Zuora Rides the Subscription 4.0 Wave

By Jayne Scuncio February 1, 2018

This story was written by Gilles Fontaine and published in French magazine Challenges on February 1, 2018.

Zuora’s founder has raised 250 million dollars since the launch in 2008.

The Californian company is optimising pay-to-use with its technology expertise. A revolution in ways to buy.

Tien Tzuo has the charm of an adolescent. Though he’s approaching his fiftieth birthday. This old California tech hand, coming up through Oracle and Salesforce, is now the herald of the subscription business model. In his view, the global economy is going through a radical transformation, and will soon move from the traditional model of selling a product or service, to that of pay-to-use.

Zuora, the company he founded in 2008 at San Mateo, California, now has over a thousand customers around the world. From the outset, the start-up observed the companies specialising in the field who were its neighbours in Silicon Valley: Netflix, the entertainment platform, or Zipcar, the carshare rental company – bought out by Avis.

“There will soon be no need to buy a car any more”, promises the business man.

His vision applies to every sector: from Royal Canin to IBM, General Motors, they are all converts to the concept whereby they gain loyal customers and at the same time increase the monetization of their products.

The secret of its success, in the face of colossi such as Oracle or SAP, relies on its time-tested algorithm and on feedback from its users. In order to develop its big data technology, the company has raised some 250 million dollars since it started, bringing its value to over 1 billion dollars.

 

Targeting audiences better

“Subscription management is an extremely complex process”, explains Tien Tzuo. “We have resolved this by automating product updates, in order to target audiences more effectively”.

Zuora’s teams recently worked with their counterparts at the Financial Times, mired in a very ineffective digital paywall strategy. The package was reduced to two types of subscription: standard or premium rate. And for the 24 hours prior to the Brexit vote in June 2016, the British daily paper offered free access to its website content, seeing an explosion in traffic and also in subscription requests, multiplied by seven in one weekend compared to a normal period.

 

High-speed in France

Zuora is now making one-third of its revenue, over 100 million dollars, outside of the United States. Things are moving very fast in France, where the company opened an office some three years ago. SNCF has worked with Zuora on its TGV Max programme, launched a year ago and targeting young people between the ages of 16 and 27. The concept involves offering this zapper generation the option of subscribing or cancelling at will.

The 79 euros a month offer was an immediate hit: “In one day we reached a month’s revenue with this target group”, reports Isabelle Bascou, general secretary of Voyages SNCF.

The San Mateo company also worked with Engie and Schneider Electric on the Internet of Things, in the energy-saving field. NRJ Mobile and the catch-up TV channel Molotov have also used its technology. “The subscription economy is global!”, chants Tien Tzuo. It will soon be put to the test: Zuora is preparing for its launch on the Stock Exchange.

 

THREE CLIENT COMPANIES

GM – Automobile

From 1500 dollars a month, the subscriber can use up to 18 different models of Cadillac, General Motor’s prestige marque.

Royal Canin – Pet food

The manufacturer has set up a subscription service for delivering bags of dog food.

Schneider Electrics – Energy

The French group installs its equipment free of charge, and is paid on the energy savings generated.