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.

Kim Kardashian's Designer Shoes As a Service - One Haute Subscription

by Megan Golden

If you’ve been keeping up with the Kardashians, you know that Kim recently launched ShoeDazzle, a subscription service for designer shoes! While the name reminds me of a costume accessory from my 5th grade jazz recital, the idea is genius... and let’s be honest, a little bit sexy.

For decades, celebrities have stepped outside their "talent" to jump on the latest bandwagon - from checking in to rehab, to having a baby, to launching their own personal brand of the latest must-have. If a female celebrity doesn’t want to pop out a baby and name it after a fruit (sorry Apple Paltrow), she’s most likely to go the fragrance or clothing line route. With her recent break-up from Reggie Bush, Kim Kardashian had no choice but to go the apparel route.

Here’s how it works. You take a series of short quizzes; think Cosmo meets Vogue.

• Who do you think is better dressed? (Btw, the correct answer is the model from the Zac Posen Summer ’10 show.)
• Which brand do you like best? (L.A.M.B. over Coach and Bebe.)
• Which celebrity style do you most admire (I stayed loyal to my longtime girl-crush Reese over Sienna & Rihanna.)

Suddenly I was funneled into a this-type-of-girl-likes-these-types-of-pumps bucket... and I liked it! After a couple of days, Kardashian’s shoe stylists sent me an email with 5 shoe suggestions for that month. After much debate (Tien, I promise I did this on my lunch break) I went with the platform suede pump in slate (so Fall 09!) that will carry me from the office to SF night life - for the month of August!

What’s so haute about this? It’s just another industry moving from the traditional buy model to the subscribe model. This is especially reflective of our current economic climate; most women are more apt to spend $39/month for the in shoe rather than paying hundreds of dollars to own them outright; especially when they have the potential to be out before they’re even paid off. You’re keeping with the trends without breaking the bank!

So for the Zappos, Piperlimes, and Shoes.coms of the world - consider a move to subscriptions to cater to the Shoe Lovers on a budget.

As for you, Kim, thank you for allowing me to go from a designer shoe ogler to a prancing stiletto trendster.

PS: And Kim - Reggie has just been removed from my fantasy football draft. You’re welcome.

Hallmark Embraces the Subscription Model with E-Cards

by Annette Giambroni

As you have probably guessed by now, we spend a lot of time talking about different types of businesses moving towards a recurring revenue model. So far, they fall into 3 categories:

• Industry disruptors - think Netflix and Zipcar
• Large IT companies announcing cloud initiatives - like Sun Microsystems or HP
• And a slightly slower moving group of Traditional Businesses

This week the old time greeting card giant Hallmark leapt into the new world order when it announced its first online subscription service. For just $9.99 a year, you’ll get unlimited e-cards with a free reminder service.

I remember well wandering the aisles of my local Hallmark store in Montclair, CA as a kid, picking out the perfect greeting card to make someone’s day and I’m delighted to see one of my favorite offline brands making a play for this new market.

Makes me wonder where they will take this next. Perhaps special upgraded cards or a tie in with a mail service where cards are ordered on line and delivered to someone's door. Maybe upgraded features for their contact management that tracks the history of what cards have been sent to whom. Or even integration with online photo-sharing site flickr so users can add photos onto a card, or better yet a card embedded with a personal YouTube video. The possibilities are endless… for a small upgraded recurring fee, of course.

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.

Traditional Household Services Move to Subscriptions

by Tricia Reilly

I was watching TV the other day and noticed a Terminix ad which touted a subscription offering called Ultimate Service Guarantee. For a nominal fee (which varies depending upon zip code, square footage, etc.), the subscription service includes a 24 hour SLA, 100% satisfaction, and a lifetime damage repair coverage, in the event of future damage caused by termites—for as long as you maintain your subscription.

When I was growing up, we got a call every so often from a local pest control company offering to come by and spray. My Mom swore that if you said no, they came by the following evening to drop off a load of ants, but that’s another story...

The service was somewhat haphazard with the vendor having to manually call you to schedule a service, rather than a recurring revenue model where you paid the same fee on a monthly or quarterly basis for on-going service.

As a condo-dweller myself, I don’t have need for a pest control service, but it got me thinking about the rise in subscriptions overall. When you think about it, household services are the perfect industry for subscriptions. Whether you’re talking about pest control, pool cleaning, gardening, carpet or upholstery cleaning, all of these services lend themselves to a subscription model.

It’s a win win for both consumers and vendors. For busy household CEO’s , it’s one less thing to have to schedule, plus it allows for easy budgeting; and for vendors, it provides a more predictable revenue stream.

Does your household subscribe to any cool services? Let us know; we’d love to hear about it.

Vivendi Outperforms Rivals With Subscription Model

by Tien Tzuo

Here's an interesting article on Vivendi that I read this weekend, from the Wall Street Journal.  WSJ.com is a paid subscription site, so you may have to be a member to see the article, but the gist of the article is that Vivendi is outpacing its rivals, even during the global economic crisis, in large part due to its investment in building out a subcription business.  Here's a quote:

After the tech bubble burst in 2000, Vivendi nearly toppled over. During this crisis, the French entertainment and telecommunications hybrid is outperforming its media rivals.

The reason: Around 70% of Vivendi's revenue comes from subscriptions to its broadband, television, mobile-phone, online-game and other services, and relatively little from volatile advertising. Vivendi is bravely sticking to its earnings outlook for the full year. Bertelsmann, News Corp. (owner of the Wall Street Journal), Time Warner and TFI -- the main rival to Vivendi's Canal Plus television unit in France -- have all lowered forecasts.

Here's another proof point as to why the predictable nature of subscription services makes for a superior business model.