An Espresso Shot for the Subscription Economy

by Jeff Yoshimura, VP of Marketing

 

Just in case there weren’t enough Starbucks cafes near you, Starbucks has gone one better. To continue to serve the make-at-home crowd, Starbucks just introduced automatic delivery of its coffees and teas by subscription.

 

The Zuora team went crazy when we saw this! When we started Zuora in 2008, we had all these ideas of how we thought the Subscription Economy would grow in traditional product categories. Our CEO Tien would say, “I think you’ll one day see Starbucks by subscription. Why not?”

 

It wasn’t an accident that Tien chose Starbucks. Subscriptions are the obvious next step for a company that is masterful at retaining customers. It’s the idea that you are giving the customer MORE, and that the relationship shouldn’t end with the swipe of a credit card.

 

Starbucks laid this groundwork with its Gold program, offering loyal customers 10% off every purchase, free Wi-Fi use, free beverages on their birthday, exclusive discounts, and more.  Rather than continuing to chase customers, they wanted to solidify recurring customer activity. And the benefit of the long term engaged customer pays off in increased revenues and profits.

 

This is precisely what Zuora means when we talk about the shift from the “Buy Here” button of the 20^th century to “Subscribe Now” button in the 21^st century. It’s not just about mail order. It’s about providing customers what they want, where they want it and how they want it, which each customer may view as unique to them. Quoting the Starbucks email campaign:

 

Want to be sure you always have your favorite coffee on hand? Simply subscribe online to have your coffee or tea sent to you automatically, as often as you like. You can easily modify your order, rearrange your shipments or pause when you go on vacation. We're flexible for you.

 

Start your subscription now. 

 

What does this mean for other companies as well? Who else is amazing with customers? Who will be next to shift to the Subscription Economy? What other retailers? Maybe clothing companies? Who knows? And, again, why not?Whoever is that next big brand to make the shift, the Starbucks example itself should serve as a warning to companies who think the Subscription Economy is only about digital goods. As we’ve seen over and over, it’s about a fundamental change in the way you serve your customers. If you want to sit and think about that any longer, companies like Starbucks will come eat your lunch and have a tall half-skinny half-1 percent extra hot split quad shot (two shots decaf, two shots regular) latte with whip while they’re at it.

 

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.

Baby Boomers are Changing the World... and this Time it’s Subscription Style

by Annette Giambroni

Remember the days when everyone was worried the Baby Boomers were all going to retire at the same time and crash the social security system? Well, they are at it again… and this time they are trying to take down one of my favorite pastimes. The Television. It appears that while their retirement may have been delayed due to a down economy this same phenomenon has kept them at the office, and more importantly, on the computer.

I was reading Paul Carton’s Instablog today where he cites some interesting stats on how Baby Boomers are turning away from TV and towards online services and entertainment. I remember hearing the same thing just a few weeks ago at a Shasta Ventures (a Zuora investor) event where Mike Vorhaus, President of research and consulting firm Magid Advisors, provided insights on his last year of research. The gist of it being; the world is moving to online subscription services and if you want to thrive, you’ll need to target consumers where they’re currently spending their time, e.g. social media outlets like Facebook, gaming sites, and online video sites like YouTube.

Most of us think of teenagers as the biggest group to be jumping on the subscription and social media bandwagons but not so according to Carton…in his article "48% of (Baby Boomer) respondents say they’d be willing to pay a monthly fee for a Video-over-the-Internet subscription if it provided the same programming currently available on their TV service."

And while I am far from the Baby Boomer generation (a spry 36) I just may be willing to give up my TV for a Hulu subscription.

Z-Billing 2.0 Launch: Subscription and SaaS-Powered Business Community Gets Together

by Tricia Reilly

Tuesday night, Zuora hosted a cocktail party at La Mar, celebrating the launch of our Z-Billing 2.0 subscription billing service and the fact that we’ve signed over 100 SaaS billing customers in less than a year.

For those of you who may not know, San Francisco experienced a bit of a heat wave last week, so the unseasonably warm weather made for an ideal dockside get together for the who’s who of the SaaS world.

At one point I was speaking with a group of Zuora customers and I realized that we were all already using or switching to subscription services in virtually every aspect of our businesses; from marketing automation to webmail to business intelligence.

It suddenly dawned on me that not only is Zuora enabling SaaS and subscription companies to grow revenue and increase operational efficiency, but we’ve created a community of subscription savvy companies who are relying more and more on cloud computing services to enable focus and growth.

In addition to sipping Pisco Sours, I proceeded to spend a good part of the evening introducing customers to partners, prospects to customers, and so on. It reminded me of the early days of the Internet when I worked for one of the largest web hosting companies. Not only were customers side by side in the data center with the hottest Internet properties, but they derived real business value from industry events which were a hotbed of business development activity.

With the launch (and the heat wave) firmly behind us, I’m looking forward to seeing the next wave of charge models for existing and new subscription products to drive growth for our customers and partners. Can you think of a way you’d like to price that we haven’t thought of yet? Did you find a new prospect at the launch event? Drop us a note and let us know!