Catching Up With Zuora On The State Of The Subscription Economy

Morning Markets: Last week Zuora reported earnings. The 2018 U.S. technology IPO hopped on the phone with Crunchbase News afterward. Here’s what we learned.

Zuora’s IPO was a fun affair. We covered it somewhat extensively, digging into its IPO filings, its pricing dance, and its first-day performance. Hell, we even wrote about its CEO’s book that came out this year.

But that’s all past now. Zuora reported its third set of earnings as a public company last week, putting them far outside our usual remit of private companies hoping to get to an IPO. But Zuora’s core business—powering subscription businesses—gives it unusual perspective into the companies that do constitute our normal fare.

To get that perspective on the record, I hopped on the phone with Zuora’s CEO (Tien Tzuo) and its CFO (Tyler Sloat).

The State Of Subscriptions

Zuora’s brass is bullish on a few things.

It believes subscriptions are coming to new areas of the economy where they haven’t become the norm. The company is willing to bet ahead of the curve on industries making the jump to recurring incomes (away from discrete sales), citing media as one area it got to early. And Zuora believes that smaller publishers alongside juggernauts like the New York Times will continue to benefit from a subscription model.

According to Zuora, publishers have to have a “swing factor” in its view of “unique content.” If you do, readers should sign up and help publications avoid an “advertising death spiral.” The media portion of Zuora’s business has grown 35 percent year-over-year for years, according to management

Second, Zuora doesn’t believe consumers are burned out on subscriptions. The company’s key wager (that most things are moving to a recurring model) depends on individuals being willing to take on more subs per-person. I wonder if I have too many, but Zuora isn’t sweating it.

“On a macro level, everything in the future is going to subscriptions,” the company said.

I was also curious if we’ve reached and passed the peak of the SaaS wave. Tzuo and Sloat don’t think so. In their view, tech is going to keep grinding towards recurring payments until the industry looks quite a lot different than it does now, even this far into the SaaS era.

It’s hard to argue with the company on the point, as it was early to recurring software payments. So far its perspective has paid off.


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