Paid content – Accenture bets on subscriptions, and so do we.

by K. V. Rao

Will consumers pay for online content? Of course they will and they already do. Look at the Wall Street Journal, Financial Times, even Netflix. At Zuora, we’re a bit weary of the over-reaction that occurs when companies announce planned paywalls. Business models are good things.

Paying for something that was once free might not be our first choice, but the free rides are over. Internet advertising spend continues to go down – the industry lost another 5.3% or $10.9B in the first half of 2009 – and online publishers continue to struggle with audience numbers. Content companies finally realize that they need business models and we, as consumers, need to accept that there really is content that we are interested in and will pay for. The sad truth is, if we don’t pay for what we want (like local news), it may very possibly cease to exist.

Rupert Murdoch made big waves when he said News Corp would start charging for all content. When I look back at other announcements made throughout 2009, I’m not so sure why everyone was so shocked at Murdoch’s plans. More and more companies like Hulu and the recently announced magazine consortium, including publishers News Corp, Hearst, Time, CondeNast and Meredith are putting wheels in motion to charge for content in the coming months.

As well, throughout the year, there’s been growing evidence that supports the fact that consumers will pay. Two surveys that stand out to me are Accenture’s Global Broadcast Consumer Survey from earlier in the year and the recently released survey by Boston Consulting Group.

Accenture’s findings highlighted the fact that subscriptions will likely reign supreme (we like that!). Accenture says “despite the downturn in the global economy, consumers revealed an increased willingness to pay for different types of programming.” Folks in every age group preferred subscriptions over pay-to-play. Accenture concluded “subscription service content appears the most resilient to the economy, as its consumption shows no signs of being hit by a drop-off in consumer spending.”

BCG’s survey found that consumers were more likely to pay for certain types of content, specifically news that is:

• Unique, such as local news (67 percent overall are interested; 72 percent of U.S. respondents) or specialized coverage (63 percent overall are interested; 73 percent of U.S. respondents)
• Timely, such as a continual news alert service (54 percent overall are interested; 61 percent of U.S. respondents)

In conjunction with what kinds of content people would pay for, they also told BCG they’d be willing to pay $3/month in the United States and Australia and even $7/month in Italy.

For example, based on BCG’s findings, an American online publisher with a relatively small monthly readership of 30,000 readers could bring in close to $100K in revenue via paid content. That’s money that wasn’t there before…not bad.

What this says to me is there are content delivery and subscription models that will work for everyone – content providers and consumers. Freemium, pay-as-you-go, usage-based pricing, recurring subscriptions, ad revenue. There is something for everyone and at Zuora, we’re confident there is a solution. We just need some time to work it out on the business side.

Fall DEMO’09: Social Media, B2B, and Chris Shipley’s Victory Dance

by Annette Giambroni

Earlier this week, we launched Z-Commerce for Media at Fall DEMO’09 in San Diego. We were really excited to see this event growing in size despite the economy. As always, there was a real palpable energy and buzz about the place and we were honored to be asked back, following our launch at DEMO in the Spring.

We’re busy following up on connections made, press coverage, and internal de-briefs – but before we move on to the next big thing, we’d like to share our observations and thoughts with you.

First of all, we were thrilled to see such a strong focus on business models and whether or not the presenters could turn a great idea into a viable business. I guess it’s a sign of the times, but following the tweets, it was obvious that people were more interested in how presenters would monetize their offering than in seeing cool technology.

Some of our favorite presenters included Webroot, Liaise (a super friendly bunch of Aussies who won the Enterprise People’s Choice Award and $500k in IDG advertising), LeapFILE (great group of people who offer a secure file transfer service), Rumbafish, Pinyadda, and TwirlTV just to name a few. Not surprisingly, there was a heavy focus on social media and crowdsourcing, but we were a little shocked that Zuora was one of few enterprise, B2B apps.

Despite the heavy focus on consumer technologies, quite a few of the Lifetime Achievement Awards went to B2B vendors such as Marc Benioff, Founder and Chairman of salesforce.com and an early Zuora investor; as well WebEx, Adobe Systems, and Google. With our own founders coming from salesforce.com and WebEx, we certainly hope to follow in their footsteps!

