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April 2011

April 27, 2011

Congrats to The New York Times: A Subscription Economy Case Study

Tien Tzuoby Tien Tzuo

During its Q1 earnings call last week, The New York Times reported that it had attracted more than 100,000 digital subscribers since employing its new digital paywall. That’s an impressive number for only the first three weeks, especially when you consider that the Times’ privately-stated goal for the entire first year (according to PaidContent) is 300,000.

The success of the NYT is merely the latest example of the power of subscriptions. Metered, “pay as you go,” and other subscription membership models have exploded across billion dollar industries in the last few years. And, we’re just at the beginning of the growth curve. To this point, Gartner analyst, Chris Fletcher, recently wrote, “By 2015, more than 40% of companies selling media and digital products, such as software, services and content, will rely entirely on SaaS or hosted subscription management services to manage their fulfillment, entitlement, billing, renewal and customer loyalty requirements.” (“Building a Strategy for the Subscription Economy,” Chris Fletcher, Gartner, April 11, 2011)

All of this is showing that subscription business models are not just for “innovative” or “emerging companies, they are for companies that seek to re-write and dominate entire industries. In the past, I used to point to Netflix vs. Blockbuster as a prime example. Now Netflix has shown that was only the beginning: In Q1 2011, Netflix added 3.6 million subscribers and has more than 23.6 million total subscribers. That’s a 69 percent growth in subscribers year-over-year. And as Ryan Lawler of GigaOm points out, Netflix is now bigger than Comcast in total subscribers.

I would love to see The New York Times and other traditional media properties replicate growth like that. But with the Times there is one matter that seems hard to reconcile: different reports have put the cost of the subscription paywall at $25M to $50M to build, deploy and maintain its paywall, which according to Bloomberg took a year to build. Certainly, it’s no small matter for a company to do all of this in-house. We can substantiate that from our experience and expertise across hundreds of deployments. But even so...$25M?

April 26, 2011

Ease & Flexibility Driving Zuora’s 27th Consecutive Month of Product Innovation

by Luke Braud, VP of Product & Engineering

I get to speak with quite a few subscription businesses. What’s been made clear through these conversations is that in today’s Subscription Economy, no subscription is the same and every customer is different. A major theme in these conversations is the need for ease and flexibility in order to survive the complex demands of the new Subscription Economy.

Like I’ve said in previous blogs, we use conversations like these to help us make decisions about what features to explore and eventually build. And that rings true for April’s release.

For Zuora’s 27th consecutive monthly release, our product team has taken the ideas of ease and flexibility to the next level. For example, we’ve introduced modular subscription invoicing where companies have the flexibility to combine or separate subscription invoices in any combination. We’ve created new preview tools making it even more painless to manage your amendments and customer communications. And we’ve made reporting and integration that much easier with a new set of data sources to pull from.

To see more details on this release, check out today's press release or What’s New section of our website.

April 15, 2011

Zipcar’s IPO: A $1B Subscription Economy Success Story

by Kyle Christensen, Senior Director of Product Marketing

It started in the technology sector, as new business models often do. Salesforce.com offered a completely different approach to buying software. Why throw down millions of dollars for servers and CD’s when you could subscribe to software, delivered as a service, over the internet?

This week we saw yet another proof point that the Subscription Economy is taking over. No, not with news of another SaaS company assuming leadership in a technology sector (although SaaS will be 85% of all new software by next year.) Not with an old guard media company transitioning to a new digital subscription strategy (that was last month.) We see it in an industry that’s not exactly known as “bleeding edge”: The automotive industry.

This week Zipcar announced an IPO at $18 per share to raise a total of $174.3 million to expand the company’s network (currently over half a million subscribers.) And the market promptly drove the share price up to $30. That's a $1 billion valuation. It’s no wonder. Why drop $30,000 on a single car that you’re stuck with for the next 5-10 years? Leasing was the next step in the evolution...you pay only for the value of the car that you use for 2-3 years. But that still doesn’t deliver the true value of the Subscription Economy. You're still locked into one vehicle, with no room to ramp your usage up or down. Then Zipcar came along and figured it out, fully embracing the concept of cars delivered as a service. Take a station wagon to get groceries on Thursday, grab a convertible to cruse the coast on Friday, then pick up an SUV to shoot up to the mountains on Saturday. Plus you’ve got gas-as-a-service and insurance-as-a-service bundled in. You pay more when you need to ramp up your millage and time, or you can throttle it back if you need to. Not a bad option with gas prices being what they are today.

