynga is at the heart of this debate, with many critics and industry insiders saying that it’s both the wave of the future and a flash in the pan. Here, we take the latter position. To see the former position, click here.

Zynga utilizes a freemium business model and offers a variety of social-strategy games (such as Farmville, CityVille, and Mafia Wars) on the Facebook platform. The games are free to play but often require social actions (such as partner purchases) or in-app purchases to progress faster in the game (usually requiring the player to obtain “energy”). Their business model is derived from both in-app credit card purchases and partnerships. Let’s take a look at why Zynga is so poorly positioned to ultimately win the Subscription Gaming Wars.

1)  Zynga doesn’t own the customer, Facebook does

Zynga’s success can be partly attributed to being on the Facebook platform, the most popular social networking site in the world. Until very recently, in order to access Zynga’s games, players had to log onto Facebook to play. Zynga doesn’t own the customer, but Facebook does. All of the information, revenue, etc is partly tethered to Facebook, who takes a cut of all of Zynga’s revenue and has just as much access to their customers’ data.

And while buying virtual goods is all well and good, players can still walk away from Zynga’s games-- as about 41 million did between the third and fourth quarter of 2011. Zynga uses the freemium business model to great success, but unlike MMORPGs like World of Warcraft, they don’t lock customers in for longer experiences. Customers could walk away at any time, they do not “own” the customer.

2) Their reputation among developers is terrible

Failed acquisitions and headline news decrying your labor practices are not the way to create confidence in your company. The stories about Zynga’s labor practices suggest that the company doesn’t treat its employees well, fostering a competitive and often destructive environment that has left many former employees bitter. Their reputation for “cloning” games and their lack of quality in gameplay has also furthered their negative reputation in the game community. Some of the best apps on the iTunes and Android markets have watched as Zynga has imitated their work and then made them more profitable-- meanwhile Zynga has taken legal action against games it deems too similar to its own products.

But a bad reputation isn’t poisonous to success. The issue is that Zynga needs some of the people they may have alienated. If Zynga wants to succeed and ultimately win the subscription gaming wars, they need to be able to attract the top talent in the industry to come work for them. That begins with treating their employees better. Zynga also needs to work on its image, repairing its damaged relationship with the gaming community. They’ll need allies, creative talent, and the best in the industry if they’re going to succeed. It’s much tougher to win the war when the best talent in the industry won’t work for you and many are gunning for you to fail.

3)   Their business model isn’t sustainable

A great deal of Zynga’s success can be traced to their games appearance on the Facebook platform. But the social networking giant has shown signs of slowing its expansion, tapering the flood of new customers that Zynga could reach. Recent news reveals another alarming problem for Zynga: Facebook has become saturated, meaning Zynga needs to find new pastures to explore. According to one report, at the end of 2010, about half of Facebook’s monthly active users were gamers-- a very healthy number of Zynga as the most popular game developer on Facebook. But by the end of 2011, that number had dropped to twenty-five percent. Monthly active users for Zynga declined in the fourth quarter of 2011 by about 41 million.

If Zynga is going to succeed, it needs to reach new audiences. While Facebook has been eager to keep their business, Zynga’s move to create their own gaming site underscores the storm clouds on the horizon. Zynga’s leaders know that their numbers will continue to decline on Facebook and that the tide is going out. They’re hoping a new platform will help, but ultimately, their long term success won’t be based on the platform they exist on: but by the quality of their games.

4)   Their IPO landed with a thud

Zynga was one of the most talked about companies in Silicon Valley a short year ago. Everyone was predicting the death of the old gaming luminaries at the hands of this innovative upstart. But a myriad of PR disasters and a lack of consumer confidence has led to a terrible launch for the company’s IPO. The company was valued at much less than previously predicted, and then the stock basically hovered at around $10 since its December launch-- not exactly confidence instilling.

Even more damning, business leaders all similarly diagnosed Zynga’s problems: they need to keep coming with new games, they need to innovate or be swept aside by the next “time-suck” and they need to treat their employees better. The fact that Zynga’s profits fell 50% in the most recent quarter is also bad news for an IPO launch.

If Zynga is going to win the subscription gaming wars, it needs to right the ship: and quick. It’s rare in this market to have a second act.

Congratulating BranchOut on Hitting 25 Million Users, Getting $25 Million in Funding

Jeff Yoshimura, VP Marketing 

 

The job board social media wars have heated up. Increasingly, prospective employees and employers have turned to sites like BranchOut for their human resources and employment needs. BranchOut is built on top of the Facebook platform and they’ve become not just the biggest challenger to job board juggernaut Linkedin, but a leader in their own right. 

BranchOut now has over 25 million users in 60 countries and 15 languages. And on April 19th, BranchOut announced that it had received an additional $25 million in funding, putting their total capital investment at around $49 million. Despite Facebook’s slowed growth, BranchOut is averaging a new registered user every three seconds.

We wanted to congratulate our customer BranchOut on its continued success. Zuora is only as successful as our customers, and BranchOut’s success is another sign that the Subscription Economy is here to stay.

We’re proud to be part of BranchOut’s continued growth. The latest round of funding indicates that not only will the customer base continually expand, but the company itself, as well. We firmly believe that the best is yet to come for BranchOut and hope for their continued success in the future.