Finally, we were sad to see Chris Shipley hand over the reins to Matt Marshall, but getting to watch her victory dance was well worth the hefty show price tag.

Zuora Launches First Online Commerce Platform for Publishers at DEMO09

by K. V. Rao

Today, we’re in San Diego at DEMO09, where established vendors and start-ups alike come to launch their wares to a panel of journalists, VCs, technologists, and thought leaders. We’re here to launch our latest offering, Z-Commerce for Media. Why Media, why now, you ask?

The publishing industry has struggled with the transition to the online world. While technology vendors successfully made the transition to SaaS and subscriptions, publishers opted for ad-supported and classified revenue models, giving away their content for free. As print circulation numbers continue to fall, and advertising and classified revenues drop, the media industry is struggling to stay afloat. We’ve recently seen household names like Readers’ Digest file for bankruptcy and the San Jose Mercury News print a ‘frank talk’ with readers about their financial woes, which begs the question, could the San Francisco Chronicle or the Boston Globe be next?

We at Zuora can’t imagine a world without a thriving free press. We believe that professional journalism is the cornerstone of democracy, so it’s time to do something to save this critical industry.

In order to survive, publishers must find new and better ways to monetize their online content. Rupert Murdoch and Barry Diller have already challenged their organizations to move away from free content. But what is the right business model? Is it monthly all-or-nothing access like the Wall Street Journal or a metered approach like the Financial Times? Is it pre-paid accounts and micropayments? Or something more nuanced like targeted premium packages for specific interests? The truth is, no one knows what pricing model will work best, so publishers need to start experimenting with bundles and packages quickly.

But media companies are going to need a flexible platform to create the right bundles for the right subscribers. As other subscription businesses have learned, a one-size-fits-all approach won’t maximize revenue, and over time they’ll need to package content to attract different market segments. But where is the platform to enable them to launch and test new products, manage invoicing, and collect recurring revenue? A lot of vendors, including Google, are talking about plans to offer products to help the media industry, but it will take time for them to actually build something. In an interesting side note, just last week Google’s CEO criticized News Corp’s plan to charge for content on all of their sites, saying that “there are enough free sources” of general news.

That’s where Z-Commerce for Media comes in. Zuora built the de-facto subscription platform for the SaaS and cloud computing industry that’s already being used by over 100 companies; and we think that this same technology can be applied to media. Z-Commerce for MediaTM is the first online commerce platform for publishers to (a) price, package, and publish content bundles online, (b) to register and manage new and repeat subscribers and their entitlements, (c) and to streamline the entire billing and payment operations processes.

What’s more – we’re already working with online publisher GigaOM and Reed Business Information, Europe’s biggest online and offline publisher – to manage their subscription billing and payment operations.

I’m excited that Zuora has chosen the media industry for our first industry solution, and look forward to helping publishers successfully make the transition to the subscription economy.

Want more information? Read the full Z-Commerce for Media press release and watch Zuora’s live presentation at DEMO09 at 11:30am PT tomorrow.

We’ll be blogging and tweeting from the show floor, so stay tuned!

The Economist.com, the Internet Manifesto and the Fate of Online Publishing

by K. V. Rao

It’s been quite a week for the world of online publishing.

First, MediaWeek reported that the Economist was moving to a paid model for its news content. The publisher, who until now charged only for online content that was more than a year old, refuted the assertion stating, “It’s something that we are considering but nothing has been decided yet.” However, with advertising revenues growing 29% year over year, the Economist.com is certainly bucking the trend of fellow publishers.

Then Wednesday, a group of German bloggers stirred up quite a frenzy when they launched their Internet Manifesto – a list of seventeen declarations of how journalism works today. The manifesto, which TechCrunch’s Markus Goebel describes as “an onslaught on old-school media and a reaction to German publishing heavyweights who feel ‘sneakingly expropriated’ by the Internet”, certainly makes interesting claims.

At Zuora, we’re not short on opinions, especially when it comes to new and interesting revenue models, and the monetization of online assets. Here’s a brief recap of our reaction to just a few of the declarations:

#1: The Internet is different.