It’s that subscription flexibility that’s tied to both the service you get and the price you pay that has customers demanding new subscription services across technology, media, communications, and now transportation. Congratulations on your success in the Subscription Economy, Zipcar! We can’t wait to see who’s next.

April 14, 2011

Jimdo, a German-Based B2C Juggernaut Goes Global

Katrina Wongby Katrina Wong, Director of Customer Marketing & Community

Christian Springub started his first business at age 12 buying and re-selling collectable toys at flea markets, and within three years, he switched to creating websites in his hometown in Fridtjof, Germany for local businesses. Now 15 years later, the company he co-founded, Jimdo, has rapidly expanded from their roots in Hamberg, Germany across 4 gcontinents with more than 3.5 million customers, and is helping take the Subscription Economy global.

Just as Christian made it easy for the local merchant to create a website, Jimdo is doing the same with its “Pages to the People” motto, allowing for any individual or business to create and build their own websites in minutes. Now with Zuora, Jimdo is going global offering pricing for 11 different markets, in 20 different currencies, and with 80+ payment methods.

See how Zuora helped accelerate Jimdo’s international growth – for more information about the Jimdo success story, see our official press release.

April 06, 2011

Zuora and Salesforce.com Move the Communications Industry to the Cloud

Shawn Priceby Shawn Price, President

Today communications service providers are increasingly under attack from a new breed of competitor. No, it’s not the broadband or 4G provider down the block. It’s the device manufacturers, the content owners, and the cloud service providers. Today companies flock to Apple, Google, Netflix, Skype, Zynga and Facebook, while carriers are turning into increasingly irrelevant commodity services.

And the stakes are large. The organization Telco 2.0 puts the market for a new breed of services at $375 billion over the next decade. We’re talking video, music, SaaS apps, gaming, and cloud services. Voice – the cash cow of the carrier – will become simply a feature supporting these other services. The question is: Can communications service providers act quickly enough to make a shift in the services they deliver, the pricing and packaging they roll out, and the ways in which they interact with their customers?

Carriers are accustomed to long-term contracts and regulated lock-in. But those barriers are going away. Just last month Ofcom in the U.K. announced an 80% reduction in termination fees. True customer loyalty will come through the right product and service strategy aligned with how customers want to buy. Free trials, pay-as-you-go options, flexible billing frequencies, and an edition upgrade path. But with systems and infrastructure designed for the old lock-in model, how will providers support this new fluid subscription lifecycle?

Carriers are used to 18 month billing rollouts. See the $100M Amdocs debacle at Clearwire last year for a typical example. In the mean time, providers using the cloud, like Open Range, are going live in less than 100 days and SaaS companies like Box.net are experimenting with different pricing models up to 50 times in a year.

Carriers aren’t unifying their customers’ interactions. Sure, you might be able to check your minutes used with their iPhone app…but what if you could also upgrade to the next tier if you were about to go over on your data plan? You might have a handle on your data usage at home, but when travelling abroad I know that I shut off my data plan, else risk coming home with a 4-figure bill. Why can’t the carriers make it easy for me to see this happening in real-time and make the adjustments to my plan to accommodate what I really need?

That’s why today Zuora is launching a brand new product and partnership with Salesforce.com for the communications industry. We’ll be delivering billing and customer care in a unified solution for managing the entire subscription commerce lifecycle…entirely in the cloud. Zuora for Communications will give communication service providers the speed and flexibility to launch new services, price, package, and bill for services in new ways, and connect with customers across the web, over the phone, and on mobile devices. In fact, Zuora and Salesforce are already doing that for hundreds of companies, including Open Range Communications and Barrett Xplore.

But we’re not stopping there. Zuora is delivering a whole library of helpful tools to understand how Zuora for Communications can help everyone from the largest carriers to the hottest upstart service providers. Check out the Zuora for Communications whitepaper and sign up for the upcoming communications industry webinar to join peers and discuss this important issue.