6 Reasons Why Zynga Will Win the Subscription Gaming Wars

by Chris Holt, Marketing

What’s the fastest growing segment of the entertainment industry? What sector can bring in $650 million in the first five days a product is on the market? And what industry has increasingly become the focus of technology giants, online retailers, and media attention? The answer to all three questions is the video game industry, and it’s in the midst of transformation thanks to the subscription economy.

For decades, the video game industry has utilized the conventional single-purchase model. Customers buy $59 retail games, and your profits are measured by your units shipped minus your cost of development. But with the advent of the Internet, games shifted from being single purchases to subscribable services. While most game publishers still operate under the old model, several pioneers have already leveraged the superior customer relationships afforded by the subscription model to very lucrative enterprises.

Zynga is at the heart of this debate, with many critics and industry insiders saying that it’s both the wave of the future and a flash in the pan. Here, we take the former position. To see the latter position, check back next week.

Zynga utilizes a freemium business model and offers a variety of social-strategy games (such as Farmville, CityVille, and Mafia Wars) on the Facebook platform. The games are free to play but often require social actions (such as partner purchases) or in-app purchases to progress faster in the game (usually requiring the player to obtain “energy”). Their business model is derived from both in-app credit card purchases and partnerships and is unquestionably one of the most profitable in the gaming world right now. Let’s take a look at why Zynga is so well positioned to ultimately win the Subscription Gaming Wars.

1)   No one knows their customer better

Critics often point to the unsustainability of Zynga’s business model. And there’s a certain amount of truth to that: games that rely on bugging your friends and lack a compelling mechanic won’t succeed in the long term. But Zynga has always stayed ahead of this curse by selling to their customers with remarkable specificity and flexibility. When one game becomes tired, an update, new content pack, or new game are ready to roll out-- renewing interest. The company has made its name by offering games that are addictive and approachable (and free) at first, but then targeting the different types of gamers and what kind of content they’ll need to keep playing. Someone once said Zynga has monetized their business model down to the haystack in Farmville, and that’s not entirely off the mark. So far, no one has as successfully leveraged in-app purchases as Zynga has. This is partly due to the sheer amount of data that Zynga has access to; the company’s analysis of its audience is the best in the market-- it knows when players log on, how long they usually play, and what incentives they’ll need to keep playing-- often before they themselves know. Compare this to other companies that struggle to ship products in a timely manner and worry about critical reaction. Zynga has circumvented the need for the expert-- they can tell you whether their games are successful in remarkable detail.

2)   Amazing profits means they can buy better games

Another criticism that is common of Zynga’s business model is that their products are all very similar, with similar game mechanics, art style, and leveling systems. Others will even go so far as to say they aren’t even games but highly interactive mosaics since there is virtually no challenge and no chance of failure.

But Zynga’s reported 600 million in profits are so high that they have the luxury of not having to worry about those criticisms...yet. Instead, Zynga can actually afford to gobble up other, more innovative developers, and utilize their talents to build better games. Zynga has begun to make overtures to companies like PopCap (the developers of Plants Vs. Zombies) and Rovio (developer of Angry Birds), and already acquired OMGPO (the developer of Draw Something). Money talks, and with the amount that Zynga has, they can certainly buy their way to better games.

3)   Freemium is still a stronger model than a conventional $59 game

Zynga doesn’t offer paid subscription games...yet. But their freemium model is well-suited to the transition to a paid model. Instead, Zynga is leveraging small-single-transactions to great success. While counter-intuitive, these small purchases are often recurring revenues that dwarf the profitability of single purchase $59 games. Why? Because more people will throw down a dollar or two for a freemium game than will invest in the hardware to run the $59 game and then actually purchase the game itself. The threshold for entry is simply much, much lower.

4)   Zynga is flexible enough to move to new models as needed

The old guard of video games is stuck in the language of units shipped, single-purchases, and meeting deadlines. Companies that utilize the Internet (and especially the Cloud) to distribute their content have a distinct advantage. Zynga, like many of these new developers, can update content, release new content, and make available new revenue streams in hours, not weeks. Zynga’s billing platform and business model are exceptionally well-suited to this, as their many in-game purchases could easily be turned into recurring subscriptions as needed.

5)   Shorter development time means they can churn out products faster

As previously discussed, Zynga has a distinct advantage over many of its peers due to its marriage to the Internet. It can distribute its content instantly, get its message out to its customer within seconds, and even radically update its games-- all in short order. Compare that to the lengthy development cycle of AAA titles like Modern Warfare 3 and Battlefield 3 which takes months, even years. Zynga can adapt to the market and produce content quickly, cashing in on the latest genres and changes.

6) Facebook needs them

But the biggest reason Zynga will likely succeed is that Facebook needs them and will do all they can to accomodate the game developer. When you’re the favored app developer of the largest social networking site in the world, you have a distinct advantage over everyone else. Facebook has recently admitted that 12% percent of their revenue in 2011 came from Zynga. As Facebook grows, so does Zynga. This partnership is perhaps the most important one in gaming right now, and until Zynga can be knocked from their favored perch, everyone is playing catch up.