The media must adapt their work methods to today’s technological reality instead of ignoring or challenging it.

We at Zuora couldn’t agree more. The Internet is making it faster and easier to publish content, and publishers who embrace technology will thrive in the long run, engaging readers in a dialogue rather than shouting at them. However, old world media companies should retain what was good about print journalism (ethics, fact checking, impartiality, etc.) and embrace what’s good about the new – collaboration, user-generated content and forums, speed to market, etc.

#2: The Internet is a pocket-sized media empire.

The web rearranges existing media structures by transcending their former boundaries and oligopolies. The publication and dissemination of media contents are no longer tied to heavy investments…All that remains is the journalistic quality through which journalism distinguishes itself from mere publication.

The good news for the consumer is that barriers to entry, which made it extremely difficult for individuals and start-ups to get into the news business, no longer exist. However, existing publishers shouldn’t be excluded from the party simply because of their historical dominance. The “internet elite” don’t get to decide who wins this competition. In the end, the consumer will determine whose content is worthy of their attention and therefore their dollars/eyeballs.

#4: The freedom of the Internet is inviolable.

The Internet’s open architecture …may not be modified for the sake of protecting the special commercial or political interests often hidden behind the pretense of public interest. Regardless of how it is done, blocking access to the Internet endangers the free flow of information and corrupts our fundamental right to a self-determined level of information.

We agree with this with the qualification that this freedom includes the right to charge a fair price for value delivered. Call me a capitalist, but it seems to me that if people are willing to pay for something – whether that be a physical product or an online service – then the ‘producer’ should be entitled to sell it to them, assuming that said product or service doesn’t pose a danger to society as a whole. This should hold true for both traditional media companies and upstart bloggers.

#8: Links reward, citations adorn.

Search engines and aggregators … boost the findability of outstanding content over a long-term basis.... References through links and citations—especially including those made without any consent or even remuneration of the originator—make the very culture of networked social discourse possible in the first place. They are by all means worthy of protection.

I have no issue with search engines indexing content (whether that be merely an abstract of an article or content in its entirety), according to the wishes of the publisher. If I follow their logic, wouldn’t all digital music be available online and without restriction? At what point does the public interest give way to the artist’s right to earn a living?

#12: Tradition is not a business model

Money can be made on the Internet with journalistic content….business models have to be adapted to the structure of the new.

We definitely agree that there is money to be made in the online publishing industry, and that a number of new business models will emerge, chief among them, subscriptions. Last month we blogged about how Journalism Online has signed up publishers representing more than 500 newspapers and magazines to their affiliate program with the aim of charging for online content. The question is, with bloggers insisting that content be free, how will large publishers compete? Will they successfully make the transition to paid content or will this be the death knell of the media industry? Only time will tell.

Reader’s Digest Files for Bankruptcy While Hundreds Join JOL’s Paid Online Content Mission

by Tricia Reilly

Another one bites the dust: last week the publisher of Reader’s Digest, filed for bankruptcy, joining a long list of media outlets battered by the recession and an ineffective ad-supported revenue model. The struggling industry is ripe for a new business model.

On the heels of the Reader’s Digest announcement comes news from Journalism Online LLC, a new venture spearheading journalism’s transition to a paid online model. Publishers representing more than 506 newspapers and magazines will join JOL as affiliates. Their goal? To generate new revenues from readers and distributors for their digital content.

JOL’s co-founder Gordon Crovitz, who for over a decade ran the Wall Street Journal Online, explains:

“Every publisher we have met with is now seeking to generate revenues for online access, which is a huge shift in strategy. The interest shown by our affiliates and many other publishers with whom we are intensely engaged confirms the need for a sophisticated commerce platform to meet the challenges facing the media industry.”

We at Zuora believe that subscriptions might just save the publishing industry. Earlier this year, we blogged about how subscription revenue models are taking center stage, and noted that News Corp Chairman Rupert Murdoch hinted at moving toward paid content. This month, when Murdoch announced plans to roll out paid content on all News Corp websites, we highlighted the power of subscriptions at Zuora customer GigaOM Network, which successfully launched a premium content service for its annual subscribers this year.

Although the publishing industry seems to be coming around to the idea of paid content, the information-must-be-free crowd stands its ground. Nearly 300,000 Facebook users have joined the group to “Keep Facebook Free,” with the threat of signing off the site.

Paid content providers will have to find a way to differentiate themselves in order to justify the premium. In his new book, Free: The Future of Radical Price, Chris Anderson argues that the most effective price is no price at all. He highlights how savvy businesses use “freemium” business models to get subscribers to pay for premium features, like Flickr does with its Flickr Pro account. The Wall Street Journal is a great example of a successful “freemium” business model in journalism. Paying subscribers can read The Wall Street Journal online, with navigation. Non-subscribers have to settle for reading the occasional Wall Street Journal story when they happen to encounter it—indexed in Google, or referenced from another site.

We’re excited to see the publishing industry rally around subscriptions to overcome its challenges. Despite the naysayers, we’re on board with JOL’s subscription model for content, and we’re thrilled to see more supporters join the ranks.

Could Subscriptions Save the Online Publishing Industry?

by Tien Tzuo

There's some irony to the fact that the publishers of the Wall Street Journal made waves this week by announcing they will soon charge for all content. On a conference call held after the company’s earnings announcement, News Corp Chairman Rupert Murdoch said that he plans to roll out paid content on all of their news websites as early as this financial year. Aren't newspapers one of the originators of the paid subscription model?

Earlier this year, we blogged about how subscription revenue models are taking center stage, and noted that Murdoch hinted at a move towards paid content saying "the challenge for media organizations was finding a balance between advertising and subscription revenues and figuring out how to charge for content without alienating existing users -- which could lead to Web sites offering tiered levels of free and paid-for material."

Staci Kramer, co-editor of PaidContent.org, really hit the nail on the head. Interviewed on Marketplace yesterday, she said:

"There's a lot of different ways that people are trying to do this. You know, what I think what we're going to enter here is a very big experimental phase with News Corp, and how they will handle this. And if you look at, whatever they do at the beginning shouldn't be viewed as something that even they expect to be in place a year from now."

News Corp is not alone - the online publishing industry as a whole is starting to come full circle on the topic of paid content. Wired Magazine is talking about "raising the price or straying from the traditional magazine business model with ideas like tiered pricing with different benefits."

Zuora customer GigaOM Network understands the power of subscriptions and recently launched a premium content service for its annual subscribers.

We’re watching this space with great interest. Subscription business models are - at the very least - part of the answer to helping struggling online publishers. But, does anyone believe that free news sites will cease to exist? The paid content providers will have to find a way to differentiate themselves in order to justify the premium.

Subscription Revenue Models Take Center Stage

by Tien Tzuo

Open Table’s success is a feather in the cap of subscription businesses and tangible proof that ad-driven revenue models are rusting. The New York Times really hit the nail on the head when it wrote: “Now advertisers have cut back their online spending. So Web start-ups are searching for new ways to make money, like selling real, or virtual, goods or asking customers to buy subscriptions.”

But, it’s not just Web start-ups that are moving to subscriptions. Traditional ad-supported businesses like newspapers with online content are offering more subscription pricing and packaging as well. Ads don’t work anymore and companies are moving beyond them. Subscriptions, tiered pricing and premium content are taking center stage.

Wired Magazine is talking about "raising the price or straying from the traditional magazine business model with ideas like tiered pricing with different benefit.”

Even Rupert Murdoch is distancing News Corp from ads. As Murdoch recently said to CNN.com, "the challenge for media organizations (is) finding a balance between advertising and subscription revenues and figuring out how to charge for content without alienating existing users–which could lead to Web sites offering tiered levels of free and paid-for material."

It’s exciting to have subscriptions in the national spotlight. Of course, here at Zuora, we and our 100+ customers already know that subscriptions are the way to go. We trust that more companies will begin to evaluate subscription-based revenue streams, especially in light of OpenTable’s success.

A big congratulations to our friends at Open Table (a fellow Benchmark company). Jeff Jordan and his team have built a great company and the market certainly agrees with us.